The CEO Of NEO Banks On Blockchain To Build A Smart Economy
Nikolai Kuznetsov , CONTRIBUTOR
AUG 10, 2017 @ 02:42 PM
The financial world, ecommerce, and other industries that witness millions of transactions each day, should prepare for fast-moving changes in order to stay ahead of competition and facilitate the rise of new solutions as well as accommodate the growing needs of businesses and consumers alike.
Today, ecommerce and the financial sector are being thoroughly shaken up by blockchain – a distributed ledger technology built to power bitcoin. It’s changing the financial services sector with banks scrambling to claim their piece of the pie. The technology itself has introduced new payment methods, smart contracts, and even new ways to verify digital identity.
I spoke with Da Hongfei, the co-founder and CEO of blockchain group NEO - formerly AntShares – who views blockchain as the key to a new “smart economy” where a comprehensive blockchain ecosystem could create better ways of managing financial transactions. The emergence of these new technologies is set to change every industry.
Let’s look at a number of examples to illustrate the pace and nature of this ongoing disruption.
New blockchain platforms are now able to handle smart contracts. Smart contracts are software that can track and automate the fulfillment of agreements over the blockchain. Certain actions can be triggered if a term in the contract is met. This allows developers to create a variety of blockchain-powered services.
NEO is one of the platforms that offers smart contracts. It dubs its smart contracts “Smart Contracts 2.0.” These smart contracts can be built using a variety of programming languages in order to lower the barriers to developer adoption.
“NEO developers can write smart contract code in .NET and Java/Kotlinm, and we are currently testing integration with Go, JS, and Python for a rollout in the future. This will allow a great number of developers globally to build smart contracts on NEO,” Da mentions.
The technology offers interesting opportunities for business-to-business (B2B) enterprises. B2B agreements can be made and fulfilled over the blockchain. For example, businesses could leverage smart contracts for use with suppliers and distributors in automating supply chain. This even promises consumers the possibility of making big-ticket purchases such as real estate and automobiles over the blockchain.
Blockchain has brought us cryptocurrencies. Bitcoin, the most popular cryptocurrency, is now worth almost three times the price of gold. It’s also gaining acceptance in more markets as countries have started to put up regulations for its use. Japan, in a bold move, declared bitcoin a legal payment method which compelled retailers to adopt solutions to be able to accept bitcoin even for brick-and-mortar establishments.
As for ecommerce, accepting cryptocurrencies such as bitcoin is relatively simpler. Bitcoin wallet services such as BitPay allow users to accept bitcoin through buttons and, for more advanced users, APIs. For instance, bitcoin services now provide merchant services to enable ecommerce companies to accept bitcoin. Through such a service, merchants would also be able to exchange it for fiat currency and vice versa giving them flexibility in which currency to use.
New blockchain platforms have also allowed the creation of more cryptocurrencies. Ether (from the Ethereum blockchain) and bitcoin cash (the new fork of the bitcoin blockchain) are the next two top cryptocurrencies priced at $300 and $320 as of writing. NEO’s own token is now among the top 10 cryptocurrencies with a market cap of more than $1.4 billion thanks to the company introducing new products, as well as its rebranding efforts.
Blockchain and cryptocurrencies are now widely used in payments and remittance. Since transactions occur in the blockchain, cross-border payments still have cheaper rates than other solutions.
In contrast, traditional payments and remittances often have to be routed through several institutions and can undergo several clearing processes for transactions to complete. Newer blockchain platforms can offer quicker confirmations of transactions. Payments and remittances done even when done cross-border over blockchain can be completed in real-time.
Because of this, cryptocurrencies are finding increased use for remittances in developing countries. If cryptocurrencies become preferred modes of payment in these markets then ecommerce companies would have little choice but to provide support for such payment methods much like how cash on delivery became an in-demand service for emergent markets.
Fraud continues to be a major concern for businesses. US retailers lost $32 billion from fraud in 2014. Because of this, fraud prevention has become a segment on its own with payment gateways and card processors offering transaction filters and identity verification services to merchants.
Blockchain actually has applications in security and fraud prevention as well. For example, blockchain startup Civic combines blockchain and cryptographic hashing to create an encrypted digital fingerprint for users while leveraging decentralization and avoiding storing personal information anywhere.
In a similar effort, NEO is also incorporating digital identity in its platform.
“We believe blockchain usage will eventually integrate real world applications, such as digital assets based on digital identity. This would allow for better anti-money laundering and know your customer capabilities in blockchain, of which there is a paucity in the modern blockchain ecosystem,” Da said.
Such mechanisms offer the potential for more accurate means to prove identity in ecommerce transactions. For merchants, this means less instances of chargebacks or rejected transactions since users are properly verified.
Ecommerce in a “smart economy”
Much like how mobile changed the way people behave, blockchain has the potential to redefine how commerce is done. For ecommerce, the potential effects of these new developments are multifaceted.
The increasing acceptance of cryptocurrencies may give rise to new preferred payment methods. Developments in smart contracts would also allow businesses to automate fulfillment of agreements thus speeding up transactions. Enhanced security would also inspire increased confidence among businesses and consumers.
For businesses, it helps keep a watchful eye to these developments in blockchain. As behaviors shift, ecommerce must be ready to adapt and offer better experiences that create a faster, more secure, and convenient ways to do business. It pays to be ready to participate as the world moves towards a smart economy.
This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. I have no positions in any of the securities mentioned above.