September 9, 2016
Mr Gérard Sanspeur mentioned on Radio Plus on the 07.09.2016 the importance for Mauritius to consider the implications of the blockchain technology. He is currently the Senior Adviser at the Ministry of Finance & Economic Development of Mauritius. Since crypto currencies and the blockchain is a technology I have some passionate interest in, I decided to look up the local media to see if his speech was documented or reported as recorded on defimedia, unfortunately there is nothing to be found. So I can only vaguely recall what was mentioned on the radio and it was a short extract. It was mentioned that Mauritius should consider the important implications of this technology and the country Estonia was also mentioned which is currently a leader in the world of having various public departments running on blockchain. Mauritius being an island with a population of only 1.3 million could leap frog into the future of efficiency by adopting such a technology. Leap frog means that the blockchain is a HORIZONTAL integration vehicle with huge potential. Just like electricity and the internet.
What is the blockchain?
The release of one of the very first blockchains dates back to the year of 2008/9 by a pseudonym or group of persons calling themselves Satoshi Nakamoto. Who he is or who they are is not known. You can Google this pseudonym and you will find lots of articles. Anyway, the technology now exists and is here to stay and change the world. Since then many improvements have been made by various collaborators and it is open source. I’m talking here of Bitcoins blockchain. There are as of today other blockchains as well and you can even start your own blockchain! You cannot look at blockchain by ignoring Bitcoin which started it all and has reached a market capitalization of +9 billion US$. It is mentioned in the Bitcoin whitepaper.
The blockchain on which operates Bitcoin and which keeps evolving with new layers of technology being added to it, it can currently be said that if fulfils the following functions for Bitcoin and other layers of technology:
It is a distributed ledger.
Owned by everyone and no one.
Accessed by everyone.
This technology didn’t exist several years ago.
Cannot be reversed.
Security & Privacy is built in.
Smart contracts. Execution of the conditions.
Blockchain can scale.
There are a couple things that come to the blockchain. Trust. Transparency. Time. Autonomy. Consensus.
Internet is an Information Exchange Protocol.
Blockchain is a Value Exchange Protocol.
A precursor to the blockchain and the mention of such a similar structure might have been the research paper by Haber and Stornetta in 1991 called “How to Time-Stamp a Digital Document”.
The blockchain is revolutionary and it solved the The Byzantine Generals Problem.
This blockchain runs on nodes distributed around the world making it a decentralized robust IT architecture. Currently there are around 5000 Bitcoin nodes which makes it harder to hack in comparison to a centralized or single-point-of-failure system. There are companies who offer commercial applications based on the blockchain technology that they have centralized. Banks and Govs are looking into this. I say with precaution the following that centralizing the blockchains technology could lead to the loss of certain security and patching benefits. (You are welcome to refute this in the comments section – especially if you are a well seasoned programmer – which I am not). Some companies try to more or less make their blockchain have similar attributes of the decentralized one by spreading the nodes to different locations and some also offer incentives for investors to run a node – similar to Bitcoin. The company Guardtime from Estonia even publishes in the newspaper periodically the calendar blockchain.
A must watch is this presentation of Andreas Antonopoulos, from this video you can learn how the decentralized blockchain that Bitcoin uses grows stronger with time vs. a centralized version of a blockchain that banks seem interested in.
Bitcoin Security: Bubble Boy and the Sewer Rat
I will not go into the details of how a blockchain works as this is more technical. In this article I will stick to more what could be the benefits of the blockchain for Mauritius, or why should Mauritus consider the blockchain.
Watch the following videos. I watched several ones, I found these ones were quite simple to understand for the novice.
New Kids on the Blockchain | Lorne Lantz | TEDxHamburgSalon
Goes more into details, gives examples and in the end part also mentions why blockchain could fail.
Alex Tapscott: “Blockchain Revolution” | Talks at Google
Where could the Mauritius public sector apply the Blockchain technology and why?
The blockchain, i.e. there can also be several blockchains that are industry specific can help to solve integrity issues of the public sector such as in the areas of:
Digital Court Files
Fully Digital Governance
Insider jobs and cover ups cannot go unnoticed. Fight corruption.
Digital Governance, no papers required.
Court files need to be valid. Get signed and hash chained in the blockchain.
Another example is turning the health sector into an E-Health Foundation. (Maybe this will be run someday on a blockchain called Carechain, a term coined by Ritchie Etwaru).
Prove record’s integrity in isolation!
Signatures in bulk within the blockchain. It can make visits to the clinics / state hospitals paperless and eliminate the scenario of lost patient files! (How many times do we hear about this issue on Radio Plus!?).
There is a Gateway system the GOV can use to access the blockchain for various other use cases.
Who could get this job done? Not me, neither a programming agency in Mauritius (not yet), it requires an experienced team, that would/could be the guys from Estonia at GUARDTIME. There are of course other companies specialised in other areas such as for notary functions. The details above are from a presentation of Guardtime I watched with speaker Ivo Lohmus.
Can Mauritius digitalize its Rupee currency on a blockchain?
Yes, it could turn its rupees into digital rupees, that is the rupee IOU run and overseen by the local central bank of Mauritius. You can use digital currency and at any time change it back, 1 to 1 into cash rupees or bank transfer onto a bank account for example. This would reduce the volatility in comparison to bitcoin. In addition an exchange can be run where rupees can easily be converted into other crypto currencies like Bitcoin or other [fiat currencies that have been digitalised]. Another idea could be that Bitcoin can be used as the transfer vehicle, once bitcoin reaches its destination the receiver can convert the bitcoins back into their local currency. A huge disruption would take place if however more and more people decide to just stick to Bitcoin itself. So digitalising a local currency and having mass adoption can also lead to its own death?
