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Bogdan Nitulescu, Tremend
Cryptocurrencies volatility is a big problem»
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Blockchain how it's made and what can we do with it

In the context of the "fourth industrial revolution" that everyone is talking about these days, The Diplomat - Bucharest analyses how an emerging technology like blockchain can be used for improving our lives, when we actually need it and when it is better to stay away from it.

2018-09-28 13:05:31 - From the Print Edition

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For those who don't know, "blockchain" is the technology which allowed Bitcoin to perform money transfers without banks. It is, in fact, the technology behind all the popular electronic currencies, but blockchain has been developed for greater purposes, experts say.

Some say blockchain is a vast, globally-distributed ledger or database running on millions of devices and open to anyone, where not just information but anything of value - money, but also titles bonds, deeds, identities, even votes - can be moved, stored and managed securely and privately. Trust is established through mass collaboration and clever code rather than by powerful intermediaries such as governments and banks.

Blockchain is said to be a transparent and verifiable system that changes the way we perceive transactions of goods and values and data exchanges in general, says Eduard Bisceanu, national technology officer at Microsoft Romania.

"The technology implies the existence of an electronic registry that keeps track of all transactions and is shared with all participants, eliminating the need for a unique trustworthy provider and adding a high degree of security to blockchain-based systems," he tells The Diplomat-Bucharest. "Thus, new business and data processes can be shared across multiple organizations, eliminating losses and reducing the costs of classical technology models, while also significantly reducing the risk of fraud and generating new business opportunities."


Eduard Bisceanu, Microsoft: Romania can generate economic growth and prosperity in this field with much greater efficiency than in any other field

When talking about blockchain's target audience, Bisceanu would split the beneficiaries into two categories: private sector, and Government organizations that could design blockchain-based systems to optimize their internal processes or facilitate the provision of services that so far could not be delivered at reasonable and safe costs, as well as citizens who can benefit from blockchain-based services that would ease their lives.

He says there are around 1.1 billion people in the world who are not registered in an official identification system. "On this background, the ID2020 Alliance emerged as a public-private partnership initiative that aims to build a blockchain technology system that allows the provision of identification systems for all categories of disadvantaged people," Bisceanu explains.

Technology and service providers from the National Association for Information Systems Security (ANSSI) offer solutions based on blockchain technology that address multiple economic sectors in Romania, such as the financial and banking sector, the insurance sector, the medical field, public institutions, the distribution of goods, and supply chains.

Technology companies are currently conducting promotional activities and popularizing new technologies that allow for digital transformation of businesses and government institutions, but the final decision to deploy new technologies on a large scale still belongs to the latter. The banking industry is investing significantly in projects that are still exploring the use of block-based technologies, but there is growing market interest and growing expertise in the field of cryptocurrency, or digital coins.
One of the objectives of Microsoft Romania is the popularization of new technologies and the increase of their use in all fields.

"I am convinced that Romania can generate economic growth and prosperity in this field with much greater efficiency than in any other field, because human resources and the technological innovation capacity are among the strong points that places Romania in a favourable position for the future," Bisceanu says.
The emergence and development of new blockchain-based trading systems has already produced changes in the financial and banking industries, allowing new players such as "fintechs" to appear on the financial market.

Adapting to the obvious change generated by the rapid pace of technology evolution not only involves the implementation of blockchain-based solutions but also the permanent adaptation to new technological trends, changing organizational patterns and adapting business processes as a whole, and last but not least, changing mentalities.

Bisceanu goes on to say that in order to understand the most relevant trends in the market, the developments in the portfolio of products and services provided by relevant players, whose language is not lacking in cloud computing, artificial intelligence, and blockchain-based technologies, must be tracked. "Governments of the states that have understood the digital revolution quickly adapt their national legislation to respond to these trends and benefit from the latest technological innovations. The United Kingdom, Australia, New Zealand, and Canada are countries with national IT strategies that are easy to access online and are a source of inspiration for the private environment, being created by people who are currently anchored and with a clear vision of the future."

