How Will Blockchain Change the World? (Part 2)

In the first part, at FINOLAB Inc. in the Otemachi area, Professor Kenji Saito, Senior Researcher at Keio University's SFC Research Institute, explained the mechanism of blockchain—the foundational technology behind Bitcoin, which has also gained significant attention in Japan. The second part delves into "The Scope of Blockchain Applications," continuing with Professor Saito, Yuki Yamashita of Dentsu Inc. International Information Services (ISID), and Toshiaki Hasamura of Dentsu Inc. Business Creation Center.

The essence of FinTech is transforming constraints into freedom

Hasumura: How will the evolution of blockchain technology change the current state of financial institutions? Magazines sometimes feature somewhat alarming headlines like "Financial Collapse"...

Saito: First, a major potential of FinTech is enabling money transfers without banks. Perhaps in ten years, just as "Apple Computer" became simply "Apple," the word "bank" might disappear from names like "○○ Bank." The business model itself will change. For example, banks possess expertise in assessing people's creditworthiness, so services distinct from traditional banking might emerge.

This is a bit off-topic, but I'm from the Kamen Rider generation and watched it a lot as a kid. Recently, I took my first-grade son to see a Kamen Rider movie. Hearing the line, "I am Takeshi Hongo. Though I may fall short, I fight for human freedom," again, I simply thought, "That's amazing." I want to be like that too. I think I've held that kind of belief since childhood.

Hasumura: So you want to contribute to human freedom?

Saito: Justice and happiness are hard to define, right? But "freedom" is something the individual can easily judge for themselves. Considering the direction of digital technology's evolution, I believe we must move towards making humans more free. Furthermore, if there are services that liberate people and others that don't, the services that liberate people will naturally be accepted and spread more widely. I think society will progress in that direction.

Yamashita: What do you personally feel restricted by, Professor Saito?

Saito: Money itself is fundamentally a mechanism that restricts people. While having money gives a sense of freedom, losing it instantly brings restriction. We've created a world where "no money = restriction."

Hasamura: I recall visiting Iran during my student days. Perhaps due to economic sanctions, I couldn't withdraw cash from bank ATMs using VISA or MASTER cards. The money was in the account, but I couldn't access it. That was truly restrictive.

Saito: Even now, you can't transfer cash amounts exceeding 100,000 yen via bank ATMs, right? I once tried to pay for a chartered bus for an event with a cash transfer and couldn't do it – it was a real hassle. I ended up depositing the cash into my own account first before transferring it to the bus company. People might not have noticed this kind of inconvenience or lack of freedom before. But with FinTech emerging, everyone is starting to realize, "Hey, maybe we could be more free."

Hasumura: What exactly does this freedom entail?

Saito: Fundamentally, it's about being able to use your own money 24/7, 365 days a year, whenever you want. For example, imagine a college student living alone who wants to receive money from their parents. But what if they don't have a bank account?

Registered cash mail is costly, and handing it over in person is difficult. Using recent technology, we could design a system where, for instance, parents send money information to their child's smartphone or mobile phone, and the child can then receive that allowance at a convenience store near their Tokyo apartment.

Blockchain is also effective for real estate transactions, legal contracts, elections, etc.

Hasumura: Currently, land registration requires visiting the Legal Affairs Bureau. It's a centralized data storage system, but real estate transactions could also be replaced by blockchain, right?

Saito: A press release came out this May announcing that Escrow Agent Japan has started a proof-of-concept experiment for real estate transactions using blockchain developed by Orb. As a relatively new real estate company, their focus is on "making real estate transactions fair." For example, large real estate firms often struggle to innovate due to vested interests. Smaller, more agile companies with fewer such constraints have greater potential to launch bold, interesting services.

Hasumura: While the fusion of finance and technology is called "FinTech," terms like "RegTech," indicating the fusion of regulation and technology, are also rapidly emerging. Even for tax filing, the current national tax electronic filing and payment system, "e-Tax," still doesn't seem to save that much effort. As things progress, filing your tax return should become as easy as writing an email. When that happens, you should be able to register documents without going to the Legal Affairs Bureau and get certified copies of the registry.

Currently, paper documents like the "Certificate of All Current Matters" might soon be available as PDFs with digital signatures. After FinTech revolutionized finance, it's said the next wave of reform will target the domains of judicial scriveners and lawyers.

Yamashita: That's right. AI will soon be able to verify similar cases from archives and extract relevant precedents. For specific, well-defined tasks, AI excels in highly specialized fields more than humans.

The financial world is similar. I understand that documents for transactions, approvals, and audits at financial institutions are often handwritten or created in Excel. I believe leveraging blockchain can significantly streamline these processes. ISID's blockchain proof-of-concept experiment with Mizuho Financial Group is also based on this same hypothesis.

Hasumura: While ISID's proof-of-concept is limited to specific companies, considering blockchain's "open" and public nature, it might also be well-suited for systems like elections.

Saito: Elections are a good example.

Yamashita: I agree. Public services requiring transparency are well-suited for blockchain. Finovate, the world's largest FinTech event, was held this past May. One venture was developing a service to issue IDs on the blockchain for refugees and immigrants without official ID, enabling them to access services from support organizations like NGOs and financial institutions. However, since they used facial photos for authentication to issue IDs on the blockchain, I don't think we can say the possibility of forgery is 0%.

Hasumura:Here at FINOLAB Inc., we also have companies advancing biometric authentication businesses under the very keyword "verifying identity by the individual themselves."

Yamashita: As we push blockchain technology to its limits, the core challenge becomes how to prove the connection between real people and their information—how to reliably verify this using biometrics and similar methods.

An era demanding vision-driven, radical thinking

Hasumura: Mr. Yamashita is still in his twenties yet stands at the forefront of blockchain. Professor Saito, do you have any message for him?

Saito: In 2008, the Bitcoin whitepaper featured the mysterious Japanese name "Satoshi Nakamoto," which caused a stir. However, it's unlikely he was actually Japanese. That said, Japan today possesses substantial technological expertise. I hope you actively share this knowledge in English to enhance your global presence.

Technologies like blockchain, AI, and IoT (Internet of Things) will transform today's systems within about a decade. Since change is inevitable, I hope you'll push for bold, sweeping transformations.

Yamashita: Thank you (laughs). As existing systems, starting with finance, are increasingly replaced, considering the recent pace of change in the industry, I wonder if the traditional approach of making long-term plans before moving forward will still work. This is because new job titles have emerged in recent years, like "Creative Technologist" – someone specializing in multiple fields like advertising creative and digital technology – or "Full-Stack Engineer" who handles everything from development to operations alone. New technologies keep expanding what humans can do, and it's hard to predict where your own career will be. I often feel it's impossible to make concrete plans for five or ten years down the line.

Saito: When the Industrial Revolution happened, there wasn't some "Nth Industrial Revolution Plan." Looking back, entirely new industries emerged. So fundamentally, planning isn't possible. That said, it wasn't born purely by chance either. What existed was human vision—"this is the kind of world we want"—and technology. Old visions and new programs won't change the world; what saves the world is a new vision without a predefined program.

Yamashita: That's right. When proposing to clients, if we think too much based on existing operations, our ideas tend to become narrow. At ISID, we also want to present an ideal vision from scratch – "this technology can create this kind of world" – to more drastically transform business and society.

Hasumura: I'm increasingly excited to see how blockchain and its surrounding technologies will transform the world. Thank you very much.

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