CRYPTOCURRENCIES, ECONOMY AND ENVIRONMENT: Alternatives to the Proof of Work

In March 2016, the French depute Pascal Terrasse wrote in a collaborative economy report “What we currently reproach to uberisation is already out-dated thanks to blockchains. The economy of burden-sharing is going to “disrupter” the collaborative economy: in the near future you will not need to use an intermediary as Uber to be able to reserve and pay a service.

We may ask ourselves, why so much optimism in Terrasse’s words? First of all because a blockchain is a public register, such a huge account book where are inscribed all the exchanges between the users of this blockchain since its creation. These exchanges can be consulted by each user, which allows verifying the validity of the transactions. Furthermore, there is no possible falsification of the blockchain. As a result, their operation system offers a huge quantity of potential new opportunities. Hence, specialized startups have stated to flourish and multiply at high speed. The British website CoinDesk states that risk capital firms have already invested more than 985 million euros into blockchains, of which 143 million were during the first trimester of 2016. Nevertheless, it is important to note that this technology keeps tract of all the transactions but does not guarantees anonymity: it only allows to have a pseudonym.”

Three of the different uses to blockchains that have started to be developed are secure transactions, certifications and smart contracts. Using concrete examples and actual projects, we are going to discuss how blockchains facilitate transactions and certifications and how these two are often correlated. Smart contracts or an application of blockchains in agriculture are discussed on a following article.

TRACKING LAND TITLING

To illustrate what is meant by “certificates”, various countries are studying the possibility of using blockchains to track land titles. An interview realized by Blokchain France in May 2016 mentions “The goal is to create a system capable to reduce human corruption in property conflicts. This project largely surpasses Bitland. Citizens are in need of a system that prevents their governments to unfairly take advantage of them. The project could bring richness to entire communities and not only in the hands of few.” This technology would allow locating the property with accurate precision thanks to its GPS coordinates. Later, the buyers and sellers would have all the necessary information and documents to carry out the transaction in the best conditions, including financial information. In this way, there is no need of an intermediary in the transaction, which will be validated in the blockchain as soon as the two interlocutors find a deal and if one of the two is identified as the owner.

Some countries that have shown interest to apply this technology are Ghana, Honduras and Georgia. In the first case, it is an organization called Bitland that has paired up with 28 communities located in Kumasi, Ghana. In the two other cases, they have been official initiatives from the governments.

The American firm Factom, blockchain specialist, announced in 2015 that the Honduran government requested its services. The president of Factom, Peter Kirby, declared, “The country’s date base was permanently hacked. That means that bureaucrats could penetrate it and attribute themselves some properties on the seaside by modifying the cadaster.” Thanks to the blockchain technology, the Honduran population would be able to protect their contracts, mining rights, hypothecs, etc. This is even more relevant when we notice that 60% of the country’s landlords are not registered in a cadaster. M. Kirby believes that the presence of his firm in the country would incite all the landlords to register their land titles. Additionally, Factom plans on using a two-factor authentication to increase the security of their transactions.

However some problems still persist. Honduras is ranked 104th in the World Transparency Index and has been the country with the highest homicide rate for various years. Duncan Riley, author for the SiliconAngle is very dubitative and pessimistic concerning Factoms’ role in Honduras. He predicts blockchain technology will derive in more violence against landholders, as for example to obtain the access codes of the cadaster blockchain. On a legal perspective, attorney Hubert de Vauplane comments that this innovation also raises concern. First of all there is a problem of identification of the stakeholders, what is asked for every transaction covered by law. However blockchains only uses pseudonyms… On another hand, we may ask ourselves how does a property registered on a blockchain, a huge “digital book”, be used in law? Pierre Noizat, the PDG of the Safe Market Place Euro-Bitcoins, Paymium, answers that transactions realized on the blockchain may be signed digitally. Digital signatures are legally recognized in countries such as France, yet the blockchain is completely decentralized, therefore an international treaty should be made. Hubert de Vauplane says “we should have an international agreement on the legal value that blockchain transactions would have, as it has already been done for websites with the HTTPS protocol in the 90s”.

As for today, Factom has not been able to apply their innovation in Honduras. The Georgian government has also shown interest in 2016 in applying the innovation but with a company called BitFury. As for Honduras, no follow up has been given.


With the previous example, we can rapidly imagine that blockchains may be used for a variety of certifications. Another example that has largely been approached is art certification. The professional services firm Deloitte has the goal to establish provenance for artwork. This implies both tracing the ownership and use of that work and ensure authenticity of an artwork. Similarly, Verisart, a new start up in Los Angeles is also using the decentralized technology to verify, document, certify and enliven the works of new artists and collectors. Furthermore, they want to intergrate in the blockchain museum standard mega data to provide immediate value for artists. The founder of Verisart, Robert Norton commented, “We believe technology can aid trust and liquidity especially as more of the $67 billion annual art market shifts to private sales (peer-to-peer) and online transactions”. Hence, certification through blockchains is not only a way to ensure the validity of artwork but also to avoid various intermediary transactions.

