Keeping up with these challenges and emerging technologies, the UAE Government created the Emirates
Blockchain Strategy 2021 (Huckle et al. 2016). The purpose
is to benefit from the blockchain technology and transform
half of government transactions into the blockchain by 2021.
This is a major commitment and challenge. The transformation of half of government transactions, and correspondingly a large proportion of the exchanges with the private
sector, is an unprecedented initiative. It is another display of
the UAE global leadership. In this case, it globally leads in
Fourth Industrial revolution, and Blockchain in particular.
6 Financial Applications of Blockchain
Technology
The Blockchain technology has numerous financial applications. However, most of its applications are anticipated for
the future. Bitcoin is the first impactful applications. The
decentralized cryptocurrency, Bitcoin, relies on blockchain
technology to record its transactions in a public ledger; a
technology originally conceived for Bitcoin in 2008 and first
implemented in 2009. The blockchain is a distributed database that maintains a continuously growing list of records
called blocks secured from tampering and revision. Each
block contains a timestamp and a link to a previous block. It
serves as the public ledger for all transactions. Every compatible client can connect to the network, send new transactions to it, verify them, and take part in the competition to
create new blocks. The competition of creating new blocks is
known as mining. The Bitcoin design has been the inspiration for other cryptocurrencies as well as for other applications. However, it should be emphasized that different
cryptocurrencies and applications can feature very diverse
organizational architectural and technical elements (i.e.
Hyperledger).
Similar applications occur for the other cryptocurrencies.
Blockchain technology can revolutionize financial alternatives and consequently monetary systems. It could change
the structure, administration and policy of monetary systems.
From centralized government assets, currencies could
become private and decentralized (Ølnes et al. 2017). More
competition could be introduced in the monetary system.
Consequently, the efficiency of the global and national
monetary and financial systems could increase. This is particularly important for countries with inflation, macroeconomic and financial instability. The use of currencies based
on blockchain technology, could provide to governments
and citizens the choice to adopt more stable, and in general
better, monetary alternatives. Moreover, citizens and businesses would have a wider range of options. This can be
particularly valuable for UAE. Abu Dhabi and Dubai are
global financial center in Middle East and new currencies
could better facilitate and boost financial activity. Innovative
Blockchain based currencies in UAE could also augment its
leadership role in monetary affairs in the Middle East and
globally.
A useful distinction is between the currencies per se and
the exchange mechanism (Mulligan et al. 2018). This is
usually hard to distinguish since the operations are often
compactly joint. The exchange mechanism, or digital platform, is a more inclusive concept. It can encompass different
types of exchanges, ranging from financial markets, to
clearing houses, insurance contracts and in general, every
exchange, financial or not. It can be applied to the government transactions with citizens, incorporating payment systems and exchanges. The range of innovative financial
exchange mechanisms and their applications is enormous. It
can range from simple accounting and financial information
to more complicated transactions being better and more
securely accessed and managed. There can be additional
dimensions that Blockchain technology can add, as a
sequence, the opportunity to search companies and attractions full records of value (Tapscott and Tapscott 2017).
There can also be more advanced applications as the
back-office handling of transactions, which can be speed up,
more effectively reported, increase the transparency and
dissemination of data, better comply with regulation, and of
course reduce transaction costs (United Arab Emirates
2018).
NASDAQ, one of the largest and most developed markets, ‘believes there is a great potential across the financial
services industry to leverage blockchain’, and it has created
(Nasdaq) Blockchain Strategy (Hayek 1990). This is a crucial initiative, since it displays the interest of important
financial institutions in Blockchain technology. More
specifically, Nasdaq Blockchain Strategy observes applications in several services, like tracking and transfer of assets,
managing payments and cash, facilitating collateral
arrangements and securities lending (Bank of International
Settlements 2017). Analogies between Nasdaq (USA) and
Nasdaq Dubai can be drawn since they share common features and they are both leading in innovation. Blockchain
ecosystems, as 3R, have been established to foster industry
wide collaboration with the participation of a range of
organizations including central banks, international banks,
large accounting and consultancy firms and technology
companies.
The sharing economy presents another major field for
blockchain applications, related to finance. Huckle et al.
(2016) suggest that blockchain has the opportunity to create
a myriad of sharing applications, for example, automated
payment mechanisms, foreign exchange platforms, electronic sales and smart contract exchanges. Blockchain, to
some extent, can replace trust in sharing economy interactions and respectively replace central infrastructures as well
90
P. N. Petratos et al.
Blockchain Strategy 2021 (Huckle et al. 2016). The purpose
is to benefit from the blockchain technology and transform
half of government transactions into the blockchain by 2021.
