Technology Review: Startups and bitcoin

December 31, 2018 11:06
The operation of blockchain consumes much electricity. Photo: Reuters

Looking back at the year about to close, it is most gratifying to witness the proliferation of startups in the city. 

According to an annual survey by Invest Hong Kong released in mid-December, there were 2,625 startups operating in major public and private co-work spaces and incubators, up 18 percent from 2017. Together these startups employed about 10,000 people, a 51 percent increase from the previous year. 

Those involved in financial technology accounted for 16 percent of the startups, while others covered various technology fields, including e-commerce, supply chain management, logistics, professional and consultancy services, computers and information technology. 

I was recently asked what I thought was the most hyped technology in 2018, and my answer was blockchain. 

Blockchain became famous for being the technology behind cryptocurrencies such as bitcoin. It offers a digital record of transactions that cannot be altered. It is regarded as having a huge potential to disrupt financial services as well as other industries. 

In the budget speech two years ago, the government said it would encourage the application of blockchain technology in the financial industry as a means to reduce transaction costs and prevent suspicious transactions. 

In fact, the government and the business community have been studying how to harness the potentials of the technology, but so far efforts have barely gone beyond strategic discussions on paper. 

The reason is that the technology has yet to come up with a killer application that could subvert the existing system and provide substantial benefits. 

By way of comparison, when the smartphone with internet function was introduced in 2009, it really changed our way of communication. The smartphone replaced the traditional voice-based mobile phone and heralded the popularity and success of 3G. 

At the same time, the operation of blockchain consumes much electricity. It is reported that a bitcoin transaction consumes about 300 KWh of electricity by the computer which alone costs more than HK$200. 

It is also said that when one uses a computer to do “mining" (which refers to producing cryptocurrencies by solving mathematical puzzles), the extra electricity charge is nearly HK$1,000 a month. 

Therefore, when blockchain is used for more complicated commercial applications, the electricity bill would be very high.  

That is why the findings of Gartner's 2018 CIO Survey came as no surprise. According to the poll of chief information officers, only 1 percent confirmed having adopted blockchain technology within their organizations, and only 8 percent said they were planning or actively experimenting with this emerging technology for use in the near future. 

Nearly 80 percent of the respondents indicated no intention of using the technology. 

However, blockchain could be of utmost importance to many industries. Its ability to record transactions and ensure that they are untampered with will go a long way in protecting personal data. 

Earlier, I reported a trial program on "blockchain-based decentralized data infrastructure for citizens to own their data" in Barcelona, Spain. 

Under the program, citizens will decide which personal information can be open to the public and they can customize the conditions, such as to whom the information can be disclosed and what are the restrictions. 

The citizens can keep track of how their personal information is used, when and how it is used, and by which organization. 

Such a system removes public concern over the use of their personal data by the government and business organizations. 

Many more trends are emerging. As such, 2019 promises to be an exciting year in the field of technology and innovation. 

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Adjunct Professor, Department of Computer Science, Faculty of Engineering; Department of Geography, Faculty of Social Sciences; and Faculty of Architecture, The University of Hong Kong