Malta: Overhauling Industries Through Blockchain Technology

This article was first published in the Times of Malta (22 June 2018) and is co-authored by James Debono (GANADO Advocates) and Michael Kelley, founder and CEO of SEMNexus.

Blockchain technology is poised to transform many industries. Several new initiatives, such as Clovyr, focus on dApp or decentralised applications. Although the definition of dApp development" is still subject of debate, it can be identified as a novel concept of open source applications which, unlike the day-to-day applications we all use (such as Twitter, Facebook or Gmail), do not feature a single point of failure.

The main rationale behind this characteristic of dApps is that their back-end is run on a distributed ledger technology and thus their function and operation does not depend on the interpolation of an intermediary.

Developers across the globe are working on several dApps that could transform many industries, including financial services, real estate, healthcare, and entertainment. Banks, brokers, and other financial services companies have traditionally served as intermediaries for a variety of transactions. When a bank makes a loan to a customer, it typically collects a fee from the borrower for arranging the loan and processing the necessary paperwork.

Also, dApps are being developed to simplify peer-to-peer lending on blockchain platforms. This eliminates the need to secure a traditional bank loan and eliminates the associated loan processing fees.

Furthermore, it is rather commonplace that traditional banks express reluctance to grant loan facilities which are secured by cryptocurrencies. To fill in thisgap and thus cater for the much-needed want for liquidity and capital-raising for small businesses, there are various blockchain projects currently under way that are creating platforms whereby individuals can receive loans backed by different cryptocurrencies.

On the other end of the financial services spectrum, stock brokerage firms are paid commissions to facilitate the buying and selling of stocks and other investments. In this case, dApps can potentially eliminate the need for a centralised broker by keeping track of who owns what in terms of investment securities while also facilitating trades among investors.

Interest in trading stocks on the blockchain is growing and it will be exciting to see how these opportunities will expand.

The real estate industry is yet another area that is fertile ground for growth through dApp development. The sale of immovable property is a very lengthy, complicated and time-consuming process, starring a wide range of intermediaries such as real estate agents, banks, notaries and attorneys.

Although their involvement either facilitates the sale, or is necessary to ascertain its enforceability, it raises substantially the cost of capital and often even pervasive. As more dApps are constantly being developed, the industry is most likely to be disrupted through the streamlining of real estate transactions, whereby the root of property title (which is one of main headaches in the current industry) is ascertained through the trustless blockchain protocol) costs are reduced for the benefit of both buyers and sellers as counterparties.

The healthcare industry could be transformed with dApps. The consensual sharing of medical information among relevant parties could be more easily accomplished through the blockchain and possibly lead to better and more tailored medical care for patients. The traceability and immutability of records on a DLT network, in the sense that these cannot be lost or changed in error or fraud, is one of the main justifications of placing patient records on the blockchain.

The entertainment industry, especially music and film, was negatively affected by internet streaming. In addition to the plague of unlicensed online streaming, the industry faces the conundrum of identifying the owners or copyright holders of creative content which leads to a conundrum for producers who wish to licence content and receive the respective royalty payments as rightful owners.

Within this context, dApps can be created that can keep tabs on who created specific content, who has used the content in new creations, and who is owed royalties. The blockchain could reduce the need for various organisations that currently monitor the owners and/or writers of creative content.

As is quite evident, dApps development is set to potentially transform many industries by leveraging key characteristics of the blockchain, such as immutability, decentralised information sharing, and tracking of information and records through time.

The auditable trace of data and information through the use of dApps provide an enhanced level of transparency and security in many sectors, which currently might be inadequate or unsatisfactory.

Notwithstanding, the rapid evolution of the underlying DLT technology, a number of legal and infrastructural considerations still need to be ironed out on many fronts, including regulatory obligations, duties relating to data protection,security and anti-money laundering.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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