FinTechBlockchainNew economic paradigm: a conversation with the ‘Blockchain Professor’

New economic paradigm: a conversation with the 'Blockchain Professor'

Blockchain expert Professor George Giaglis has joined the advisory board at blockchain startup INVIOU. He spoke to The Global Treasurer about how the technology is primed to revolutionize the financial services industry.

Blockchain has been an enduring discussion topic over the past few years. With a broad range of applications, it has been touted as having transformative potential across multiple sectors, and many enterprises are keen to reap the benefits.

This, however, is often easier said than done. Lacking the technical knowhow – or the resources to recruit the right expertise in-house – smaller businesses are frequently unsure how to make best use of blockchain.

According to Professor George Giaglis, director of the Institute for the Future at the University of Nicosia, SMEs are at an automatic disadvantage when it comes to starting out down this path.

“Blockchain is still a new and untested technology – at least in many of its theoretically attractive application areas,” he says. “Although creating theoretical concepts, and even small-scale prototypes, is fairly easy, moving to enterprise-scale applications requires expertise and resources that most SMEs simply do not possess.”

Nicknamed the ‘Blockchain Professor’, Giaglis has been involved in blockchain and cryptocurrencies since 2011. At a time when Bitcoin was still a niche curiosity, he became intrigued about the prospects for a decentralized network of value exchange. Since then, he has worked extensively in the field, publishing more than 150 articles on the subject and coordinating the world’s first academic degree on blockchain.

Moving to enterprise-scale applications requires expertise and resources that most SMEs simply do not possess

In July, he announced he had joined the advisory board of the credit finance platform INVIOU, which aims to redefine the invoice financing industry for small and medium-sized businesses. Essentially, it uses blockchain technology to manage their financial records, connecting them directly with credit financing entities and invoice factoring companies.

“Probably the biggest benefits of blockchain are that it enables trusted recording of ownership, digital signage, and verification of transactions, as well as proof of service, delivery, and payment,” says Giaglis. “This could revolutionise finance. INVIOU taps on this promise by creating new possibilities for invoice factoring for small and medium companies.”

The promise here is that the invoices can’t be counterfeited – the information is encrypted and transparent to all permissioned parties. This keeps risk to a minimum and establishes trust between the participants.

“The platform aims to significantly reduce the financing and credit margins for small businesses that would be otherwise blocked from entering the credit financing market due to their low volume of activity and the high-risk management cost to lenders,” says Giaglis. “It will create a marketplace that is easy to use and, crucially, easy to trust for SMEs.”

It will create a marketplace that is easy to use and, crucially, easy to trust for SMEs

He explains that, while SMEs are in constant need of working capital – which might be obtained via invoices – existing systems effectively shut out small companies from invoice factoring.

“It limits their geographical scope and imposes extremely high fees to compensate, among others, for fraud risk,” he says. “Blockchain promises to change that, and the INVIOU platform will create a secure, transparent, and low-fee global marketplace for lenders and SMEs.”

Credit financing is just one of the functions that blockchain could be poised to overhaul. As far as smaller businesses are concerned, some other key possibilities might include distributed cloud storage, digital identity and so-called ‘smart contracts’ (automated computer programs that can carry out the terms of any contract). In general terms, blockchain-based technologies hold huge potential to improve security and reduce overheads.

Giaglis feels we are moving towards an entirely new internet architecture, in which value can flow from third parties unobstructed.

“This ability can unleash a wholly new economic paradigm, with global commerce becoming even more frictionless and competitive,” he says. “Coupled with the advances in AI, and blockchain-based smart contracts, we can also think of whole economies being run by machines and new types of corporations that will not rely on the currently known pillars of human capital.”

This period will mark the real adoption of blockchain-based applications across a wide spectrum of industrial sectors and types of businesses

He believes we are currently moving into a period of consolidation, following on from the hype surrounding blockchain in 2017. This, he thinks, will be followed by another wave of growth, in which blockchain applications begin to proliferate in business.

“This period will mark the real adoption of blockchain-based applications across a wide spectrum of industrial sectors and types of businesses,” he says. “The first industry to be disrupted will probably be finance, since it is currently plagued by many intermediaries and is ripe for disruption, but the wave will extend to other industries as well. Larger organizations will probably adopt first, with their SME suppliers/partners to be impacted next.”

For now, it’s early days for SMEs looking to make inroads in this field. However, fintech startups like INVIOU are already causing excitement among early adopters, who are surveying the ways that blockchain might help them steal a march on competitors.

“It is important to choose the right partner in order to make one’s first moves in the blockchain application world,” points out Giaglis.

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