Also, promising that blockchain technology can keep food fresh is heightening expectations unreasonably. Shippers and supermarkets keep food fresh. This particular project is focused on detecting the origins of food contamination. Not the same thing.
Furthermore, of the founding members of the group, only two are supermarkets (Walmart and Kroger). The others (Golden State Foods, Dole, Unilever, Nestle, Tyson Foods, McLane Company and McCormick) are distributors, meat processors or manufacturers.
And, while the technology exists, claiming that it will be implemented is a stretch. A lot of buy-in will be needed for it to make a difference. Network effects will give an advantage to the first mover, but will not necessarily give it victory over others that emerge. Can there be more than one platform fulfilling the same function? If so, some degree of interoperability will be necessary to avoid silos of information – not a simple task. And if not, is that not the ultimate centralization?
Blockchains make sense if distributed control is an advantage. Why that is assumed to be the case here is unclear. Could a powerful database not do the trick? IBM could maintain the ledger, make sure that only trusted suppliers participated, and assume that its reputation for reliable development will give it room to grow with the network. A decentralized approach would most likely distribute the responsibility for the input data, ensuring it complies with regulations. But which regulations?
Furthermore, blockchains are only as reliable as the data they hold. What does it matter that data can’t be manipulated once input, if the data is faulty to begin with? Supply chains are notorious for shoddy documentation requirements and practices – changing a culture of record-keeping and processes will take a lot more than a new platform.
I’m not saying that the idea is not feasible. It’s just that it is so much more complex than superficial articles like this imply. And telling the public that they can expect contaminated food to be a thing of the past is misleading. Even worse, it sets the scene for major disappointment.
According to Gartner, blockchain applications for supply chains are on the initial upward slope of the hype cycle. Articles like this lead me to believe that they are almost at the peak. When the trough of disillusionment is upon us, critics will point to how the technology has not fulfilled its promise. Development projects will be shelved, failures will be paraded and attention will move elsewhere. No-one will blame the media that helped fuel unrealistic expectations.
The world of capital markets is littered with terms that sound simple on the surface, but thoroughly confusing once you start poking at them.
Take, for instance, “equity swaps”. Easy, you swap equities with someone else, right?
It turns out that you don’t swap equities. You swap the returns that the other party’s equities give. That way you can diversify your portfolio without having to actually sell underlying holdings. Selling large holdings incurs costs and can move the market, which you probably want to avoid. Or, maybe your fund’s bylaws prohibit you from doing so. Or, maybe you would rather avoid capital gains tax. Other possible advantages include retention of voting rights (you want to retain your holding in a company but would rather have a fixed dividend than a variable one), access to illiquid markets, or being able to legally go around holding restrictions (eg. limitations on foreign funds).
So, let’s imagine you have a holding that pays you a fixed rate, the same payment every year. But you would rather a variable one. Rather than sell your fixed rate security, you enter into a swap with another party that has a holding that pays (for example) the return on the S&P 500 stock index. They are tired of so much volatility and want something more stable (or maybe they have fixed payments coming up and need to lock in those receipts).
So the two of you enter into a swap – you get the other party’s payments from their security, they get yours.
Now, just imagine the complicated and duplicated paperwork that backs up this operation.
Digitisation helps, obviously. Traiana, founded in 2000 to provide pre-trade risk assessment and post-trade solutions, is the market leader in electronic processing of over-the-counter (OTC) swap trades. It connects derivatives exchanges, institutional investors, interdealer brokers and swap execution platforms, channelling trades to clearing houses and providing analytics.
It is owned mainly by the Nex Group (formerly ICAP Ltd.), which at one stage was the world’s largest interdealer broker for OTC trading with daily transaction volume of over $2.3tn. After a tumultuous few years (which included whopping fines from the Commodities Futures Trading Commission in the US and the UK’s Financial Conduct Authority), that division was sold at the end of 2016, and Nex now focuses on market infrastructure.