One of the main advantages of blockchain is the increased trust between the participants in transactions, which builds security in general as an attribute via the transparency generated by the ease with which it can respond to transaction logging/ audit requirements. "We can also talk about relatively low transaction costs compared to traditional centralized systems, and - last but not least - resilience to potential cyberattacks," Bisceanu says.

Although blockchain technology-based systems benefit from increased transaction protection when compared to the protection systems by centralized trading systems, the infrastructure that enables them and end-user devices to operate is nevertheless subject to the same security risk categories as any other system.

"In many of the newest and most sophisticated cyber-attacks, the human factor was the main vulnerability that allowed successful exploitation of technological vulnerabilities by attackers," Bisceanu explains. "The use of blockchain technologies contributes significantly to increasing the security of transactions and resilience of systems, in particular due to their decentralized and distributed nature, but this does not solve all the increasingly-complex problems generated by modern cyber threats."
Speaking about blockchain evolution in Romania, he believes that certain economic sectors, with the financial and banking sector in priority, will adapt much more rapidly to these trends, as products and services based on blockchain technology will become more and more mature.

"To enable minimal cost testing and the rapid creation of blockchain-based applications, there are service providers on the global and national market that provide "BaaS" - Blockchain as a Service - an aspect that increases the agility of organizations that want a fast adoption with low costs and risks of new technologies," Bisceanu says. "Unfortunately, there is no public information that is allowing us to see the Romanian state displaying a corresponding interest in the adoption of such new technologies in the interest of its citizens and the business environment."

Although there is much talk about blockchain′s IT innovation, it does not provide answers to all of the industry′s problems, according to Bisceanu: "The more blockchain-based systems will be deployed in production, the more we will be able to explore the potential of this technology in the future. Considering that society as a whole - not just certain economic sectors - is based on human interaction, we can imagine an extended series of scenarios where life could be made much more comfortable if these interactions could be made online, in safe conditions and at decent cost."

He went on to say that whenever certain technologies with large-scale development potential appear on the market, regulators have a latency in responding at a proportional speed. "Sometimes, the lack of regulation can be a factor of evolution, because the market has the ability to adjust itself up to a certain point, but, as we have said, governments oriented towards modernization and evolution take care to see the regulations they generate do not create industry bottlenecks, but rather allow and encourage innovation and quick implementation of new technologies in public systems. I do not believe at this time that specific regulation on the use of block-based technologies in Romania would be necessary."


Alexandru Bujor, Blockchain Romania: The biggest risk of blockchain technology is the "theft" of the private key or the electronic wallet

Blockchain technology has become very popular with Bitcoin′s tremendous growth, but there are only a few who know exactly what is hidden behind it, and therefore the technical details remain rather "mystical", says Alexandru Bujor, chief operating officer at Bluedrive Solutions and member of Blockchain Romania Association.

"Blockchain is nothing more than a distributed data structure, consisting of blocks that store information," he tells The Diplomat-Bucharest. "These blocks are chained together, in the order they are added to the blockchain. The important idea is that all blocks are distributed to all blockchain participants who can easily check if the data structure is validated by making simple, local calculations on their own system."

If we make an analogy with the financial-banking field, each bank transaction may resemble a blockchain transaction, with the notable difference that in blockchain each participant holds a global account and not an account associated with a specific bank. "When a transaction is generated, it is sent to the blockchain network in the same way that a client of a bank sends it to the banking institution: indicating the source and destination accounts and signing the transaction. Once the transaction gets signed and sent to the bank, it is processed," he explains. "In blockchain technology, this processing translates into adding the requested transaction to the global data structure, and once it is accepted by the network it becomes confirmed. This process would somehow be equivalent to sending a bank transaction to absolutely all the banking institutions in the world if all the banks were linked to a single system, which is impossible at the moment considering the way the banking system is working."
Blockchain manages to connect all participants interested in making transactions to a global network that can perform verified and accepted transactions by all participants with a very small effort.
"What is even more important is that it manages to do so based on cryptographic algorithms that make the idea of having a central authority to control and verify transactions virtually redundant. Anyone can become part of the blockchain regardless of name, age, country or other restrictions," he explains. "Looking beyond the cryptocurrency landscape, we can also use blockchain to store information that circulates between applications, people, companies, or authorities, so we should not limit the blockchain perspective to that of cryptocurrencies."