You can read here about Barbados having it’s Dollar on the Blockchain: Bitt Launches Barbados Dollar on Blockchain, Calls for Bitcoin Unity
In Mauritius, the population is well banked, it is easy to get access to bank services and have a bank account. Therefore easy to transfer money world wide (at a very high cost of around EUR 40 per transfer abroad), so there will need to be stronger convincing factors for the locals to adopt bitcoins or a digital rupee for all their transactions. Even the mobile payment solution JUICE developped by Mauritius biggest commercial bank MCB is growing amongst users and merchants. In many developing countries, the very reasons people are turning to Bitcoin is because the services offered by banks are not easily accessible and on top to transfer money is to restricted. If let’s say Mauritius reputation gets downgraded and seen as a shady financial centre, corresponding banks might consider the option of de-risking. Just have a look at the Caribbean:
“The Caribbean, more than any other region in the world, now faces a threat that has severe implications for its economic viability. This threat is the termination of Correspondent Banking Relationships (CBRs). Correspondent banking relationships are essential to the global payment system, facilitating cross-border transactions, particularly for international trade, remittances and foreign direct investments (FDI). Outside of setting up branches in foreign countries (which is costly), a domestic (respondent) bank requires a correspondent bank (CB) in that foreign territory
to act on its behalf. However, amidst concerns about money laundering and the financing of terrorism (ML/FT), several correspondent banks have been terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, the inherent risk. This action, referred to as ‘de-risking’ or ‘de-banking’, is a challenge that requires urgent and coordinated action from Caribbean economic, regulatory, and political leadership.” Read the full article here: The Correspondent Banking Problem – Impact of de-banking practices on Caribbean Economies
Can Mauritius innovate in the blockchain arena?
No – it might just be a follower and end user. Or Yes? The train is about to leave the station at these bullish times! There are several African countries already innovating in this area and some of them even have held their pitches in Mauritius of which the population itself didn’t know much about this happening.
View the linked article, it also lists the 12 African Fintech Startups you can have a look at.
“For the second consecutive year, we are thrilled with the number and calibre of the African startups applying to our programme,” says Fabian Vandenreydt, Global Head of Securities Markets, Innotribe and the SWIFT Institute at SWIFT. “The Startup Challenge is an enriching experience for every company participating as they benefit from expert mentoring and get that much needed exposure to financial institutions. We are excited to start this year’s journey and look forward to seeing the startups pitch their innovative products with determination in Mauritius.”
Bridge the gap between the FinTech startup ecosystem and the financial services community
If Mauritians would have been able to attend such an event it would have given them a boost to see what our neighbours are doing and inspire them! What a loss for Mauritius that such an event/organisation considers Mauritius ONLY for the destination that provides conference rooms, lodging and nice beaches. …Mauritius definitely has much more to offer.
African startups looking at the blockchain have an urgent reason to innovate because there is an urgent need for their population and entrepreneurs to have solutions that will allow them to trade with the world. Blockchain and Bitcoin for example allows them to receive and make payments. There are many opportunities for exchanges and merchants to bring it to the people so that they can trade because various international exchanges will be closed doors for emerging economies. But in Mauritius there is no need for Bitcoin to trade internationally (yet?) because it’s easy to make bank transfers and get credit cards.
There are definitely entrepreneurial opportunities regarding FINTECH. But does Mauritius have the resources and right skilled labour to innovate? Mauritius dedicated a certain amount of money in its budget to innovation. In comparison the Central Bank of Singapore dedicated $160 million for a 5 year plan research on blockchain technology which is 37 times more than Mauritius, I’m not sure if that reserve is still stuck at Maubank and there aren’t enough Startups yet emerging to benefit from this venture capital? If you know more about this please share in the comments section.
Let’s look at the Swiss! The following is an excerpt from the white paper of nexussquared and Shruti Patel.
“No Government-Backed Fintech Initiative
Unlike other cities striving for fintech growth, Switzerland currently has no overarching strategy or government endorsed initiative. Although the Swiss Fintech Innovation Lab and other thematically related platforms are working to establish a fintech ecosystem in Switzerland, these initiatives are not focused on promoting the country as a fintech destination. With no shared vision or prominent organisation taking the lead, the fintech industry remains fragmented, lacks direction and global visibility. As the experience of New York and London illustrate, the diffusion and commercialisation of financial technologies requires close relationships between financial services firms, start-ups, and government bodies. And here lies a window of opportunity for Zürich. It has the opportunity to position itself as the leading regional fintech hub by moving before rivals such as Berlin (which has a distinctly lacking financial industry) to promote itself internationally and aligning efforts between relevant jurisdictions such as the city, government, regulatory authority, tech firms and industry players.”
Cool stuff to look at
Nasdaq Explores How Blockchain Could Fuel Solar Energy Market
Estonia Issues Blockchain Shares with Nasdaq’s Linq (Will Semdex do that someday?)
The BitFury containerized data center (Would be great to have one in Mauritius… Maybe through seed capital Mauritians could participate in having shares of their own mining farm and share the rewards as a mining pool.)