The “name a famous Belgian” game is always a challenge, as one always gets stuck after Audrey Hepburn (counting Leopold II as infamous rather than famous – if you don’t know about him look him up and be disgusted). When visiting fund managers over there we’ve been astonished that locals refused to converse in each other’s languages despite being surrounded by them every day. Walloon/Flemish intermarriage is less common there than interracial marriage. So what’s the point of Belgium?

Actually there is a point – rather like Wales, (which in addition to good rugby and hearty choirs, mostly exists as a reference point for how much rain forest is lost per day/week/month/year), Belgium is a reference point……Bitcoin is currently consuming roughly the same amount of electricity as Belgium. Well done Belgium, you’ve been useful.

Bitcoin is a blockchain technology, which is the subject of our quarterly “In the middle of chain reaction”, published today. Blockchain has gone through a hype cycle in the past few years, and is currently sitting in Gartner’s trough of disillusionment with many questions being asked as to why it hasn’t created more of an impact. It is typically a replacement technology, doing things better, yes, but often doing things that are already being done (land registries and currencies for example). While it is at risk of being a cure for a problem that doesn’t exist, be patient – Blockchain’s foundational application Bitcoin was launched in 2009, and that the modern internet’s arrival took around 15-20 years after ARPANET adopted TCP/IP in 1983. Applying a similar timeline to blockchain would mean that it’s poised to emerge as a transformational technology in the 2020s.

Blockchain is a way for multiple parties to manage information on a trusted network, without any of the parties involved needing to trust each other. This idea of ‘trustless trust’ sounds paradoxical, and reflects that blockchain is fundamentally different to the traditional, centralised structures that we have used to create trust in transactions. These traditional structures use the threat of sanctions to create trust – whereas blockchain aims to instead make it individually rational for no-one to cheat the system. We explain how this works in the report, which in Bitcoin’s case is through mining.

All of this means that blockchain has potential applications in a wide range of sectors including: finance (digital currencies, clearing and settlement of financial transactions, financial asset tracking, and insurance); asset exchange (tracking luxury goods or any valuable asset); corporations (supply chain management, contract execution and dispute resolution, and critical information security); governments (voting, land registries, and public records); and personal data management (identity verification and control of online identity). A diverse mix of companies have exposure to blockchain and distributed ledgers, and companies that we are watching include listed Argo Blockchain and finnCap client Minds + Machines (making use of its .luxe domain for blockchain addresses); and privately held B3i, Everledger, Overledger, The Proof of Trust, Provenance, and we.trade.

The success of these companies, blockchain, and distributed ledgers in general, is dependent on demand (and disrupting existing players and technologies), and timing. Belgium’s role as being the international buffer zone at the hub of the source of too many wars didn’t work terribly well in stopping the events of 1914 and 1939 – but blockchain’s purpose, in giving us the ability to remove fraud in a whole range of fields, is rather compelling, a “when” not an “if” of adoption, and we look forward to the opportunities.

Happy Friday