BUILD­ING BLOCK CHAINS

The ben­e­fits of elec­tronic cur­rency for trav­ellers

Business Traveller - - CONTENTS - WORDS JAN­ICE LE­UNG HAYES

Most peo­ple have heard of Bit­coin by now – the mys­te­ri­ous elec­tronic cur­rency cre­ated by “Satoshi Nakamoto”, a nom de plume for the in­ven­tor, or in­ven­tors, of Bit­coin. By cre­at­ing Bit­coin, Nakamoto also in­vented the con­cept of the blockchain: a database that is im­mutable, se­cured by ad­vanced cryp­tog­ra­phy (en­cryp­tion and codes) and backed up with iden­ti­cal copies of in­for­ma­tion on a global net­work of com­put­ers. This net­work is not con­trolled by a sin­gle author­ity, and has so far proven im­pos­si­ble to hack. The tech­nol­ogy is com­pli­cated, but the con­cept is sim­ple: blockchain is es­sen­tially a ledger or database that is open and de­cen­tralised, and al­lows for the cre­ation of cen­sor­ship­proof, se­cure, bor­der­less, paper­less cur­rency that can’t be tam­pered with or changed. Bit­coin was the first, but it’s been fol­lowed by many oth­ers, re­ferred to as “alt­coins”, in­clud­ing Ethereum, Lite­coin, Dash and Monero.

IM­MUTABLE SYS­TEM

Se­cu­rity has al­ways been a con­cern in the world of in­ter­net pay­ment, but ex­perts like Leon­hard Weese, founder of the Bit­coin As­so­ci­a­tion of Hong Kong, feel that it’s the con­ven­tional bank­ing sys­tem that is in­se­cure.

“Credit cards are a bit of a mess from a se­cu­rity per­spec­tive,” says Weese. “All the in­for­ma­tion you need to spend on a credit card is writ­ten on the card. Any­one who ob­serves it can use it.”

The break­through of blockchain comes down to “trust­less-ness”, ac­cord­ing to Clif­ford Choi, tech­ni­cal ad­vi­sor at Emurgo, a blockchain ven­ture fund and in­cu­ba­tor. “You don’t own the data you give to Face­book,” says Choi, “you just have to trust them with it if you want to use their ser­vices. It’s the same for the money in your bank ac­count, though most peo­ple don’t read the small print.”

With a cur­rency on a de­cen­tralised blockchain, such as Bit­coin, there’s no need for trust in an in­sti­tu­tion – what the ledger shows is yours and you can store and spend it with­out the need for a bank.

NEW CUR­RENCY EX­CHANGE

For trav­ellers, one im­me­di­ate ad­van­tage of blockchain is cur­rency ex­change. Blockchain en­ables over­seas trans­ac­tions to be com­pleted with­out pay­ing bank fees or in­flated ex­change rates, as trav­ellers can ex­change cryp­tocur­rency for lo­cal cur­rency with fewer in­ter­me­di­aries.

At present, this can be done at cryp­tocur­rency ATMs or by phys­i­cally trad­ing with some­one on the ground. A num­ber of Fin­Tech so­lu­tion providers are rapidly emerg­ing to help fa­cil­i­tate this. Bitspark is one such com­pany, which of­fers 100,000 phys­i­cal lo­ca­tions around the world for peo­ple to send and re­ceive cash via blockchain tech­nol­ogy.

Dig­i­tal cur­rency ex­change ven­tures can also be used by busi­nesses trad­ing in Bit­coin to ex­change the value into their home cur­rency. On­line travel agency Ex­pe­dia has started to ac­cept Bit­coin on this premise, us­ing a com­pany called Coin­base to ex­change value from its Bit­coin trans­ac­tions to fiat cur­rency.

Rafael Haux­ley, au­thor of Bit­coin vs

The 2018 Re­ces­sion, who is cur­rently shoot­ing a Net­flix doc­u­men­tary about the cryp­tocur­rency’s im­pact on the world, says: “The most ob­vi­ous in­con­ve­nience of us­ing fiat cur­rency is how much money I lose con­vert­ing from my home cur­rency to lo­cal cur­rency. There’s a rea­son that cur­rency con­vert­ers of­ten sit in ex­pen­sive tourist lo­ca­tions – they’re mak­ing money, hand over fist. By us­ing BTMs [Bit­coin ATMs] and lo­cal Bit­coin sell­ers and buy­ers, I’ve of­ten saved enough on fees to en­joy a nice din­ner or two.”

Mov­ing and ac­cess­ing money via blockchain can elim­i­nate the woes of los­ing a bank card, hav­ing your ac­count frozen while over­seas, or hav­ing to travel with large bun­dles of cash. Weese also points out the ben­e­fits of blockchain could pro­vide an out­let for the emer­gent mid­dle classes and en­trepreneurs in coun­tries with­out a func­tion­ing bank­ing sys­tem.

Blockchains en­able over­seas trans­ac­tions with­out pay­ing bank fees or in­flated ex­change rates

DAPPLICATIONS

Blockchain is also poised to rev­o­lu­tionise “peer-to-peer” sys­tems with more trans­parency and trust.

“You can build apps like Airbnb and Uber [on the blockchain], but we call them ‘dapps’ be­cause they’re de­cen­tralised ap­pli­ca­tions – there’s no cen­tral en­tity,” says Stew­art Macken­zie, co-founder of Frac­tal­ide, which cre­ates tools for non-tech­ni­cal users to build dapps.