Traiana counts among its investors such blue-chip firms as Bank of America Merrill Lynch, Barclays, Citigroup, Deutsche Bank, JP Morgan, Nomura, and the Royal Bank of Scotland.
Yet in spite of the presence of a clear market leader, the sector does not have a common infrastructure, leading to costly data reconciliation.
Could equity swaps benefit from blockchain technology? That’s what New York-based startup Axoni is hoping to determine.
Last year it completed a trial involving nine market firms, including Barclays, Credit Suisse, IHS Markit and Capco (a capital markets consultancy owned by FIS), as well as shareholders Citigroup and Thomson Reuters. The project established a blockchain processing network for equity swap trades using Axoni’s proprietary distributed ledger software.
One interesting aspect is the involvement of Traiana competitor IHS Markit in the trial. One of Axoni’s investors is Euclid Opportunities, the investment arm of Traiana’s parent Nex, and the two firms also both have Citigroup and JP Morgan as investors.
Although it worked with IHS Markit in this trial, Axoni has collaborated with Traiana on other projects in the past, such as a securities post-trade prototype in early 2016 and a foreign exchange one currently under development.
Could there perhaps be industry consolidation further down the line?
While equity swaps are a small part of the global OTC derivatives market, they could be considered the “low hanging fruit” of the sector for capital markets blockchain integration. The processes are complex, and the market is distributed and fragmented. What’s more, changing regulation calls for increased transparency and reporting. Coherence and coordination will benefit all participants, adding liquidity while reducing costs.
A blockchain-based platform would have the additional advantage of scalability, perhaps also including other types of swaps and offering even further efficiencies to market participants.
While blockchain exploration is ongoing in other areas of capital markets, Axoni’s equity swaps test is an interesting snapshot of a concrete use case. Furthermore, it points to how the sector will be restructured: carefully, one application at a time.
(This is the first in a series on the potential impact of blockchain technology on capital markets. Up next: FX.)
The New York Times reported this morning that tens of thousands of people who took out private loans to pay for college may be about to see their debts wiped away.
Why? Because critical paperwork has gone missing.
Judges are throwing out recovery suits brought by loan issuers because they cannot produce the relevant paperwork to prove ownership of the debts. The New York Times did some digging and found that many other collection cases also had incomplete documentation.
This could turn out to be a very big deal. The paper draws parallels between the student loan overhang and the subprime mortgage crisis a decade ago, when billions of dollars in loans were swept away by the courts because of missing or fake records.
Given that student loans have ballooned to account for approximately 7% of GDP, with more than 44 million borrowers owing $1.3tn, the hit to the economy would be sizeable if a chunk of that debt were to “disappear”. Over 10% of these loans are in default.
The default percentage could suddenly rise when word gets out that the debt cancellation only benefits those that don’t meet their obligations, ie. those against whom the lending companies bring suit. Don’t pay your student loan, get sued by the issuer and have your debt cancelled. What could go wrong? (Note: this is so definitely NOT advice, nor is it a good idea.)
That such an important sector of the economy – student lending is the second highest consumer debt category, behind mortgages and ahead of credit card and auto loans – is still dependent on paper documentation is staggering. These “lost” cases at least are shining a spotlight on the urgent need for reform.
The UK government is investigating the potential use of blockchain technology to manage student loans. The advantages include more secure documentation, less administrative overhead, greater oversight and more transparent data.
It sounds like the US could use similar help. True, the cases mentioned by the New York Times are from private lenders, which account for approximately 10% of the overall market. The troubled loans in question total about $5bn. That is still a sizeable hit, though, and the ripple effects could cause other debts to be questioned, future loans to be denied and uncertainty to deepen in a sector already trembling from the default overhang.
That the problem is due to missing documentation highlights the importance of trustworthy records. That a sector struggling to increase the repayment rate has yet to modernize, especially after seeing what faulty records did to the sub-prime mortgage sector ten years ago, is puzzling.