This is a major commitment and challenge. The transformation of half of government transactions, and correspondingly a large proportion of the exchanges with the private
sector, is an unprecedented initiative. It is another display of
the UAE global leadership. In this case, it globally leads in
Fourth Industrial revolution, and Blockchain in particular.
6 Financial Applications of Blockchain
Technology
The Blockchain technology has numerous financial applications. However, most of its applications are anticipated for
the future. Bitcoin is the first impactful applications. The
decentralized cryptocurrency, Bitcoin, relies on blockchain
technology to record its transactions in a public ledger; a
technology originally conceived for Bitcoin in 2008 and first
implemented in 2009. The blockchain is a distributed database that maintains a continuously growing list of records
called blocks secured from tampering and revision. Each
block contains a timestamp and a link to a previous block. It
serves as the public ledger for all transactions. Every compatible client can connect to the network, send new transactions to it, verify them, and take part in the competition to
create new blocks. The competition of creating new blocks is
known as mining. The Bitcoin design has been the inspiration for other cryptocurrencies as well as for other applications. However, it should be emphasized that different
cryptocurrencies and applications can feature very diverse
organizational architectural and technical elements (i.e.
Hyperledger).
Similar applications occur for the other cryptocurrencies.
Blockchain technology can revolutionize financial alternatives and consequently monetary systems. It could change
the structure, administration and policy of monetary systems.
From centralized government assets, currencies could
become private and decentralized (Ølnes et al. 2017). More
competition could be introduced in the monetary system.
Consequently, the efficiency of the global and national
monetary and financial systems could increase. This is particularly important for countries with inflation, macroeconomic and financial instability. The use of currencies based
on blockchain technology, could provide to governments
and citizens the choice to adopt more stable, and in general
better, monetary alternatives. Moreover, citizens and businesses would have a wider range of options. This can be
particularly valuable for UAE. Abu Dhabi and Dubai are
global financial center in Middle East and new currencies
could better facilitate and boost financial activity. Innovative
Blockchain based currencies in UAE could also augment its
leadership role in monetary affairs in the Middle East and
globally.
A useful distinction is between the currencies per se and
the exchange mechanism (Mulligan et al. 2018). This is
usually hard to distinguish since the operations are often
compactly joint. The exchange mechanism, or digital platform, is a more inclusive concept. It can encompass different
types of exchanges, ranging from financial markets, to
clearing houses, insurance contracts and in general, every
exchange, financial or not. It can be applied to the government transactions with citizens, incorporating payment systems and exchanges. The range of innovative financial
exchange mechanisms and their applications is enormous. It
can range from simple accounting and financial information
to more complicated transactions being better and more
securely accessed and managed. There can be additional
dimensions that Blockchain technology can add, as a
sequence, the opportunity to search companies and attractions full records of value (Tapscott and Tapscott 2017).
There can also be more advanced applications as the
back-office handling of transactions, which can be speed up,
more effectively reported, increase the transparency and
dissemination of data, better comply with regulation, and of
course reduce transaction costs (United Arab Emirates
2018).
NASDAQ, one of the largest and most developed markets, ‘believes there is a great potential across the financial
services industry to leverage blockchain’, and it has created
(Nasdaq) Blockchain Strategy (Hayek 1990). This is a crucial initiative, since it displays the interest of important
financial institutions in Blockchain technology. More
specifically, Nasdaq Blockchain Strategy observes applications in several services, like tracking and transfer of assets,
managing payments and cash, facilitating collateral
arrangements and securities lending (Bank of International
Settlements 2017). Analogies between Nasdaq (USA) and
Nasdaq Dubai can be drawn since they share common features and they are both leading in innovation. Blockchain
ecosystems, as 3R, have been established to foster industry
wide collaboration with the participation of a range of
organizations including central banks, international banks,
large accounting and consultancy firms and technology
companies.
The sharing economy presents another major field for
blockchain applications, related to finance. Huckle et al.
(2016) suggest that blockchain has the opportunity to create
a myriad of sharing applications, for example, automated
payment mechanisms, foreign exchange platforms, electronic sales and smart contract exchanges. Blockchain, to
some extent, can replace trust in sharing economy interactions and respectively replace central infrastructures as well
90
P. N. Petratos et al.