The Dutch fascination for Bitcoin and Blockchain
Many companies have more and more data to manage. They also have to worry about security risks and other issues when it comes to analyzing and sharing data. Some of those companies are now turning to blockchain to help solve some of these problems.
If you're familiar with Bitcoin, the cryptocurrency based on blockchain technology, you might have heard of the Dutch man who sold all his family's possessions to buy the virtual coins. Didi Taihuttu, a 39-year-old father of three children sold his spacious house, invested everything in bitcoin, and now lives with his family in a holiday chalet on a campsite.
The Netherlands seems to be one of the pioneers when it comes to Bitcoin adoption. Over the first nine months of 2017, trading platform BTC Direct registered 44 thousand Bitcoin transactions by Dutch customers in which a total of over 25 million euros was spent. And that's just one trading platform.
Research agency TNS Kantar estimated that around 135 thousand Dutch own cryptocurrency, including other types of coins such as Ethereum or Litecoin. The report by BTC Direct puts most of the Dutch Bitcoin buyers in Noord-Holland and Zuid-Holland, with the mention that people from Noord-Brabant are more generous with their investments, buying 0.29 bitcoins per transaction on average. Friesland's residents are displaying more caution, buying 0.18 bitcoins per transaction on average. Also, fun fact: Arnhem is believed to be the most Bitcoin friendly city in the world, there even is a Burger King accepting Bitcoin.
Opinions remain divided amongst industry specialists regarding the stability and future of Bitcoin. In response to a moderator question at an Institute of International Finance conference JPMorgan Chase's Chairman and CEO Jamie Dimon recently said:
"If you're stupid enough to buy it, you'll pay the price for it one day."
Bitcoin is the first official decentralized crypto-currency. It uses blockchain technology to create a financial transactional system. Bitcoin allows users to transact directly, peer to peer, without a middleman to manage the exchange of funds. The transactions are stored and transferred using a distributed ledger on a peer-to-peer network that is open, public and anonymous.
Blockchain or distributed ledger technology, as it's also known, has been on an explosive growth path over the last few years. From 2014-2016, $1.4 billion has been invested in blockchain and 2,500 patents have been filled. Blockchain works by creating a data structure that can be shared among a network of computers. In the world of blockchain, each computer is called a node. The system uses cryptography to allow each person to manage the data securely. When users enter data into the blockchain, it is very difficult to change it or remove it. This is due to the fact that when a change occurs, all copies of the blockchain, created by individual users, run algorithms to check and approve the new data. If the data is valid and matches are found, the data will be added to the blockchain. Ripple was actually one of the first blockchains to gain adoption. A banking protocol that is institutionalized and not decentralized, Ripple acts as both a cryptocurrency and a digital payment network for financial transactions.
Many people have been quick to point out that Bitcoin may be just another bubble, very similar to the Dutch 'Tulip Mania' bubble that took place from 1634 to 1637. Considered to be the first recorded financial bubble, the Tulip Mania witnessed tulip bulb prices being propelled by speculators to incredible heights before collapsing and plunging the Dutch economy into a severe crisis that lasted for many years. William Deringer, a historian at MIT, notes that:
"The value of the thing was not just about a calculation of its economic return but also about the aesthetic value of its coolness. To own Bitcoin is to make a statement about what sorts of technologies you value."
Some argue that there is no such thing as just Bitcoin anymore. While it is the most stable and probably the most adopted cryptocoin, Bitcoin's role in this market is now related to other cryptocurrencies, making it what the gold standard was for fiat money. And since the Dutch have always been interested in improving and diverging from the standard especially when it comes to payments, we could be witnessing another disruption of the payments industry.
What most people can agree on is that, more than Bitcoin, the Dutch recognize blockchain as the technology that influence their future considerably. An opinion which is in agreement with Jamie Dimon's subsequent statements regarding blockchain:
"Blockchain is a good technology. We actually use it; it will be used for a lot of different things. God bless blockchain."
Emanuele Francioni, founder of Web 3 Ventures, a Dutch incubator, believes that this increased interest in Bitcoin and blockchain is due to a established tradition of being at the forefront of innovation:
"Traditionally, the Netherlands has always been at the forefront of innovation and the blockchain space represents no exception. Activities with the goal of raising awareness and promote sound business development avail of the efforts of both institutional actors and domestic businesses."
The former have been quite successful in creating consortia (e.g. National Blockchain Coalition) to render blockchain technology and the underlined crypto space safer and more accessible. The latter represents the backbone of a thriving community dedicated to the advancement of the technology with an ever increasing choice of great meetups and events (e.g. Blockchain in Business, Bitcoin Wednesday and ICOEvents). Even the Royal family plays an important role (e.g. through the involvement of Prince Constantijn in the blockchain initiatives of StartupDelta).
This theory seems to be supported by the National Blockchain Coalition, an initiative established by the Ministry of Economic Affairs' information technology team. Its goal is to unite more than 20 public and private organizations including the government agencies, universities and private companies from financial, logistics and energy sectors, for the purpose of turning the country into a leader on blockchain technology. Supporters of this initiative include ABN Amro, ING and Nationale-Nederlanden, one of the region's largest insurance companies.
"By keeping the Netherlands at the forefront of the application of innovative technologies, our knowledge base remains progressive and world-class. That creates jobs and income."
Dutch Minister of Economic Affairs Henk Kamp
As a matter of fact, the Dutch banking community is currently planning to deliver an instant payments infrastructure by May 2019. The payments industry and the retail community have the joint ambition to increase the share of cashless payments to 60 percent by 2018 (based on a Covenant between the retail organisations and banks).
Another reason for the increased interest in blockchain technology is the need for financial institutions to improve return on equity. Dutch organizations and banks have been at the forefront of European blockchain initiatives since the very beginning, experimenting on the technology's potential to enhance efficiency, trust, transparency, reach and innovation in the banking model. In July, 2017 two leading Dutch banks - ABN AMRO and Rabobank joined SWIFT's blockchain proof-of-concept (PoC) initiative for the Global Payments Innovation (GPI) service. At the same time, ING successfully completed the testing of blockchain-powered trade confirmation platform in partnership with Calypso and the R3 consortium.
Most large Dutch banks are reported to have intensified their blockchain initiatives in 2016 and 2017. ING, for example, worked on 27 proofs-of-concept in six business areas: payments, trade finance and working capital solutions, financial markets, bank treasury, lending and compliance and identity. Tangible key performance indicators (KPIs) were used to validate the results and suitability of these proofs-of-concept. Similarly, ABN AMRO launched a pilot to explore how the blockchain application "Torch" can allow parties involved in a real-estate transaction to seamlessly record and exchange information. The bank also explored how blockchain might solve issues in financial auditing and compliance, in Financial Recovery and Restructuring (FR&R). Other examples are Rabobank, that focused its initiatives on cross-border payments and micropayments, while SNS Bank moved out of traditional banking areas to test out the use of blockchain in addressing inefficiencies in healthcare system.
Just as tulips became a symbol for Dutch innovation, it seems that Bitcoin and blockchain are reclaiming The Netherlands' top place in technology advancements. It would not be a complete surprise if the Dutch reinvented Bitcoin into something else in the near future.
While the future of Bitcoin and other cryptocurrencies cannot be predicted at this time, blockchain's role as a driver of change is becoming more and more clear to everyone following the Dutch lead.