SOLAR COINS AND ITS DUAL FUNCTION

FACILITATING REMITTANCES SCHEMES

“Certification” does not only imply “property”. In France, Lumo, a financing platform specialized in renewable energies uses blockchains to support photovoltaic projects; each megawatt-hour (MWh) generated is rewarded. How? The producer of a MWh receives a “solarcoin”, a currency that certifies you generate photovoltaic energy. Each MWh is rewarded by one solarcoin. This way “we do not only punish polluters, we reward all of those who contribute to the developing of photovoltaic energy” comments Alexandre Raguet, president of Lumo.

However, the project does not only stop here, Lumo wants solarcoins to circulate throughout the users. They fixed the maximum amount of solarcoins distributed to 98 millions. In function of the offer and demand they are going to acquire a certain value. “A solution could be to implicate firms as Apple, Ikea or Patagonia, which have taken engagements in terms of renewable energies. These enterprises could accept solarcoins in their selling points,” proposes Alexandre Raguet. As for bitcoins, the exchange of solar coins would be based on the blockchain. The idea is to establish a horizontal system where all the persons in possession of solarcoins could interact without intermediaries. Conclusively the double function solar coins can take (certification and transfers) opens new perspectives on how to endorse the development of renewable energies.

Blockchains don’t have to be seen as a purely entrepreneurship exercise as seen on the previous examples. Various start-ups have driven their attention to the unbanked in Africa. Because the blockchain is a public domain and controlled by everyone participating in the network, it could be an alternative to the bank transfers made by migrants to their families back in Africa. Le Monde estimates that 7 billion dollars of the 60 billion sent by these migrants correspond to transfer costs. Instead, using blockchains as a transaction tool would reduce any transfer cost. Moreover, millions of citizens would have an easy access to monetary transactions. Lawrence Wintermeyer, CEO of Innovate Finance shares his thought on the innovation “There are 2.5 billion people that have no access to banks or accounts and most of them live in economically and politically unstable countries. By using bitcoins to store wealth, you eliminate the chances of a local government expropriating any funds from a bank account.”

Applications as “Beam” in Kenya have already started innovating transcontinental monetary transfers. With this mobile application that is in use in Ghana and Kenya, the transfer costs are now of 3%, much lower than the 12% of classical systems. Furthermore, transactions are realized in ten minutes since it does not need any human intervention.

The previously mentioned examples are optimistic and open various possibilities for populations abandoned by the classical banking system. However, the biggest challenge Beam and the blockchain will have to face is connectivity. Digital currencies requires that both users to have an access to a smartphone and good Internet connection. Still, the unbaked citizens are generally the same that are not “connected”. For example, in Burkina Faso only 4,4% of the population has access to Internet. Even if in Kenya and Ghana this number is way higher (70% for Kenya), we still cannot consider this innovation as the perfect solution for every citizen.


When looking at the future, blockchains are an aspect that has to be taken in account for future societies. However their development has to be done in parallel with various other features. If we jump with both feet into this innovation, with no previous establishment of legal margins and groundwork in our societies, the opposite of the desired effects could rapidly be seen.

REFERENCES

Credits:
Téo VANDER HEYDEN

Sources:
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Bitcoin PR Buzz. (2016, May 16). Bitland Puts Land Titles on the Blockchain in Ghana. Retrieved November 02, 2016.

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Butcher, M. (2015, July 07). Verisart Plans To Use The Blockchain To Verify The Authenticity Of Artworks. Retrieved November 06, 2016.

De Matharel, L. (2016, February 04). Un titre de propriété inscrit sur la blockchain a-t-il une valeur légale ? Retrieved November 04, 2016.

Des cadastres sur la blockchain. (2016, March 03). Retrieved November 03, 2016.

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Higgins, S. (2016, May 17). Deloitte Demos Blockchain Use Case for Art Industry - Steemit. Retrieved November 06, 2016.

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Reaching the unbanked in Africa through digital currency and blockchain • Appsafrica.com | African mobile and technology news, insight and advisory. (2015, July 15). Retrieved November 06, 2016.

Riley, D. (2015, May 17). Honduras to use Bitcoin Blockchain tech to run its land registry. Retrieved November 03, 2016.

Rumignagni, M. (2015, February 09). Start-up africaines : Des initiatives très variées. Retrieved November 07, 2016.

CERTIFICATION AND TRANSACTIONS

Blockchains, which are announced as the new big technological revolution, are often assimilated to bitcoins and to the financial world. However, it is far from being its only possible application. In a world where corruption, impunity, or false reproductions are light years away from being eradicated, the impossibility to falsify blockchains would allow us to bring new alternatives and solutions. One of these is blockchains taking the role of certificates. The validity of the chain would prevent anyone to put into question the certificate.