The case for a blockchain Universal ID

Governments have been floating the idea of a universal ID around for a while, but haven’t come to any conclusions. The case for having such a thing as a universal ID is that it would increase national security, help with counter terrorism and prevent, or at least deter, identity theft. This would all make people’s lives easier it is argued.

Naturally there are problems with the concept. There are countries like the United Kingdom that don’t believe in a national ID, and in countries that do have ID databases, like the USA, the information is held in a centralised national database, which may not be as secure as they should be.

To give you an example: in the first six months of 2018 there were 668 data breaches in the USA in sectors including banking, business, education, government/military and health care. There are weaknesses in the databases that leave them exposed to cyber attacks. And, as the cyber criminals become more sophisticated, the national ID database’s security systems simply don’t seem to be able to keep up with them. So, imagine how fortunate the cybercriminals would feel if there were a universal ID database set up on a centralised system — it would be the biggest gift they ever received.

Blockchain solves the data breach problem

The most obvious solution is the use of blockchain technology. By using a distributed ledger, each person’s ID information could be held in a decentralised system that is more secure, because it uses cryptography. For example, a wide range of identity documents could be stored on the blockchain in a single place — let’s call it an identity wallet — and each wallet could have its own form of encryption. The information would be decentralised on the distributed ledger, which makes it far harder for cybercriminals to get access to it.; it would certainly make it much harder for them to undertake the kind of mass scale identity theft attacks that they are capable of right now, because they would have to hack into each individual wallet.

Using the blockchain would also give us a s citizens more control over our data, because we would have the ability to update out data in a single space and decide what data we share with certain individuals.

Companies are already working on identity blockchain technology, however it is still in early stages and will have to be proved before presenting it to governments. Of course, even these projects raise questions, such as who is developing it, how will they monetise it and how will they maintain it. Legally, there is also an issue about who owns the information once it is uploaded to the blockchain; each individual or a government?

Although we’re not quite there yet, it is to be hoped that blockchain technology will make data breaches a thing of the past, although whether we ever see a universal ID system emerge is another matter altogether.

How to hold an ICO in 2019

Once upon a time, people holding ICOs didn’t give too much thought to regulations, because there weren’t really any to follow, but in 2018 and beyond, they need to keep rules and regulations at the front of their minds.

ICOs started in 2013 with Mastercoin, swiftly followed by the Ethereum ICO promising smart contracts and the ERC20 token standard, both of which encouraged investors. Things were fine it seemed until 2016 and the DAO ICO, which raised $50 million, but then had its funds hacked. The US Securities and Exchange Commission (SEC) announced that DAO should have been considered a security and it wasn’t long after that that China banned ICOs, calling them illegal. However, what happened in China wasn’t followed elsewhere and ICOs continued to flourish, reaching their zenith in January 2018.

However, as 2018 passed by, we saw ICOs decrease, and a more regulated environment is one of the most likely reasons for that. We also saw a shift to a different type of ICO investor. Whereas in previous years, ICOs appealed to the man or woman in the street who would take a punt on a new project, this group dropped away and the institutional investors started to take their place. Old venture capital also made way for new crypto and blockchain-related VC firms that were focused on projects using the emerging technology. One report by

Autonomous Next indicates that VC funds invested $1.6 billion in blockchain projects in August 2018 alone. Meanwhile, funds raised by ICOs has been falling throughout 2018 and in Q3 the number of ICOs raising over $1 million had halved compared with the end of Q2.

Where is the best place to hold an ICO?

Places where there are clear guidelines for ICOs and favourable regulations are obviously the ones to choose if you’re planning a new coin offering. The two most important things to consider first are:

1. How can we safely conduct an ICO?

2. Can the project operate legally after the ICO and will licences etc be needed?

Europe is one of the regions most favourable to ICOs as it isn’t rushing to impose regulations. As long as projects follow KYC and AML rules –until some other rules come along –these are the most important regulations in Europe. Switzerland is one of the more friendly environments in Europe and in February 2018, the Swiss Financial Market Supervisory Authority, FINMA,issued a set of guidelines for ICO projects, which stated, “Each case should be decided on its individual merits.” Gibraltar is also high on the list and the UK has not really made a decision about firm ICO regulations yet, and looks at ICOs on a case by case basis.

