Empowering participation, enhancing transparency
Marc Lijour compares blockchain, a type of distributed ledger technology, designed to record digital transactions and consisting of immutable records, to a ‘global whiteboard.’ istock.com
Often associated with the “second era of the internet,” proponents see blockchain as the internet of value, coming on the heels of the internet of information. Beyond providing the means for securely storing, managing and transferring valuables – including money, identity and cultural assets, such as art or music or even votes – how does blockchain contribute value?
Marc Lijour, VP, Capacity and Innovation Readiness, Information and Communications Technology Council (ICTC), sees a number of areas where the technology is making a difference, enhancing transparency and enabling market participation among them.
“Think of blockchain as a meta-ledger, a kind of global whiteboard for tracing and recording relevant information,” he says, adding that the technology’s unique advantage comes from a distributed verification system, where transactions are confirmed by participants rather than a central clearing authority.
“With public blockchains, you can leverage the most powerful part of blockchain: the public record,” says Mr. Lijour, who suggests this can provide an antidote to centralized power and potential corruption.
“... it’s a way to democratize the governance of industry as well as empower consumers to direct companies toward a more virtuous path – and ultimately to a more environmentally friendly and balanced society. ”
“If you want a record of what you own, this information is maintained and secured by your community on blockchain,” he explains. “For example, you could prove you own a piece of land or a house, and nobody can claim otherwise. And companies also need to ‘sync’ their data to avoid errors and discrepancies. With blockchain, anybody can see where the valuables are at any point in time.”
Proof of ownership may be the upmost benefit of public blockchains, which are the foundational technology for cryptocurrencies like bitcoin. “The dollar in your bank account has a few issues, mainly because it’s a debt the bank owes you, and, by the way, it has no intrinsic value,” says Mr. Lijour. “In the last century, you could go to the bank and ask for the equivalent in gold – thanks to the gold standard. In recent years, we’ve seen banks fail to restitute the full amount, for example, in Cyprus. When they do, which thankfully happens most of the time, the real value of your dollar might have fallen significantly because of the inflation created by the massive injection of liquidity by government actors around the world, mainly in North America and Europe.”
Bitcoin and other public blockchains, such as ethereum, aim to solve both of these problems. Token owners have 100 per cent control on their crypto-assets, which they can retrieve at any time. “Furthermore, the monetary policy on these chains resembles more closely the ideal policy proposed by the famous
Nobel Prize-winning economist Milton Friedman, who argues that more quantity of money leads to inflation,” he notes. “For example, the bitcoin protocol predicts how many blocks and bitcoins will be ‘mined.’ And ethereum recently implemented a new policy (EIP-1559) that can reduce the quantity of money (ETH) over time.”
The thesis of many crypto-currency holders is that the value they own can be preserved over time, in spite of the volatility and other problems that have been raised about this alternative to traditional banking, Mr. Lijour says. “In recent years, several financial services have appeared on top, from lending to borrowing, exchanging tokens and buying insurance – opening a new area of decentralized finance, or DeFi for short.”
Ownership of digital assets can be addictive. Blockchain’s power to “cut out the middlemen” also enables direct participation in marketplaces, with the rise of non-fungible tokens (NFTs) further easing entry, he notes.
In the past, purchasing art through Christie’s, for example, was the prerogative of the wealthy. Yet today’s art aficionados have additional options. NFTs – digital assets that link ownership to unique physical and digital items – can be bought and sold online, with each transaction recorded on a blockchain, says Mr. Lijour. “With NFTs, people can enter the marketplace and deal directly with creators. This allows them to establish a relationship where they’re supporting the artist as well as a particular community and culture.”
This community aspect is a particularly strong draw, he believes. “People participate or buy something because of an emotional connection. We see a lot of interest in identity – and in supporting causes that are aligned with certain values. For example, people are buying Indigenous art, crypto art or art supporting the education of Afghan girls.”
A sense of belonging – coupled with economic empowerment – is also driving participation in platforms like Axie Infinity, a play-to-earn NFT game, where earnings are not insignificant, for example, in countries like the Philippines, notes Mr. Lijour. Axie Infinity, which has attracted a considerable number of active users, bills itself as “a social network and jobs platform that rewards players for their contributions to the ecosystem.”
Many blockchain applications are seen as “disrupting the establishment,” yet the technology is also proving useful for mainstream sectors, especially for facilitating coordination between multiple actors where central oversight is absent.
Mr. Lijour points to the example of a food supply chain, where the farmer, food processor, distributor and retailer have to rely on the claims of each party involved in handling the food. Blockchain can help to verify where the food comes from, how it was grown and when it was harvested as well as any other step from the farm gate to the table.
“Having a trusted system where every transaction is verified can also be useful for industries for establishing their carbon footprint; for example, by tracking emissions, carbon offsets, etc.,” he adds.
Companies are also using blockchain to get 100 per cent transparent with their environmental, social and governance (ESG) commitments, partly in response to public concerns about “green-washing,” says Mr. Lijour. “While this is a legitimate concern for consumers, there often is little that can be done short of boycotting a product or a company altogether.”
In addition to providing heightened transparency, blockchain-based solutions can offer rewards that go beyond brand loyalty. For example, Lactalis Canada, which owns iconic Canadian dairy brands such as iÖGO , Cracker Barrel and Black Diamond, has recently partnered with WhatRocks to empower their customers to donate to the charity of their choice.
“I’m excited about this,” says Mr. Lijour, “because it’s a way to democratize the governance of industry as well as empower consumers to direct companies toward a more virtuous path – and ultimately to a more environmentally friendly and balanced society.”
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