“Ex­ist­ing so-called ‘peer-to-peer’ ser­vices such as Uber and Airbnb are not ac­tu­ally peer-to-peer. They’re ex­tremely cen­tralised – you pay a cen­tral en­tity, you use their servers, they con­trol all the data so you need to trust them with ev­ery­thing; you need to trust that they haven’t ma­nip­u­lated the data, that they’re able to pro­tect your in­for­ma­tion from hack­ers, that they’re not sell­ing your data, and so on.

“Cen­tralised en­ti­ties, like com­pa­nies, are easy tar­gets. You can lobby against them, as taxi unions and ho­tel groups have done. Peo­ple who rely on Airbnb and Uber can sud­denly find them­selves with­out ac­cess to these ser­vices if they’re in a ju­ris­dic­tion where the gov­ern­ment de­cides to block →

them. This is also a huge prob­lem for peo­ple who rely on the peer-to-peer econ­omy for their in­come.

“You can think of a dapp like any other app, but in­stead of run­ning on a com­pany’s servers, it runs on a pro­gram­mable layer of the blockchain. This gives it all the ben­e­fits of be­ing trust­less and de­cen­tralised. When you build things on a blockchain like this, mak­ing use of what’s called ‘smart con­tracts’, the code be­comes in­con­tro­vert­ible law. What the code says will hap­pen is what will hap­pen.”

For ex­am­ple, if you were rent­ing an apart­ment on a dapp, Macken­zie says, “the dapp might re­quire that enough of your cryp­tocur­rency be locked to pay for the book­ing and that the funds be re­leased either back to you or to the ac­com­mo­da­tion provider at a spe­cific date de­pend­ing on whether or not cer­tain cri­te­ria are met be­fore that time. It could de­pend on any­thing; maybe you want to book ski ac­com­mo­da­tion but get a cer­tain per­cent­age of the money back if there’s no snow. With blockchains like Car­dano com­bined with Frac­tal­ide, build­ing things like this be­comes very easy.

“We haven’t re­ally seen mass adop­tion of dapps yet, but we are fast ap­proach­ing a tip­ping point,” he con­cludes.

TRAVEL IM­PLI­CA­TIONS

Roughly 260 air­lines world­wide, plus ho­tels, on­line travel agents and other travel ser­vice providers, have al­ready be­gun to ac­cept Bit­coin and other cryt­pocur­ren­cies (“alt­coins”).

As Haux­ley ex­pe­ri­enced: “I could buy air­line tick­ets with Surf Air, book a ho­tel via Ex­pe­dia, pay di­rectly for my burger and beer at brew­pubs in Hong Kong, and with­draw my money in lo­cal cur­rency around the world us­ing BTMs or lo­cal Bit­coins.”

A ma­jor dis­rupter, how­ever, is the travel-fo­cused dapp Wind­ing Tree, which is tar­get­ing tra­di­tional mid­dle­men on­line travel agen­cies, such as Ex­pe­dia, by team­ing up di­rectly with providers in­clud­ing Lufthansa and Air New Zealand. With Wind­ing Tree, a travel agent or in­di­vid­ual trav­eller could, for ex­am­ple, have real-time ac­cess to seats on Air New Zealand flights with­out go­ing through an in­ter­me­di­ary, thereby cut­ting costs and lag time. Wind­ing Tree is also con­nect­ing trav­ellers to ho­tel and travel guide providers.

Other pos­si­bil­i­ties in­clude keep­ing track of loy­alty pro­grammes for ho­tels and air­lines, which can be an area fraught with is­sues and er­rors. If all air­lines in a global al­liance were to do tick­et­ing and air miles on a shared blockchain, there would be no need to trust each other and the trans­ac­tions would be much sim­pler and more ef­fi­cient, says Choi.

One new en­trant tack­ling this area is Sand­block, which aims to en­able travel providers to cre­ate their own loy­alty to­kens. These could be traded for brand re­wards or con­verted into fiat cur­rency.

Mean­while, other start-up ven­tures are tack­ling spe­cific trav­eller woes, such as queue­ing at air­ports and more ef­fi­cient pro­cess­ing of per­sonal data to stream­line se­cu­rity checks.

FU­TURE PROSPECTS

As an emerg­ing tech­nol­ogy, blockchain has colos­sal po­ten­tial but is still lim­ited in prac­tice. Weese re­calls a time in Am­s­ter­dam when a friend’s HSBC ac­count was switched to the Union­Pay sys­tem and he was un­able to ac­cess his ac­count. “I was able to lend him a few thou­sand dol­lars-worth of Bit­coin, which he traded for Eu­ros, but it was lucky for him that I was there and able to make the trade. Bit­coin is not quite ‘there’ yet, where it’s re­ally use­ful in prac­tice. It de­pends on who you are and where you are.”

Choi agrees the tech­nol­ogy needs to ma­ture, and points out this is al­ready hap­pen­ing: “Bit­coin uses the first gen­er­a­tion of blockchain. To this day, it’s still the most se­cure which makes it great as a store of value, but you can’t do much else with it. It’s like the un­der­ly­ing ar­chi­tec­ture of the in­ter­net and the first static HTML web­sites of the late 1990s.

“Ethereum (an­other type of blockchain) came along later and al­lowed more func­tion­al­ity – and now we’re just start­ing to see third-gen­er­a­tion blockchains, like Car­dano, which can power the blockchain equiv­a­lent of Face­book, Google, and your favourite apps.”

Whether you like it or not, Haux­ley says the blockchain way of life is com­ing. “I choose to live off my Bit­coin. But for peo­ple who aren’t choos­ing to be af­fected, even they’ll start notic­ing within the next five years. Trav­ellers will cer­tainly see the ben­e­fit in five years or less.”

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