Hopefully the exposure of this vulnerability will trigger a re-design of the loan process. The benefits of using blockchain for the modernization are apparent, and it would provide the most future-proof solution, but other technologies could also help. The important thing is that the shift happens, because for both students and lenders, a lot is at stake.
Tucked away in the northern part of Italy, San Marino has the smallest population of the Council of Europe and claims to be the oldest still-existing sovereign state in the world, as well as the oldest constitutional republic.
Telecom Italia Mobile has signed an agreement with the government of San Marino to upgrade the 4G system in preparation for state-wide 5G trials starting in 2018. 5G testing is ongoing in other regions such as South Korea, China and the US. However, they tend to be small trials lacking the pressure of real-world use cases. San Marino’s small size makes it the ideal site for first nation-wide test case (although it should be noted that AT&T plans to roll out 5G in test cities such as Austin and Indianapolis, each with approximately 30x the population of San Merino).
As its name implies, 5G is a step above 4G, which is what most developed countries have installed in the cities (with 3G still the main carrier technology in the countryside), with speeds up to 10x faster. 5G promises broader coverage, faster downloads and lower latency.
While the first two characteristics sound great from a user perspective, the latter is essential for effective deployment of the Internet of Things (IoT). Latency refers to the time elapsed between one node sending a signal and another receiving it. If we are going to have a myriad of gadgets exchanging data, we need to know that the transfer is fast, especially if payments are made or if decisions are based on the information.
Driverless cars, for example. Sensor-based shopping. Smart gadgets reacting quickly (lights turning on, doors opening, alarms alerting).
With sensors in close proximity to the central server, latency is not usually a problem. But with sensors distributed in a wide area, it would be, especially if the connection is to a blockchain.
I’ve written before on how blockchain technology can help the Internet of Things, but since that was a while ago, a brief update: a network of gadgets connected to a central server is more vulnerable than one connected to each other. It’s not only the single point of failure that is the concern – the possible manipulation of data, relatively simple when that data is centralized, is also a significant risk.
On a blockchain, however, gadgets share information with each other. “Smart contracts” can help to execute actions dependent on that information, and verification is carried out by the network itself. The security is much more hack-proof than traditional databases. And regulators can be “looped in” to the network, facilitating compliance and approval.
Blockchain IoT networks can also give rise to new business models, with “things” being owned collectively, and being economically self-sustaining. For example, a driverless car can both earn (by ferrying passengers) and spend (on tolls, parking and maintenance) its own money.
This scenario is not possible, however, without an upgrade in connectivity. 5G could offer that.
Once the new service is rolled out, San Marino perhaps could also become a testing ground for distributed IoT networks, and other latency-sensitive blockchain applications.
So, the nationwide trial is a big step forward not only for mobile networks but also for blockchain. While many experts believe that we won’t see 5G rollout until the end of this decade, we are getting closer. And San Marino, small and steeped in tradition as it may be, could end up helping pushing development of these two key technologies forward.
A few weeks ago, CoinDesk published an article about a blockchain project in Kazakhstan. The central bank is testing a blockchain-based mobile app that will allow investors to buy central bank debt directly, without passing through a broker.
I puzzled over this, as I couldn’t figure out why they needed a blockchain for that. One issuer and a wide range of buyers doesn’t need a blockchain. A database could handle that.
Blockchains aren’t designed for vertical systems, with one entity at the top.
The article went on to say that long term, the platform could be used for IPOs.
Ah, there you have it. Other entities could be invited to join the platform and use it for issuing securities, either equities or debt.
So, is Kazakhstan effectively creating a new financial market? The advantages for using blockchain technology for that are relatively obvious (fewer middlemen, faster settlement, lower costs, greater transparency).
A while ago the government of Kenya used the M-Pesa mobile money system to issue a bond. That trial was intriguing in that it facilitated financial inclusion by offering citizens with very little money the opportunity to not only earn a return on the little they have, but also to purchase their first saving product. The minimum investment was KSh3,000 (approximately $30), and it was open to all Kenyans with an M-Pesa mobile money account, over half the population.
