Chris Skinner – author of the bestselling book Digital Bank – recently published ValueWeb: How FinTech firms are using mobile and blockchain technologies to create the Internet of Value. The ‘”ValueWeb” covers the rise and importance of blockchain technology, describing it as a key technology for authentication and transactions. Skinner positions blockchain technology as a means to an end, with the ValueWeb being the ultimate outcome. The ValueWeb, being closely linked to to the Internet of Things, allows machines to trade with machines and people with people anywhere, in real-time and at virtually no cost.
The blockchain can be used as a shared ledger for shared economies. One of the things I liked about the ValueWeb book is how Skinner removes all sense of buzz around blockchains by stressing the fundamentals which underpin this new technology: “The blockchain creates a marketplace for globalised value exchange that is trusted, secure and irrevocable.”
These are the main things that I took away from reading Value Web:
- Mobile as an authentication tool – Skinner makes the point that mobile “makes invisible banking visible.” He also explains how mobile serves as a very effective authentication tool, based on four key mobile attributes (see Fig. 1 below).
- Africa shows the way to the future – The book’s chapter titled “Africa shows the way to the future” felt the most inspiring. In this chapter, Skinner zooms in on the success of M-PESA in Kenya. M-PESA is a pioneer with regard to facilitating mobile money transfers between people in Kenya, through mobile network operator Safaricom, a subsidiary of Vodafone. Through M-PESA, a mobile wallet, the mobile phone is acting as a ‘value exchange mechanism’, making it easy for people to send and receive money. M-PESA’s “agent network” is the key component here. Agents in Kenyan towns take money and text the agent in the location the money needs to be delivered. The agent in the receiving location gets the text message and then issues cash to the target recipient.
- Digital currencies – The ValueWeb is based upon two key technologies. Firstly, mobile, which enables people to exchange value in real-time and facilitate real-time authentication (see point 1. above). Secondly, digital currencies, to provide a store of value to exchange. Bitcoin is the key value currency which started it all. The key thing to know about bitcoins, and the different variations of this cryptocurrency, is that it was the first ‘enabler’ of online value exchanges, conducted in real-time and at very low processing cost. Skinner offers a good overview of what the bitcoin is (see Fig. 2 below).
Main learning point: In “ValueWeb”, Chris Skinner does a great job of demystifying some of the buzz around blockchain technology and bitcoins. By focusing on the value that people can now exchange in real-time, Skinner paints an exciting picture of great opportunities that are are already starting to happen.
Fig. 1 – Mobile as an authentication tool, four key mobile attributes – Taken from: Chris Skinner, “ValueWeb”, p. 47
- Tokenisation – You can check the customer is who they say they are by locating if they have a second token – a mobile registered to their account – with them.
- Geo-location – You can geo-locate customers using location. For example, a company called XYVerify does this using telecom masts, rather than a mobile device. The system will establish a person’s location based upon where their signal can be located between different mobile transmitting masts.
- One Time Passwords (‘OTP’) – You can authenticate who the customer is interactively OTP by text messaging. An interactive text or app-based OTP process means that mobile can offer a great second level authentication tool.
- Mobile biometrics – Using mobile biometrics can become a very effective way to authenticate customers. For example, Banca Intesa in Spain was using mobile apps for iris recognition and Voice Commerce offer voice verification by mobile.
Fig. 2 – A quick overview of bitcoin – Taken from: Chris Skinner, “ValueWeb”, pp. 81-86
- New bitcoins are generated by a network bode, and these network nodes are created each time a solution is found to a specific mathematical problem.
- The people trying to solve these math problems are called miners, and each time they successfully solve the problem they create a new bitcoin.
- This math challenge is so difficult to solve that there are businesses dedicated to this, with data centres running thousands of computers focused upon bitcoin mining.
- The reason they do this is that each tine a bitcoin is created, the company or person who solved the problem receives 25 bitcoins, which were $250 each as of August 2015. Hence the bitcoin miners do this to earn virtual currency rewards.
- Before you can buy any coins you must create a wallet to store them. You can do this by installing the bitcoin client, the software that powers the currency, or use an online wallet, where this data is stored in the cloud.
- A bitcoin transaction is recorded on a public ledger system called the blockchain. The blockchain is a shared ledger system that means all of our bitcoin wallets can be see publicly.
- No one knows who made the transaction, but the fact there is an electronic shared ledger ensures transactions cannot be made twice.
- All confirmed transactions are included in the blockchain. This way, bitcoin wallets can calculate their spendable balance and can be verified to ensure they are spending bitcoins that are actually owned by the spender. The integrity and the chronological order of the blockchain are enforced with cryptography.