The Emergence of Blockchain in Taiwan

Amazon Alexa, self-driving vehicles, and robotics. These are all widely known technologies available to the general public which utilize hardware, but rely heavily on software that is programmed into it in order to function. As many are able to perceive, technology is shifting towards a software-based environment. Namely in Taiwan, one of the world leaders in hardware manufacturing, technology leaders see opportunities beyond hardware. A specific area of interest in Taiwan is blockchain technology, which is a public ledger utilizing a peer to peer, decentralized structure. As of now, we put a lot of trust into a third party such as banks, retailers, and corporations to keep our private information safe (which isn’t always reliable). Blockchain is a clever technology whose versatility is becoming increasingly apparent to the Taiwanese government. With blockchain, transactions are recorded in a public ledger and verified by none other than the users themselves, allowing the transfer of cryptocurrency and other data in a decentralized structure. Due to its almost guaranteed security and its easy traceability of irregularities, it’s not hard to think of the many possibilities for practical application that blockchain can provide — recording information such as healthcare data, tracking natural resources, and removing the need for an intermediary to name a few. Various Taiwanese businesses, institutions, and the government have begun to utilize blockchain technology in order to benefit citizens.

Taiwan has traditionally been a very hardware-focused country in its technology sector due to cheap labor costs and a high marginal profit. Sharp, HTC, and Acer are some of its most prominent names. Recently, however, Taiwan has been working towards integrating software as well, such as IOT, software development, and blockchain. Led by Jason Hsu, a legislator who is known to be a strong advocate of blockchain technology, the Taiwan Parliamentary Coalition for Blockchain was founded to push blockchain projects through legislation. Before, the Taiwanese government adopted a “hands-off” approach to blockchain technology — it neither supported nor prohibited it. In recent years however, authorities are becoming increasingly aware of its capabilities and have announced its support to turn Taiwan into a global blockchain nation. Due to various projects which have proved the usefulness of blockchain, its advantages and improvements in the public sector are clearly recognized by the government.

Some of these projects include a blockchain-based payment system which greatly reduces transaction costs and a virtual ID card that prevents identity theft. As a Taiwanese citizen, the impacts of having blockchain integrated in the public sector are very visible. For example, a blockchain-based payment system running on Ethereum has already been implemented near National Chengchi University, used by restaurants and merchants. Since its implementation, the number of transactions in this area has increased fourfold, showing how well its improved merchant sales. There are plenty of reasons for this — decreased transaction costs, elimination of intermediaries, and increased profit that follow. Because of the Byzantine Fault Tolerant consensus protocol that allows two nodes to communicate safely through a network, if a consumer were to pay for something through this system, the transaction times would be cut to less than a second. It would also greatly improve the efficiency and security for the average Taiwanese merchant because of the blockchain structure: transactions are easily verifiable and located on the public ledger, with little doubt of fraud. Due to its low cost for each transaction, merchants forgo extra payments to banks and corporations, allowing more profit to be made.

Another project aimed to integrate blockchain in the public sector and therefore improving the security of Taiwanese citizens’ data is “TangleID”. Think of it as a “Digital Citizen Card” that stores important health data, personal information, and other identification. Identity theft is always a risk when dealing with traditional public ledgers of data. Data leaks, criminal activity, and other threats can all compromise one’s personal data and identity. Yahoo is infamous for a data leak which compromised three billion user accounts. eBay has had a similar crisis in 2014, in which 145 million users’ names, addresses, birthdays, and passwords were all exposed. By utilizing the security of a blockchain ledger and its decentralized nodes, the risk of data being leaked intentionally or unintentionally from a third party is eliminated without an intermediary needed. This is the main basis of TangleID’s security. This way, citizens will be able to rest assured that identity theft as well as voter fraud will be eliminated.

One application that would be especially useful in Taiwan would be using blockchain to track natural resources. Although Taiwan has been going through a very rapid industrialization for the past decades, the environmental costs of doing so is enormous and often times shrugged off in the name of advancement. A blockchain could be used in this situation to track where resources are going towards and how much is being used. By using a blockchain and a “transactive grid” to track energy usage, businesses and the government would be able to easily query where energy is being sourced from and how much is being used. The fact that adding anything onto a blockchain is a immutable record and its low transaction costs make this a very efficient implementation.

Through the multitude of projects that are already in the works, it is very visible that blockchain can have an enormous impact in the public sector, improving Taiwanese citizens’ lives in many aspects. The unique security that comes with utilizing a blockchain structure, its fast transaction times, and low costs can be integrated in a number of creative ways. Jason Hsu hopes to continue this momentum of innovation and change with blockchain. As one of the writers of the “Financial Technology Innovation Experimentation Act” passed in Taiwan, Hsu constantly rallies for legislation supporting blockchain and cryptocurrency. With the pro-blockchain environment in Taiwan, new projects that may be in the works will utilize this technology and be a driver for next generation’s innovation, benefitting citizens and the government alike.

By Kenneth Lee on October 12, 2018.

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