Blockchain Revolution: Digitizing Economy

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Blockchain technology is fast emerging as a key enabler for innovation. But there is still a lot of ambiguity around it. Global consulting and technology firm Booz Allen Hamilton demystifies this generational-disruptive force and explains why it matters in the GCC

Blockchain technology

New and emerging blockchain technologies are integral to supporting and realizing a digital economy in the Middle East while ensuring effective protection against rapidly evolving threats of data security and cybercrime, said global consulting and technology firm Booz Allen Hamilton in a new report released today.

The report, titled ‘Blockchain Technology – Can the Digital Economy Thrive Without It?’, recommends that as Gulf countries seek to create some of the world’s smartest cities amid a culture of innovation, blockchain technology can offer streamlined and effective ways of protecting and enabling smart city development, disrupting digital transaction systems, and incubating a start-up ecosystem to drive economic growth.

Known primarily as the public ledger of Bitcoin transactions, blockchain helps maintain tamper-proof lists of ever-growing data records, and enables secure value exchanges – be it money, stocks or data access rights. Unlike traditional trading systems, no intermediary or central recording system is needed to track the exchange. Instead, all parties deal directly with each other.

“Economies in the Middle East and North Africa (MENA) region are undergoing a period of rapid change as governments diversify away from petroleum-based assets and explore newer sources of revenue with smart technology at the core,” said Ramez Shehadi, Executive Vice President and Managing Director of Booz Allen Hamilton MENA and co-author of the report.

“But, with opportunities come challenges. As Smart Cities rise up to support national agendas, governments need to be prepared for threats ranging from hacktivism to cybercrime, and this is exactly where blockchain can help them achieve their digital economy goals while ensuring maximum network security,” he said.

Blockchain technology supports real-world applicability across various industries ranging from healthcare to automotive and finance, and helps regional governments extract tangible value from vast amounts of data that can be used to meet changing consumer demands at minimal additional costs.

The global digital services market is expected to reach $1.2 trillion in 2018 from $768 billion in 2013 and digitization is forecast to boost GDP by $5.5 billion in Dubai alone over the same period. 

As the GCC’s focus on technological innovation increases in accordance with rising Internet penetration, Blockchain facilitates a high-assurance infrastructure: one that can scaled, and adapt to a rapidly accelerating and transforming digital economy.

Cyber Security in Digital Economy

An increasingly digital economy has brought cybersecurity risks into sharper focus. Annual losses to companies worldwide from cyberattacks now exceed $7.7 million on average per organization, according to the Ponemon Institute.

GCC governments have responded to cyber threats by creating programs such as national identification and public key infrastructure (PKI) that rely on biometric data to secure information. While such initiatives have proven highly effective against such threats, if one link in the digital chain of authority is broken, it can potentially compromise the whole system. Some have also questioned the ethical side of using biometrics for security purposes.

The simple and efficient nature of blockchain technology removes layers of complexities while shoring up security and mitigating risks associated with digital certificates and certification authorities.

“In the push to turn data to currency and maximize its value, blockchain technology is indispensable,” said Dr. Mahir Nayfeh, Senior Vice-President at Booz Allen Hamilton MENA and co-author of the report.

“Blockchain can help remove the security concerns often raised by organizations to justify their unwillingness to reveal information, while encouraging the adoption of data-sharing incentives and fostering a community-based ecosystem that can determine the value of data over time.”

Industries in Focus 

  • Healthcare: Healthcare is a core sector at the center of Smart City development. Blockchain technology can help prevent data breaches in the healthcare industry by creating trustworthy, multi-signature and cryptography functions. Using blockchain, patient records can be created, shared and accessed by multiple parties, without compromising data integrity or security. 

Through this technology, patients can use their own signature, combined with that of a hospital, to unlock specific sets of data under different situations. Blockchain can also be useful in insurance and billing, with the technology creating the possibility for patients, insurance companies and hospital billing departments to manage payments through a single platform, reducing redundancies across the industry.

  • Transport: Cars are now becoming an interactive component of a growing interconnected transportation grid. In addition to software and diagnostics that improve vehicle safety and performance, technological advances now allow vehicles to detect traffic patterns and report potholes, emissions and fuel consumption.

In the transport industry, blockchain technology can help mitigate the risks of cybersecurity by providing a trusted and secure platform, where data is captured safely in a distributed consensus ledger (DCL) that may be public or private, depending on usage and permissions.

  • Finance: Blockchains are disrupting the financial system by offering a direct, efficient and secure transaction environment for the exchange of a full range of financial instruments from stocks, bonds and cash, to wages, benefits and airline miles. While blockchains are most widely associated with Bitcoin, the technology has game-changing applications that can increase the performance of transactions, drive down costs and eliminate the need for existing legacy systems such as financial clearing houses.

Blockchain technology can help GCC governments boost security in the financial system by securing and facilitating transactions in the fast-growing Islamic capital market, and improving trusted and broad-based access for investors; assisting in applying for loans from Islamic banks by issuing a smart contract that is mined, validated, and replicated through the network; managing identity theft; and enabling Smart grant financing.

  • Start-ups: Incubating start-up and accelerator ecosystems is integral to the GCC’s digital economy growth. Blockchains have an important role to play in incubating the start-ups ecosystem, by simplifying processes such as registering a business, securing funding and patenting ideas. The technology can allow individuals to make their data accessible to a number of pre-approved entities involved in the network, such as business registration, patenting and funding authorities, while also allowing data to be updated in real time. This reduces the need for duplication of information, facilitates application processes, and reduces the time and some of the costs associated with starting up and running a business.

Already, the GCC is tuned in to the benefits. The Global Blockchain Council established by the Dubai Museum of the Future Foundation sets out to encourage start-up incubation and explore the technology’s potential impact on business and finance, as well as its role in facilitating transactions across sectors. The first pilot project, BitOasis, focuses on Bitcoin exchange, and is being implemented by Dubai Multi-Commodities Centre (DMCC) to secure flexidesk contracts and registration processes using the blockchain ledger.

Mr. Shehadi summarised: “The potential applications of blockchain technology within the GCC’s overarching drive for innovation are manifold. By offering pioneering solutions to disrupt, enable and incubate digital capabilities, blockchain technology can prove an invaluable tool for a region with smart ambitions.”

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