The Korea IT Times, a S. Korea-based global news network, will run a five-installment series dedicated to startups developing blockchain technology (which is considered as a means of democratizing the financial market) and leaders in innovative financial services. The five installments will revolve around 1) simple payment services, 2) retail finance, 3) credit and asset management, 4)crowd funding and 5) virtual currency, respectively.
In this first installment, we cover Dongguk University Prof. Park Sung-joon’s talk with Hong Joon-young, vice chairman of K-FiNNeT, who has been preparing a parliamentary forum on the creation of ‘regulation-free fintech zones,’ scheduled for September. Prof. Park has also been busy preparing to open a blockchain R&D center in September.
Prof. Park, a cryptologist, underlined the importance of blockchain technology, a shared public ledger based on peer-to-peer cryptocurrencies, and proposed ‘Government 4.0’ policy.
Hong: The UK government has published a far-reaching report about the nature and potential of blockchain technology. The report titled ‘Distributed ledger technology: beyond block chain’ indicates that the essential meaning and value of blockchain tech serves as the foundation for a transparent society which is not monopolized by a few power groups. The foundation of S. Korea’s economic democratization is also based on the same notion. What’s your view on this
Park: At the beginning of the 21st century, I emphasized a “cyber paradigm” and the need for revolutionizing the Internet in this country. I believe blockchain technology is so disruptive that it can trigger a second Internet revolution just like the Internet has brought in innovative changes across all sectors of society. That’s why I set forth a “blockchain paradigm.”
Hong: Let’s think about the effects of blockchain technology on industry. If global financial companies tapped into Internet-based blockchains, they could cut the cost of building and maintaining infrastructures by 15-20 billion dollars a year by 2020 and the average global cost of sending money overseas could fall from the current 7.68 percent.
Blockchain consortiums have a plan to let people send money overseas at one tenth of the average global cost of sending money overseas in a couple of years. According to McKinsey, once blockchain technology has been introduced to existing financial systems, the cost of managing customer databases and maintaining security will be cut by 23 trillion won a year.
Is there any other effect of blockchain technology that you would like to comment on
Park: As of now, in many countries including South Korea, blockchain-based projects are being run on a trial basis or blockchain technology has already been commercialized. Leading consulting firms regard blockchain technology as a disruptive technology that can rock the current business structure to its foundations.
Under the “blockchain paradigm,” blockchain is perceived as an innovation in distributed, digital trust, so once blockchain technology, described as the 'trust machine', has been adopted, the roles and status of trusted entities will change. This means the “birth of a new industry.” A few days ago, Democratic presidential candidate Hillary Clinton argued for the introduction of blockchain technology into public services. Her comment exactly echoed the US’s view on blockchain technology. I here name it ‘Government 4.0 policy.’
Hong: In South Korea, excessive regulatory hurdles have thwarted the commercial use of blockchain technology. As a result, our country has few up-and-coming blockchain startups. What’s your take on the current status of the Korean blockchain industry
Park: One of the characteristics of blockchain technology is that it is economical. Thus, business expenses in all sectors can be dramatically slashed, which can help industries reinforce competitiveness. However, to that end, we need to grasp the intrinsic characteristics of blockchain technology and change the way we do business. The biggest hurdle here is regulations.
Characteristically speaking, blockchain technology entails the recalibration of the roles and status of trusted entities. All the laws and institutions have been made from the perspective of trusted entities. Thus, the current laws and institutions work as a drag on the promotion of blockchain technology. Therefore, to build an industrial ecosystem based on blockchain technology, efforts to develop fundamental technologies should be accompanied by efforts to make improvement in the current laws and institutions.
Hong: What are the technical limitations of blockchain technology Are there responses strategies to address the limitations
Park: As of now, many people mistakenly believe that Bitcoin is synonymous with blockchains. As a result, they might think that blockchains have exactly the same the shortcomings Bitcoin has. The Bitcoin network is just the most widely known example of blockchain technology.
There are various blockchain technologies and they are consistently evolving as we speak. Global blockchain R&D centers are developing various technologies to keep control measures to a minimum and ensure anonymity and protection of personal information. Our blockchain R&D center has also developed a new blockchain technology by addressing the shortcomings of previous technologies.
First of all, I plan to propose to the government the development of “blockchain PKI,” aimed at converting the National Public Key Infrastructure (PKI) into blockchains, as part of Government 4.0’s infrastructure policy.
Hong: South Korea has to drift away from excessive ex-ante regulations and take a new Asia-Pacific finance initiative in order to become a hub for fintech startups. What kind of strategies will your center employ to help the country move in that direction
Park: Our center have several divisions, including the education and consulting division, law and institution division, services division and technology division. The education and consulting division is dedicated to raising public awareness of blockchains and offering consultations on different blockchain business models in different sectors. The services division is focused on blockchain-based authentication and the discovery of blockchain success cases. The tech division is tasked with tracking the latest trend and securing fundamental technologies. Our center plans to link what we do to government policies so as to serve as an apparatus for social consensus on a wide range of social issues.
To help nurture Korean fintech startups, Park and Hong will develop their organizations into startup incubators and push for a blockchain PKI pilot project in line with Government 4.0. Furthermore, they are poised to offer substantial support for the promotion of startups by establishing a governance structure for the continued expansion of relevant projects. To that end, the blockchain R&D center and K-FiNNeT will jointly hold the Forum for Fintech and Blockchain Startups in September.