Blockchain Romania Association aims to provide an access point to blockchain specialists who can offer relevant advice, ignoring the global hype issues.

For Bujor, the biggest risk of blockchain technology is the "theft" of the private key or the electronic wallet. "An attacker who can access the private key associated with a wallet can do any transaction with that wallet. There are multiple ways to do this, and methods that are not related to blockchain technology (viruses, malware, etc.) are generally used," he explains. "There are also browser-level attacks that can, for example, change the destination wallet address to which a payment is made without the user becoming aware of it. It is also worth mentioning the situations in which various sites use the browsers of its visitors as clients to mine cryptocurrency without them becoming aware. However, my ‘favourite' problem is related to the private key loss by the wallet owner and then his desperate recovery attempts. This situation is quite common and is an example where the central authority could prove useful. In the normal banking system, losing your ID or card does not automatically mean that you lose your bank accounts. In blockchain things are a bit more harsh."
In his opinion, Romania is an atypical country for the IT market: "We have a community of developers very interested in the latest technologies, but companies and local authorities ‘consume' the latest news on the market. It is difficult to predict what will happen in the future, but there is an important and growing interest in the development of blockchain-based applications, although mostly for external customers."

Bujor goes on to say that he wants to see an electronic voting system based on blockchain. "It would be extraordinary to see a voting system on the basis of which we could know the results immediately after the closing of the polls. I′m not saying it would be 100 per cent safe, but it would definitely limit the number of frauds," he explains. "The potential is very good, but it depends on many factors (including authorities)."


Bogdan Nitulescu, Tremend: There are still many steps to be taken to accept cryptocurrencies as a payment method

Blockchain technology has multiple applications, at the beginning of an era where a wide variety of industries are ready to adopt this technology - from financial (where it is estimated that it is already implemented by over 15 per cent of global players) to aviation (there are airlines that have already stated that they intend to use the blockchain to provide a better experience for travellers and to optimize the procurement chain), says Bogdan Nitulescu, partner and CTO at Tremend Software Consulting.

"It may also have applications in education systems. For example, all students′ grades in some faculties can be stored in the blockchain, avoiding further alterations," he tells The Diplomat-Bucharest. "The target audience is extremely broad because it can include all three categories - companies (both developers and customers), traders speculating cryptocurrencies, and farmers who provide the computing resources needed to operate the blockchain."
There are still talks about the crypto revolution, but there are still many steps to be taken to accept cryptocurrencies as a payment method, for example, or to talk about a radical change in the current financial system.

"Cryptocurrencies volatility is a big problem. And for now, it is still quite difficult to turn a virtual currency into a product to buy from Amazon," he explains. "Virtual currency trading intensifies, resulting in a number of beneficial "side effects", especially in the area of financial education. Findings that until recently were known only by specialized traders are now available to anyone."
In his opinion, the main advantage of blockchain is that the information, once published in the blockchain, can no longer be changed by anyone, not even by the one who created it: "This allows transactions of any kind without the existence of a central authority. Then traceability - any modification made in the blockchain is visible."

He goes on to say that any industry needs transparency in data processing: "Companies in the financial services area were the first to adopt blockchain technology, other industries are soon to follow. We talk about the health system, the insurance system, the Internet of things, the manufacturers of smart home appliances and smart electronics, the music industry - to create extensive databases and pay real-time copyright. And the list could continue. Many analysts consider blockchain one of the most important technological inventions of the past decades."

Blockchain can be used to identify citizens of a state, for example, according to Nitulescu. As long as information about citizens is stored in silos that do not communicate with each other, and there is no dialogue, there is a risk of multiple identities. Printed documents are a risk and an inconvenience - they can be stolen, duplicated, falsified. But a blockchain approach that puts the citizen at the centre would act as a layer over the databases that would provide encrypted communication between these bases, providing citizens with access to their data, and allowing them to share it with authorities, for example.