But, the government didn’t use a blockchain. There was no need to, and not just because they already had an efficient distribution in place. They also didn’t need to because the relationship was one-to-many (issuer to buyers).
Blockchains are good for many-to-many relationships. If the Kazakh project does indeed end up including other issuers, the trial makes sense. But for now, it doesn’t. Blockchain’s potential won’t be tested with one central issuer.
It also doesn’t make sense to combine IPOs with debt issuance – the two have very different mechanisms and regulation. Inviting other issuers to take advantage of the new processes would have efficiencies – but that doesn’t seem to be a main priority.
So, despite the declared expansion intentions, I still found the incongruity puzzling.
Then an “out there” thought occurred to me. Perhaps what the central bank really wants is for the bonds to circulate. On a blockchain platform it would be relatively simple. Holders trade, and the ownership changes, smoothly and without intermediaries. The ease, especially on mobile, could encourage liquidity and boost circulation.
Why would a central bank want its bonds to circulate?
Perhaps so that they could become a type of currency, exchanged in payment for services received from other institutional platform participants – utilities, for instance (electricity bill?), education (a masters’ degree?) or even taxes.
There a blockchain platform starts to make a lot of sense. Regulated institutions would be “invited” to “open an account” to which bonds could be sent. Bondholders could treat their securities as a type of bank account, earning interest when they are still and being accepted in exchange for something else (fiat money or services) when they circulate.
Using central bank debt as money? Well, isn’t that what we’re doing now, with bills and coins?
Decentralization and fragmentation – not two words that you normally associate with currencies (or would want to, given the implied chaos). But, maybe it’s happening.
An experiment currently under way in London could reveal whether or not our relationship with money can change enough for local currencies to become possible.
Israeli firm Colu – known for their “coloured coins” platform – recently launched the “Local Pound, East London” (LPEL). As its name suggests, it is a digital currency specifically designed for circulation amongst the businesses of East London.
How is this different from the normal pound? And why bother?
The aim is to boost the local economy. The LPEL plans to do this by encouraging users to spend locally – that apparently keeps money circulating in the area, rather than have it sent back to head office in Stockholm (or wherever).
The accompanying app is meant to help residents to discover (or “re-discover”?) local businesses, and to help those businesses manage transactions.
To be honest, it’s not very obvious what the advantages are. Merchants can use the app to manage transactions, which means they don’t need to invest in a PoS system (which they almost certainly have anyway).
It works just like “normal” digital money – it can be bought (at par with the pound) using credit cards or bank transfers. This raises the question as to why the users won’t prefer to use “normal” digital money. I haven’t been able to find information on additional advantages that the LPEL platform offers (like discounts or more direct marketing, for instance?).
The “hook”, according to press reports, is that users feel good supporting local economies. (Um, maybe some, but I wouldn’t count on many.)
Additional resilience could be a factor – blockchains tend to have greater security than centralized systems. But, centralized payment rail outages are rare enough for this reason to lack conviction.
The LPEL has a sister operation in Liverpool – the Liverpool Local Pound went live in late 2016, and currently has 16,000 registered users and approximately 30 merchants on the network. Given that Liverpool has almost 500,000 people, it’s a stretch to claim that it’s a resounding success.
But, it’s good to see that the enthusiasm continues regardless, because sometimes a good idea fails to get traction simply because it’s time has not yet come.
Whether or not the LPEL takes off is beside the point, though. What really matters here is feedback, to iterate the design and to hone the message.
In interview with CoinDesk, co-founder Mike Smargon said that the objective was scale. Colu recently unified its various Tel Aviv local coins into a generic Tel Aviv coin. Not that there seem to be a lot of users there, either. In the same interview, Smargon revealed that Colu has about 50,000 users across its coins, which – subtracting Liverpool participants – leaves about 37,000 users for a city of over 3.7 million.
