Blockchain: Behind the noise, the silent revolution?


Behind the glowing or acerbic newspaper headlines, technical terms and a lot of noise lies a revolution that is still poorly understood by the general public.

Introduced in 2008 by ideologists advocating a libertarian capitalism where private property has no limits and where everything can be exchanged or owned, the blockchain has gradually imposed itself, sometimes drifting from this original vision and often finding an echo in unexpected use cases.

The technology, which was used to fuel many deceptive proofs of concept in 2017-2018, has evolved a lot and has been enriched with new features. Need speed of execution? Solana is closing in on Visa’s level of performance. Need to exchange anonymously? The ZeroKnowledge Proof (ZKP)1 rollups will allow you to exchange data confidentially. Fees too high? A Layer 22 like Polygon will solve the problem. According to CoinMarketCap, there are now about a hundred Layer 1 assets that are the basis for more than 18,750 crypto assets traded daily. Proportionally speaking and with the exception of relatively low project quality, the blockchain has made it possible to list more projects in less than three years than Euronext since its creation.

How clean is your blockchain?

The hidden sides of this revolution, however, are not always honourable. While technology has evolved, so have its ecological considerations. Even though Bitcoin maintains a consensus by Proof of Work (PoW)3 , Ethereum has begun its transition to Proof of Stake (PoS)4 , almost as secure but a lot less energy-consuming. It is estimated that Bitcoin consumes the equivalent of several nuclear reactors, but that a PoS technology like Tezos consumes the equivalent of only 17 households for a higher value offer (elaborated smart contracts, on-chain governance, etc.) Like traditional industries, blockchains and miners are also beginning their transition from Chinese coal to decarbonised energy as well as the recovery of wasted energy. Forward-thinking, miners share the same cost structure as hydrogen production stations (lowcarbon or wasted electrical energy at the lowest possible cost). Similarly, PoW protocols are either disappearing or beginning their transition, like Ethereum.

What is the status of the technology adoption?

This evolution of technology has been supported by an ever-growing community of developers. A meta-analysis conducted on the code-sharing platform GitHub estimates the number of blockchain developers in 2021 at more than 105,000 people (+63% compared with 2020). The profiles are therefore rare yet becoming more numerous. This community, supported by a massive inflow of money, has allowed technology to move fast. Very fast. So much so that following the blockchain requires meticulous monitoring, which benefits “crypto influencers”.

Where is the revolution?

Although Bitcoin allows for simplified smart contracts, it was Ethereum that introduced a so-called “Turingcomplete” environment5 . This was followed by the development of DApp (decentralised applications)6 and the appearance of the first DEX (decentralised exchanges)7. Thanks to these DEX, it is now easier to buy a crypto asset than a Peugeot share. If we talk about figures, listing an asset on a DEX costs between 5 and 200 euros (depending on the network), and access to market data is free if we host a node ourselves, or less than 50 euros per month if we go through a node provider8 like Exanode. Just as SpaceX has decreased the cost of access to space fivefold, making projects like Starlink economically viable, DeFi9 and DEX are disrupting the status quo. So much so that the listing of small and medium enterprises (SME) and private equity fund assets are being considered. Startups are already offering to digitalise account keeping and to issue securities directly on the blockchain. Others suggest the possibility of making liquid what today is not, such as assets held by private equity funds. The blockchain, thanks to its standards and robustness, is becoming a “turnkey” tool for listing and trading assets.

What impact for the bank?

Taking the logic and philosophy to its extreme, the new investment bankers will be the advisors in ICO10, the clearing houses will be the blockchain, organised markets will be DEX and interfaces like Bloomberg will be node providers. The blockchain is continuing its relentless progress, with regulation playing both with and against it. While the ecosystem is flourishing, consolidation is undeniable, but behind Non-Fungible Tokens (NFT) or questionable ICO projects, there will always be this technology that will profoundly change our way of understanding the exchange of goods... and by extension our currency.

Vivien Sayve, Head of Finance and Strategy, Exaion

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Zero-Knowledge Proof (ZKP) is a method used in cryptography to prove that a statement is true without having to provide additional proof of its truth, making it possible to anonymise part of the information.
2 Layers (1 or 2) are basic concepts of “blockchain”-type architectures; a “Layer 1”- type blockchain does not need an additional infrastructure or network to validate or finalise a transaction. A “Layer 2” protocol will need a “Layer 1” network to manage its security and allow the establishment of a consensus to validate a transaction.
3 Proof of work (PoW) is the basic consensus algorithm in a blockchain. To validate a transaction listed in a blockchain and confirm transactions in order to produce new blocks in the chain, the participants (the “miners”) are pitted against each other to solve an equation, and subsequently be rewarded by the attribution of the cryptocurrency thus created. This method is very energy intensive.
4 Proof of Stake (PoS), on the contrary, requires the user to prove possession of a certain amount of cryptocurrency (their “stake” in the cryptocurrency) to be able to validate additional blocks and receive the reward if there is one.
5 A “Turing-complete” environment is a computer environment that can perform basic algorithmic operations and execute computer code, whatever that code is.
6 Decentralised Application (DApp): an application developed according to the standards of distributed consensus protocols (Bitcoin, Ethereum, etc.) These applications are deployed on blockchains and shared across large peer-topeer global networks. They are operationally transparent, robust and above all impossible to stop or censor, which makes it possible to remove the intermediaries necessary to put two actors in contact.
7 A DEX system works so that all its transactions are carried out directly on a blockchain. The DEX operates on the basis of so-called “smart” contracts that contain all the information needed to carry out the transaction (including liquidity).
8 A node provider gives access to a readable copy of the entire blockchain registry. Node providers are facilitators that host a copy of the registry and make it easily accessible to third parties (traders, Web Application, etc.) They are the “infrastructural” heart of the blockchain, alongside the miners who add the blocks.
9 Decentralised Finance (DeFi) is an emerging financial technology based on secure distributed books, which eliminates the control that intermediaries (banks and financial institutions) may have over money, financial products and related financial services.
10 Initial Coin Offering (ICO) is a method of raising funds, operating through the issuance of exchangeable digital assets (usually in exchange for cryptocurrencies) during a project’s start-up phase. These items will be called “tokens” and may cover several types of assets with the objective of becoming easily exchanged, thus improving the asset’s liquidity.