Bogdan Botezatu, Bitdefender: Crypto jacking attacks are the most common in the world

The Blockchain ecosystem security is achieved using cryptography to arrange transactions in chronological order, says Bogdan Botezatu, senior cybersecurity analyst at Bitdefender. "The same design provides resistance to potential changes to data already arranged," he tells The Diplomat-Bucharest. "Another strong point is the distributed system, that public ledger that provides transaction verifiability and permanence. Permanence is due to the fact that already validated records cannot be changed without the consensus of the whole network and data cannot be lost because a copy of them is available on the rest of the infrastructure systems."

According to Botezatu, the biggest problems Bitdefender has encountered over time were not about infrastructure architecture, but human factor vulnerabilities (malware attacks on the user′s computer that either look for the victim′s private keys (keys that allow transactions), or exchange vulnerabilities (online services that allow users to trade Bitcoin or other cryptocurrencies) and which host their e-wallets.

"Another endemic issue is the unauthorized cryptocurrencies mining on the victims′ systems, whether they are household users, or data centres with immense computing power," he explains. "For example, in December 2017, when cryptocurrencies cost reached a historic high, we identified a massive increase in crypto-jacking attacks (the infiltration of cryptocurrency-mining computer scripts). These crypto-jacking attacks have proliferated 100-to-one compared to ransomware attacks. Practically, for every identified ransomware attack in the market, we identified 100 crypto-jacking attacks, a sign that hackers understood that they can make more money from unauthorized cryptocurrencies mining than from any other cybercrime."

At this point, crypto jacking attacks are the most common in the world, according to Botezatu. In his opinion, it is important to understand that these attacks do not target the blockchain, but vulnerabilities that exist in software applications at the home or enterprise user level.
"This phenomenon is extremely complex because cryptocurrencies mining applications use advanced lateral movement techniques (that is, they move from one computer to another through the local network)," he says. "Some families of such applications also use, for example, the EternalBlue and EternalRomance exploits that apparently would have been developed by the NSA for computer spying."


Nicolae Ghibu, certSIGN: Blockchain potential is huge, this technology cannot fail and there is no turning back

Blockchain technology is innovative, and - from a certain point of view - is fundamental to the development of new versions of the technology itself, but also to the development of new business models, the main element being decentralization, says Nicolae Ghibu, chief commercial officer at certSIGN.

"Choosing a blockchain implementation must be a well-founded process from a technological point of view and especially from a business point of view," he tells The Diplomat-Bucharest. "Blockchain technology lends itself to implementing systems that are linked to financial systems. But there are other political and business endeavours that need to be implemented to the same extent. In an individual or experimental manner, a number of such implementations have already been carried out, but a general adoption such as "a new financial system" involves many aspects which are monetary policy decisions."
This technology is equally applicable to any geographical region in any industry, provided it is suitable for that business model. Some implementations may have to comply with business-specific regulations with or without a link to that country, according to Ghibu. He says that the range of application areas is virtually unlimited for both the private area and the government or administrative area.

"It is important to correctly identify the benefits of using blockchain technology compared to the classical technologies for the different business models that will underpin implementations," he explains. However, we are not just talking about industries, any area in social life can be subject of implementation as long as it brings added value."

He goes on to say that the only issues indirectly generating certain implementation dislocations will be related to regulations, which will take time to correlate and uniformize, legislators being generally reactive and not proactive to the situations that arise with the implementation of blockchain technology projects.

"Blockchain potential is huge, this technology cannot fail and there is no turning back," concludes Ghibu. "Regulations will come gradually and will cover - directly or indirectly - all areas. Undoubtedly, regulations must exist, and the first steps in this regard have already been made in some American states or countries on all continents. There is also a special concern at EU level in this area, regulation being one of the major objectives."