I puzzled for a while on how unifying coins could help “local” businesses, and on how you can combine scale with fragmentation.
But then it dawned on me: it’s actually not about small communities. It’s about testing the advantages of central bank digital currencies, starting small and working up. A smart strategy.
The company is in the process of applying for an e-money license in the UK, so I imagine we can expect further local launches. It also recently announced partnerships with asset brokerage firm eToro and trading app Lykke, and is a member of blockchain consortium Hyperledger. So we will most likely see interesting innovations that open our eyes to the potential of local currencies.
Even if practicality continues to be an issue, the idea of combining the advantages of community with the scope of large scale is intriguing.
And not only in the realm of finance and commerce. Let’s have a think what this could do to politics and governance, too.
I was startled to see yesterday that China’s freight activity has been in contraction for the past six months. Given the country’s push to increase its global footprint, and its dependence on manufacturing and exports, this doesn’t look good.
So I did a bit more digging and saw that the Baltic Dry index, which assesses the price of shipping raw materials by sea, shows that freight activity overall has been falling sharply since April (which did not happen in the previous two years), and is well below 2014 levels.
Global shipping is slowing down?
All the more reason, then, to reduce costs and streamline processes, as fast as possible.
With several enterprise firms around the world examining the potential impact of blockchain technology on supply chain logistics, progress is being made.
Microsoft’s Project Manifest platform plans to track everything from auto parts to medical devices, and as of May 2017 had 13 members, including Auburn University and supply chain tech firm Mojix. One pillar of the project is the connection of RFID scanners to the ethereum blockchain. Previously, Auburn University’s lab succeeded in combining RFID technology with the electronic data interchange transaction standard that improves supply chain traceability using centralized databases. It will be interesting to see what impact decentralized ones will have.
Earlier this year, the Danish shipping giant Maersk revealed the completion of its first live blockchain trial, aimed at reducing the amount of expensive and time-consuming (not to mention error-prone) paperwork that a global supply chain requires. A 2014 study commissioned by the company showed that an average of 200 separate transactions, passing through the hands of 30 counterparties, are involved in the shipment of a product using a shipping container. A blockchain platform can streamline the verification and transfer of the relevant documents, giving the counterparties access to the real-time information they need to process their part.
After a difficult year which saw profits decline, plus the rocky outlook for global shipping signalled above, the cost reduction a live platform could offer would be welcome.
Late last year, the port of Rotterdam formed a blockchain consortium focused on logistics, along with ABM Amro, Royal FloraHolland (which ships flowers) and several research institutions. The group plans to focus on testing the sharing of contractual and logistical information.
And there are many others.
However, given the obvious inefficiencies, and the shaky position of world freight – not to mention its importance in the global economy – it is surprising that there aren’t more.
You know the adage about complex systems not changing until they absolutely have to? That time may have come.
I get so annoyed when blockchain hypesters bang on about how “blockchain will change the world”, and it’s the “most revolutionary technology to emerge since the internet”. (And I say this as an enthusiast who is excited about what it can do.)
Why does it bother me so much? Because they are empty claims. Sure, the world will change. But that will happen even without blockchain technology. Stuff changes.
And, blockchain won’t change everything. Bagels will probably still be the same (I hope, anyway). African safaris will probably continue to run as always, and childbirth (unfortunately) is unlikely to see many blockchain efficiencies.
So, enough with the empty claims that only serve to turn thinking people away, once they’re tired of rolling their eyes.
And anyway, to put blockchain fans (like myself) in their place, check out this chart from Axios:
Investment in AI is dwarfing that in blockchain, even including ICOs. (Blockchain investment is not included in the graphic – see? blockchain isn’t even in the top three of “next-generation technologies”.)
According to CoinDesk’s State of Blockchain 2017 report, blockchain investment in 2016 reached $500m. Axios’ chart shows that investment in artificial intelligence in the same period reached $3.6bn… Over seven times as much!!!
