We commonly associate the term ‘Blockchain’ with BitCoin and cryptocurrencies. But is that all to it? Not so.
So quick question, anyone here really know what Blockchain really is? Or does anyone think it’s some fancy new technology that Bitcoin uses?
Like, it’s just some code. Who cares what it really is, amirite?
While Blockchain is commonly associated with cryptocurrencies, its uses far outstrip that singular point. Malaysia, like many other countries, is now seeing the benefits of the tech and are slowly starting to adopt it for their own uses.
But first, what is Blockchain?
Blockchain is a cryptographic distributed ledger that is comprised of immutable, digitally recorded data in packages called blocks that are ‘chained’ together so that it can be shared and accessed by anyone (the public) with the appropriate permissions, or the ‘key’.
In layman terms, it means that the digital information aka the ‘block’ that is stored in a public database – ‘the chain’. Block and chain. These ‘blocks’ will then store information like transaction dates, time, purchase and amount in it with a corresponding unique digital signature.
These blocks are then strung together, creating a chain of information stored in a shared database that’s stored across many different locations, without a centralised version, making it vastly more secure than other forms of storage. The decentralised ledger also becomes a system for recording and managing property rights as well as enabling the smart contracts to be duplicated if records or the smart key is lost.
Blockchain: A Critical Development in Malaysia
Malaysia needs to take advantage of this new form of technology by exploring the potential application within its markets, although admittedly it is lagging behind in its adoption compared to other countries.
Currently, the country does not have any regulations or an outright ban on the new tech and its application.
Instead, the Securities Commission Malaysia (SC) has taken steps to incorporate a pilot project involving blockchain, it shows that it’s a good sign of the development in our nation.
SC will use the technology to provide more clarity for OTC, and unlisted market space which is largely considered to be vague due to the lack of information available currently.
The SC Chairman, Tan Sri Ranjit Singh has also mentioned that they would be further working closely with Bank Negara Malaysia in developing a framework for blockchain that will regulations and guidelines.
Other than that, key sectors in Malaysia, such as the financial and agricultural sector are starting to adopt the tech for further enhance their operation, productivity and efficiency.
Blockchain Revolutionising Financial Sector
Admittedly, the best use for the tech is in finance and security systems, such as international remittances and banking. The tech’s decentralised system acts as a real-time transaction service, reducing the need for banks to act as an intermediary and reducing the time spent on each transaction from days to mere seconds.
Maybank CEO Datuk Abdul Farid Alias has voiced tentative hope that the tech will be useful in the future, noting that it is an exciting opportunity but remains impractical at the moment.
“In fact, we have tested blockchain in Maybank and it works like [a] charm,” he says.
Another area under the financial sector that has high potential to grow with the adoption of blockchain technology is Islamic banking.
The Syariah-compliant banking, accounts for 28% of the country’s financial sector, with the country aiming to grow that to over 40% in the coming years.
Under the Syariah law, it is forbidden to collect interest, and any debt created must be backed by material goods such as gold. Blockchain, with its strong anti-hacking defences can help mitigate these costs while allowing banks to remain compliant to Islamic laws.
Still, there are tentative acceptance within the wider Islamic banking community as firms in Dubai and the Middle East are looking to peg physical gold to cryptocurrency units as a workaround.
Solving An Ethical Dilemma In Agricultural Sector
Another interesting use for blockchain is in the agricultural sector, specifically, the palm oil industry. The palm oil industry has been a contentious one, with many in the western world condemning its existence due to illegal land and forest clearing and its effect on the environment.
However, palm oil is the country’s biggest export, accounting for nearly half the agricultural income generated.
With such heavy reliance on palm oil, the Malaysian government is looking into regulating the industry. One of the ways suggested by recent news reports are via certification for its products and allowing it to be done so on blockchain.
Besides allowing an automatic end-to-end tracking across the value chain, the tech will enable digital identity tracking which is traceable, with immutable data records, transparency for stakeholders and also gives accurate information to end consumers.
The industry will also benefit as Managing Partner of Lardi & Partner Consulting GmbH, Strategy and Business Advisory, Kamales Lardi says small stakeholders will gain irrefutable credibility as a sustainable supplier of palm oil and reduce costs and production waste while increasing production through a real-time infrastructure.