FT- Dubai turns to blockchain for domestic challenges

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In the heart of Dubai’s financial district, there is an office whose form perfectly matches its function. The office, with its smooth curves, is the region’s first to have been built with a 3D printer, and it houses an organisation capitalising on other promising 21st-century technologies.

From self-driving cars to blockchain, the government’s Dubai Future Foundation is seeking to wed new technologies to the state bureaucracy and position the emirate as a Petri dish for the future, not just a sun-and-shopping tourism paradise. This is more than encouraging fintech businesses to use Dubai as their base: it is putting technology at the service of the state’s needs. At the nexus of government and business, the city is committed to experimentation to establish an era of public-private partnerships.

The DFF’s Dubai Future Accelerators programme, for example, has selected 30 companies and given them three months’ development time and access to millions of dollars of venture capital to test their technologies with local government authorities.

The participants include supersonic transportation system Hyperloop and ConsenSys, a company building developer tools and applications for blockchain, the shared database system.

Organisers hope that the collaborations will help solve challenges set by various government departments. These include seeking automated transport networks that can cut congestion by 20 per cent; nature-inspired buildings which reduce power usage by two-thirds; and “integrated behavioral, genetic and biological systems” which are 10 times better at identifying and tracking criminals.

“They say a picture is worth a thousand words, but a prototype is worth a thousand pictures,” says Saif Al Aleeli, executive director of the Dubai Future Foundation.

“There is no better way to get your hands dirty with new technology than by trying it out. Our goal is to turn Dubai into the world’s leading test bed for the application of new technologies that help us achieve our goal as a 21st-century state.”

The accelerator programme dovetails with another project founded by the DFF — the Global Blockchain Council, a public-private initiative bringing together government departments, local businesses and international start-ups. The council, set up in Dubai earlier this year, seeks to foster the technology’s development in the real world via test cases for new business models.

It has launched seven pilot projects, with the results to be announced this month, when the Dubai government will also seek to expand on plans to integrate blockchain into its operations. The pilots aim to exploit blockchain to reduce paperwork, integrating the technology into processes that include the checking of documents and identities.

Dubai Multi Commodities Centre, a government-owned free zone, is working with its GBC partners to use blockchain to authenticate and transfer Kimberley certificates, which are issued to confirm that diamonds are not from conflict areas. Ahmed Sultan bin Sulayem, chairman of the DMCC, is also chairing the 81-country Kimberley Process organisation this year.

UAE-based telecoms provider du is working on piloting a health records scheme. The manual process of transferring records between clinics and patients is cumbersome and prone to human error. Using blockchain as a protocol for sharing these sensitive records would protect them against tampering and cut costs for providers, du says.

Blockchain, says Osman Sultan, chief executive of du, “has extraordinary potential to improve our lives as witnessed by the electronic health record application that will allow secure and real-time access to patient records, guaranteeing their integrity.”

“Blockchain is a major component of our strategy,” says Aisha bin Bishr, director-general of Smart Dubai Office, a government agency committed to expanding the use of technology across the city.

One area of interest to the government is the cryptocurrencies that use blockchain to underwrite their transactions, such as bitcoin. Dubai-based BitOasis, a bitcoin wallet and exchange company, has growth of up to 80 per cent as adoption of bitcoin and other cryptocurrencies goes beyond a narrower world of technology “geeks”, says founder Ola Doudin.

While more people are taking advantage of the “almost free” cost (in her phrase) of these transfers, banks are also trying to learn about blockchain technology as a means to cut operational costs and simplify complex regulatory demands for much better compliance.

Financial institutions are also aware that the emergence of cryptocurrencies for innovative transfer systems threatens to undermine their future profitability.

One of the main tasks of start-ups such as BitOasis is to work with regulators and governments to improve education about these technologies. They have sparked resistance from regulators who fear losing oversight of transactions. “Banks are really getting much more aware of the technology, they definitely want to learn more, but we are still in an experimental phase,” Ms Doudin says.

Those joining the experiment hope that the Dubai government’s single-mindedness will speed up the transition from vision to reality.

The emirate’s role as the regional commercial, trading and tourism hub has been founded on the government’s ability to move decisively to stretch its business-friendly advantage over competitors.

Some domestic critics say that this latest obsession with futuristic models is a gimmicky distraction.

They argue the government should be focused on the basics, such as greater competition in telecommunications, educational change, productivity and judicial reform, including decriminalisation of debt.

But officials say they will press on with engendering change where they can, focusing on areas of cutting red tape that will enhance the business environment.

“Dubai has a culture of figuring out how the world should work and going for it,” says Global Blockchain Council member Vinay Gupta, a London-based venture capitalist.

“This adaptive capacity and vision lets it in theory be ahead of places like London, where there is enormous bureaucratic drag. We are worrying about Brexit when Dubai is worrying about blockchain.”

Blockchain is a data-recording structure that creates a shared ledger which is distributed among networked computers, allowing users to make and verify transactions immediately without a central authority. New transactions are checked by the network and, when approved as valid, are added to the blockchain.

Most widely known as the ledger underpinning the bitcoin digital currency, blockchain technology can be public, allowing anyone to participate in adding new transactions to the blockchain.

Companies are also exploring private blockchains shared by known participants.

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