Even when you add in the digital token frenzy of 2017, investment in AI businesses so far this year continues to outpace that in blockchain businesses by a factor of more than three.
If blockchain were the “most revolutionary technology” as some in my sector like to claim, wouldn’t smart money be overwhelmingly flowing there?
Don’t get me wrong, I strongly believe that blockchain technology will have a big impact on processes, structures and even philosophical issues. And I am excited to work in this space, I wouldn’t want to be anywhere else. But, it’s not the only show in town. And keeping a big-picture perspective will help us to see beyond the knee-jerk application and the “me-too” ICOs, and truly understand what a profound role it will play in the evolution of societies and systems.
It will also help us to understand that the impact will be uneven. And that the technology is just part of other profound changes that actually began some time before bitcoin appeared.
With that understanding, we can hopefully waste less time, and get down to some real work.
While looking into passports for sale the other day (not for me, you understand… not yet, anyway), I came across a name that I had heard before but knew very little about. So I did some digging and almost had my mind blown.
The Sovereign Military Order of Malta – also known as the Knights of Malta, or Knights Hospitaller – is a religious order with ties to the Holy See that dates back to the early 12th century. But, it is also an independent, sovereign subject of international law.
Its mission is still, almost 1000 years later, to care for the sick and infirm, especially those displaced by conflict. As well as its 13,500 members, it has 80,000 volunteers and employs approximately 25,000 medical personnel.
So, it is an NGO with sovereign status. It can negotiate with other governments as a sovereign entity. Other global NGOs such as Caritas, Greenpeace and Médecins sans Frontières need the backing of a sovereign power. The Knights of Malta don’t, because they are one.
It doesn’t have any territory, except for two buildings in Rome, both of which have extraterritorial status (which means that they are technically not part of Italy – much like embassies).
In 1998, however, it signed a treaty with Malta for the use of the upper portion of Fort St. Angelo in the city of Birgu (for the next 99 years). Technically, this will also be a sovereign territory, but the Order will not be able to grant asylum to anyone, and Maltese law applies. At the moment, it appears to be used for historical and cultural activities.
And get this: the Sovereign Military Order of Malta can issue stamps, currency and passports.
Three of them, to be precise. The Order issues passports to the Grand Master, the Deputy Grand Master, and the Chancellor of the Order.
It has diplomatic relations with over 100 states, including the European Union, which means embassies. It also has observer status at the United Nations (along with the Red Cross, the Council of Europe, the African Development Bank, the European Organization for Nuclear Research and a host of other not-for-profit academic and regional associations), which entitles it to participate in the work of the UN General Assembly.
What I find most intriguing about this is the concept of sovereignty being granted to an organization that has no territory and no citizens (sort of). True, it was granted almost a millennium ago, and no government has dared to attempt to alter that.
Personally, I hope that they never do. I find the mix of chivalry and honour, combined with the long reach of history, totally captivating.
And the notion that sovereignty does not always require the traditional parameters of borders and citizens opens up a new understanding of what could become possible as identity is redefined.
According to an article I stumbled on in Fortune, approximately $2bn a year is spent on buying citizenship. The exchange is usually dressed up as real estate or business investment and a certain minimum is generally established, but the purpose is clear, and an increasing number of nations are making good money on this.
For example, an IMF report from 2015 puts the income from selling passports for St. Kitts and Nevis at about 25% of GDP. While the economy is small, that is still a staggering statistic.
A recent report in the Financial Times highlighted this growing global phenomenon from a tax perspective:
“The search for second passports and offshore havens is beginning to take on a last-helicopter-out-of-Saigon urgency as capital controls, tax reporting and visa procedures tighten up around the world.”
Other reasons cited are political instability and fear of persecution. According to the IMF, there has recently been a surge of wealthy Chinese and Russians buyers, with an increasing number coming from the Middle East, where tax avoidance is obviously not the issue.
This raises the question: why shouldn’t citizenship be a commodity?
What does citizenship actually mean?
