Let's dig in...
I think the practical implementation of blockchain is something that a lot of people wonder about while many speculate the impact that it may have. There seems to be a lot of confusion between blockchain and cryptocurrency, but Monica has been leading this space for the last few years, so we look forward to getting some of her opinions on the topic.
The interview started with Colin ruminating about this webinar series being called 'Game Changers' - and mentioned that Monica is not only involved with a technology that is changing the game, but that she herself was also a game changer when she started Strate and ran it for many years. When asked to elaborate a little on her progression in this regard, Monica said that she was tasked 25 years ago, to transform the South African financial markets from paper-based to electronic. She recalled how, when trading shares back in the mid-90s, people used to get a physical piece of paper with their names on it as proof of ownership of their shares in the stock market.
At that time, there were only 4,000 trades a day, by the time I left Strate, we were doing around 350,000 trades a day - just on equities. We were also doing the clearing and settlement of money markets and bonds. So, it was a very successful story that needed to be told because the world was categorising South Africa as one of the worst emerging markets in the world for operational and settlement risk.
South Africa Lead: ConsenSys
Strate acts as the central intermediary.
Monica went on to explain how Strate acts as the central intermediary for the brokers, JSE, custodian banks, and central banks by keeping track of all the share trades. Some of the features that she wanted to implement was the ability for the issuer to see who was buying and selling shares in real-time as well as for investors to see their whole portfolio in one view - regardless of which intermediaries they went through. But she explained that this was impossible because each intermediary keeps their records through different technologies.
Only after reading Satoshi Nakamoto's white paper, did she realise that the solution for financial markets is not centralised with a reliance on all these intermediaries that we as society have outsourced our trust to. The white paper talks about a peer-to-peer system, where the investor, the buyer, and the seller can all talk to each other in real-time via a transparent, open-source technology called 'blockchain' - a decentralised ledger technology we are all familiar with today. For Monica, this was significant, because up until that point her understanding of ledgers has been that they are siloed in nature. Needless to say, Monica started to focus her attention and energy to further innovate the industry with this technology. She realised that; in the same way that she helped to change the world from paper to electronic systems, it will now change from centralised to decentralised information.
Huge amounts of innovation.
This evolution of banking is happening very fast, why? Because most of it is open source and everything is happening on the internet. So, you've got people from all over the world participating in this technology and creating huge amounts of innovation. I've been with ConsenSys for five years, and we are the biggest blockchain company in the world. The amount of innovation that I've seen in these last five years will blow you away.
South Africa Lead: ConsenSys
When asked whether she was still as excited about blockchain and cryptocurrencies as she was when Colin spoke to her a few years ago - despite the recent in revelations of fraud, drop in value, and many people exiting the market - Monica said that her passion has increased, not diminished. She believes it is necessary to separate cryptocurrencies from blockchain solutions as that market is based on speculation driven by fear and greed, just like traditional financial markets.
The intention is to truly create something better for the world. Interoperability is one of the pillars of the fourth industrial revolution. Artificial intelligence, internet of things, big data, and blockchain all come together in forming technology solutions for the betterment of the world.
South Africa Lead: ConsenSys
Recent developments of regulators.
The interview also touched on recent developments of regulators getting involved in the market. In South Arica, cryptocurrencies have been declared a financial instrument, bypassing the need for new legislation - while the Financial Accounting Standards Board in the USA now allows cryptocurrencies to be measured at fair value, whereas in the past, it was treated as intangibles. There have also been new developments with the introduction of stable coins and Central Bank Digital Currencies (CBDCs).
The topic then evolved into another major development in this space, namely, Decentralised Finance (DeFi). Monica explains the advantages of people now being able to bypass intermediaries for financial instruments, and instead opting for Defi which utilises smart contracts on a blockchain. This eliminates many of the painstaking procedures from traditional finance such as Know Your Customer (KYC) and others.
While answering a question by Colin to explain what Decentralised Autonomous Organisations (DAOs) are, Monica predicts that DAOs are eventually going to replace Limited Liability Companies (LLCs). At the moment, LLCs are very centralised, and as we are moving to decentralisation and smart contracts, these intermediaries will ultimately fall away. To explain, she uses a scenario where a person can create a smart contract for a social cause such as 'save the whales.' The person can then share this smart contract on a public forum and anyone who wants to participate will be tokenised. People can all work for the cause remotely on a voluntary basis in their spare time and be rewarded with tokens without the need for physical buildings or legal structures.
Monica also anticipates that we'll be seeing more organisations delisting from traditional stock exchanges as it becomes more evident that they are stuck in silos, such as the JSE, which is regulated in South Africa using the Rand, when they could rather be making use of a DAO in a DeFi environment and get liquidity from anywhere in the world, in any type of currency. Intermediaries - such as stock exchanges, incumbent banks, and others - will face further disruptions over the coming years as more people become accustomed to this new technology.
Monica concludes by stating that blockchain technology will soon become ubiquitous and implores all organisations to not just study it at this moment in time, but to rather get a head start and actively participate in the innovation.
Here are some of the questions from the audience that were discussed during the session:
From Kanital Roopa
Why has Bitcoin price dropped so drastically?
We cannot say for certain, it has a lot to do with supply and demand - and the macroreality of what we're going through in the world at the moment.
From Rob Jackson
Do you see country-imposed Forex limitations being removed?
I don't think so... the opposite actually. Because at the moment foreign exchange rules are mainly based on the transparency of where the money is going. So that will carry on being in existence.
From Lunga Mkhize
How does one directly invest in blockchain?
Blockchain is the technology that records the ledger. So, let's not get confused. It's not about blockchain, it's about the input that needs to be resolved.
From Zwakele Mbanjwa
Are DOAs only useful for social initiatives or does it have broader applications for businesses?
Absolutely, Uniswap is a successful example of an organisation utilising a decentralised network protocol.