To put it in a nutshell: if you’re planning an ICO, look for a favourable jurisdiction, make sure you comply with its regulations plus KYC and AML, and if you need a special licence because you’re in the fintech space, make sure you put yourself in a good position to get one.

Why security is more important than speed

If you have read much about blockchain technology, you will be aware that there is an obsession about transaction speed within the community. Indeed, it is possible to conclude that every problem the blockchain and cryptocurrencies are curently experiencing comes down to the issue of speed.

But this obsession is blinding us to the fact that speed isn’t everything and it certainly isn’t going to be a deal-breaker that ends the future of blockchain projects. Certainly most people working in the fintech sector don’t believe it will and for good reason. If you use PayPal as an example, there is an average of 193 transactions per second. Blockchain-based platforms are aiming for one million transactions per second. However, that is a long way off happening. Still, even if PayPal is ‘slow’ compared to what blockchain developers believe they can achieve, nobody thinks the lack of speed is going to be the end of PayPal forever.

Ethereum is the blockchain network most used for transactions and scaling has presented an issue for it. People using the ethereum platform would like to see it scale faster, but there is something else that is more important to them, and that is security. As James Halladay writes at Hackernoon; “Of course, rapidly scaling the Ethereum network would be fantastic — no one’s disputing that — but making it the goal seems misguided.” He calls the obsession a smokescreen and a distraction.

And here is why: do we really need the kind of transaction speed that blockchain enthusiasts have set as the “holy grail”? No, because for fintech platforms security and stability are much more important than being fast. And, the obsession with speed is off-putting to the more conventional financial institutions that might be wooed over to using blockchain solutions if there was more focus on security and stability.

Security is the major advantage that the blockchain has to offer, so if we talk about a ‘Three S’ blockchain, it should be Security –Stability- Speed in that order.

Have ICOs reached the end of the road?

In 2017, Initial Coin Offering (ICO) was probably one of the biggest buzzwords in the fintech and other blockchain-based sectors. There were ICO calendars, journalists tracked how various ICOs were doing and reported on the final amount raised, looking for the ICO that would break all ICO records. However, the negative reaction of media giants like Facebook and Google to the ICO sphere had the effect of making it more difficult for those fledgling businesses holding ICOs to market their offering, and ultimately could be said to be responsible for dampening enthusiasm for this new form of crowdfunding.

Then 2018 brought with it a change in wind direction: the cryptocurrency market started to behave in a way that disappointed the small investor. Institutional investors were still apparently wary of the entire ecosystem, regulatory bodies debated how to handle it, and on top of that, the word ‘ICO’ became almost toxic thanks to the social media rulings on promoting them. Instead, people started to look for ways around it, calling them ‘token sales’ and talking about ‘digital assets’ rather than cryptocurrency. And, lets be honest, the glamour and excitement associated with ICOs in 2017 was beginning to wear a bit thin.

This is not something I made up: data from Crunchbase published this summer and in the Q3 of 2018 shows that there has been a massive decline in ICO fundraising. A report from ICORATING reveals, “a total of just over $1.8 billion was raised by a total of 597 ICO projects in Q3 2018, down significantly from the over $8.3 billion that was raised in Q2 2018.”

America’s SEC is also responsible for some of the problems faced by ICOs; its scrutiny has made the country a cold place for the blockchain-based startups. And America isn’t the only jurisdiction presenting barriers for the sector.

ICOs aren’t dead; they’re being reborn

The fact that ICOs seem to be declining in terms of the funds raised this year doesn’t mean that funding is not coming in for new blockchain businesses. Instead, what is happening is that the environment is simply changing: ICOs may no longer be the fashion, but there is an increase in crypto funds coming from venture capital sources. What we are going to see are better funding solutions in a different format.

The point I really want to make is this: just because there is a decline in ICO activity, don’t take this as a sign that cryptocurrencies, tokens and blockchain technology have also had their day. This is a new market where various roles and functions are constantly evolving, and there’s nothing surprising about that as history shows us.