Teodor Blidarus, FintechOS: Blockchain technology is on the digital transformation agenda of the entire financial-banking system

Blockchain technology is at the beginning of its road and by 2027, ten per cent of global GDP will be supported by blockchain solutions, says Teodor Blidarus, CEO and co-founder at FintechOS and managing partner at Softelligence.

"The applicability of this technology is closely related to the concept of Smart Contracts," he tells The Diplomat-Bucharest. "I believe that the target audience or the market segments that can benefit from blockchain technology range from banks and insurers to scholarships and television, from accountants and notaries to the e-government area."

Blockchain technology is on the digital transformation agenda of the entire financial-banking system, according to Blidarus: "Both banks and insurers already have a digital-first strategy to provide customers with fast, efficient, low-cost services. In the coming years, we will see an increasing differentiation in what we receive as consumers. Ultimately, consumers will validate whether blockchain technology will define the financial system of the future. From my point of view, an institution that is not anchored in understanding the benefits of modern technology, will lose the train in a few years to technologically-armoured players."

The biggest advantage is the system decentralization, which allows both a cost reduction and a processing speed of instantaneous transactions with a significantly higher degree of security than in the current situation. Another advantage is that a transaction, once registered, can no longer be erased, and the decentralized registry cannot be destroyed.

Romania unfortunately does not have a powerful technological hub that will generate traction and attention from big investors, as Blidarus explains: "The most important blockchain hubs remain in New York, San Francisco, Dublin, London, Stockholm, Singapore, Hong Kong and Sydney. In Romania the blockchain penetrates through multinationals, especially in the financial-banking area. We have usage scenarios for damage cases, for example where the existence, appearance, accuracy and completeness of information can be instantly made in a Smart Contract, with an automated incident reporting (if there are certain IoT sensors on the insured object). It is an example, but expanded at industry level we can talk about transport / logistics, media / entertainment, healthcare, government."

He goes on to say that a blockchain solution is much safer against cyber attacks than a traditional architecture: "The use of technology especially in the cryptocurrencies area has brought to the public′s eyes more cases of fraud, money laundering or security problems. These situations were not generated by the technology itself. Moreover, problems have been fuelled and exposed by the media and the traditional system, which is not ready to embrace blockchain technology. I would say that, on the contrary, security is precisely one of the major advantages of the blockchain and is the main driving force in the Identity Management area, for example."

In Romania, the blockchain technology is strongly associated with cryptocurrencies, as Blidarus says.
"Technology will get into more and more practical areas, but it will have more impact on the back-office, process, which is an area inaccessible to the general public," he explains. "Just as AI technology revolutionizes customer interaction and is becoming increasingly useful for understanding human behaviour and creating customized interaction experiences between suppliers and consumers, blockchain technology is more geared toward process, efficiency, and speed. The blockchain has a noticeably strong effect on the companies that adopt it, and its impact is seen in reducing costs."
Last year, blockchain technology has been used over 50 per cent in the payment area, according to Blidarus.

"The reasons are the same - greater transparency, low costs, no intermediaries, high transaction security," he explains. "The second area of use is the Identity Management area. We estimate a doubling of the Identity Management market due exclusively to blockchain technology, precisely because of its high security. Moreover, the lack of traditional on-line systems for identifying and securing personal identity, the emergence of GDPR and the increasing demand for personal data protection, as well as the need for rapid biometric identification on large volumes of images, all feed the demand for solutions using blockchain technology."

Blockchain solutions can bring cost reductions of more than 20 billion USD annually for the financial and banking sector, as Blidarus concludes. "Here we are just talking about reductions in infrastructure costs. This adds to the perceived benefits of consumers, the reduction of time per transaction and the reduction of commissions by eliminating intermediation. In the medical field, it is estimated that blockchain technology will experience an explosive increase of over 85 per cent in each of the next five years because real-time interoperability between patients, medical institutions, pharmacies, and researchers through instant and secure access can be ensured, over a variety of data sources such as patient electronics, imaging, dossiers, or IoT sensors."



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