According to Merriam Webster, a citizen is “a native or naturalized person who owes allegiance to a government and is entitled to protection from it”. So, it’s an exchange of allegiance in exchange for protection.
Why, then, is it not transferable? If your state is not protecting you, why can’t you transfer your allegiance to one that will?
Because citizens are considered resources by the countries they are born into. They work, which contributes to economic development. And they pay taxes, which contributes to public finance. This “what’s mine is mine” mentality also explains the concept of capital controls imposed by some countries to stop citizens from sending their wealth abroad.
In the increasingly free market world in which we live – in which we can choose who gives us our electricity, phone service, groceries – it is extraordinary that a similar philosophy isn’t being applied to citizenship. If governments actually had to convince (rather than force) their people to stay, it’s very likely that there would greater efficiency and less corruption in government spending.
If market incentives came into play, the role of government could evolve to focus more on protection and service. Tax rates would be more directly associated with the amenities offered, and citizenship would become a matter of proud choice rather than limiting obligation.
A totally free market concept, though, would perhaps leave the geopolitical balance vulnerable to instability. If a country cannot, for whatever reason, compete with another then the unstoppable flow of people would leave one poor and bankrupt, which would open up the temptation of annexation or even invasion.
And it’s not hard to envision circumstances beyond a government’s control. Natural disasters, a lack of natural resources or poor geography could condemn a nation to poverty and chaos, no matter how pure the government’s intentions. The resulting flood of people to neighbouring regions would put a strain on the receiving country’s resources in the short term, until the entrants find their feet and start contributing.
Along with aid from international organizations, nations depleted by exodus could be helped by the offering appealing amenities at relatively low prices. Attractive investment opportunities, for example, or education facilities, or simply relative stability. As with businesses, the affected governments would need to develop a differentiating offering to attract citizens.
As the article in Fortune pointed out, the possibility of buying citizenship exists, but the choices are limited and available only to the very rich.
Now, bring into the picture the concept of blockchain-based sovereign identity, in which a person’s official name does not depend on a state-issued document, but can be held securely and electronically by each individual. No government would have the right to take that name away, or to pretend that the person does not exist – a blockchain-based solution could ensure that. This name could be assigned the nationality it chooses. It would also reveal any financial or even criminal history, if applicable, which – on a blockchain-based solution – could not be retroactively altered.
Add the financial commitment of a purchase, and you can begin to imagine a whole new business model. Individuals that cannot afford the initial purchase price could enter into a financing agreement with one of a range of approved institutions, and pay the lender back through future earnings, possibly with the help of subsidies from the receiving government.
This could lead to selection bias – only those with reasonable prospects would be welcomed by their chosen domicile. After all, criminal records would be harder to hide. This could lead to some unfair calls, but since the bulk of anti-immigration sentiment usually stems from fear of increased crime, some sort of filter could end up making immigrants more readily accepted by their new neighbours. Those that through no fault of their own end up being blocked could perhaps be eligible for additional aid and/or the opportunity to seek a sponsor.
Education would also be easier to prove, as verified certification could be added to the identity’s history. Governments could even end up “bidding” for the best-educated immigrants.
The paperwork involved would be eased by the validation inherent in a blockchain platform. And the immigrants would have a much easier time integrating, as access to financial services, accomodation and utilities would be helped by reduced documentation and history requirements.
Cost vs benefit? It would be up to individual governments to decide what they offer, and at what price. This quasi-free market approach would have effects beyond that of economic value. It would make governments more conscious of their role, and see it less as a privilege and more as an opportunity. (Imagine if public salaries were tied to the results of satisfaction polls…). Also, citizens around the world would be more conscious of what their government does for them.
Obviously the idea is a lot more complicated than the brief suppositions laid out here. But passport shopping is already an economic fact. Should it be only available to the very rich?
Blockchain technology could offer the breakthrough that will enable the activation of sovereign identities tied to convenient nationalities – while at the same time incentivizing governments around the world to better understand what their purpose is.