Enterprise Blockchain: What You Should Know and Prepare For || Adebayo Fabamise || Alumni Retreat

[music] My name is my name is a law firm that services a few technology clients. Uh and I say a few because we are much more precise about quality rather than quantity. Um we represent a few web three based startups. We are also investors in a few projects as well. We currently are um participants of the consortium that launched the NRA stable coin.

NRA reputable brand CGM came on that project three years ago when it was starting and we've been able to we've been able to sort of uh grow that start that project up to regulation and being able to you know to key into regulation which is one of the reasons why this topic is very important to me because what it allows you what it will what I hope it will allow you to do is to be more uh to sort of build some level of foresight into being able to anticipate moves and key into those moves. Um you we currently operate in a very dynamic space. I mean the entire blockchain web3 space is as dynamic as as it can. It's ever changing. Uh today it's been banned, tomorrow it's been regulated.

Next tomorrow you know there are additional regulations. the day after you know there is some little ban again. And while bans obviously are not what we expect from a regulatory standpoint, you sort of can maybe say that you some uh some bands will come because of you know everybody will take will take you know advantage of new technology take advantage of regulation to be able to carry out whatever activities that they're going to. But then what that then effectively does is negate uh sort of you know negate negate trust in that system cuz of course if frosters are using it then you know people are going to believe you know that's what that's ex exactly what it's for. So we'll start with this very very interesting topic enterprise blockchain what you should know and prepare for.

I'll be speaking from the business point of view. I I'm not technical in the real sense. So I I cannot speak like my hour uh that sort of understands what it takes to roll out the technology itself or the technology stuff. What I can speak from is from other areas around that. And when I say other areas, I'm talking much more regulation compliance uh business development opportunities and areas that we sort of should focus on.

So let's start with what enterprise blockchain is. What exactly is enterprise blockchain? From what most of what we are more familiar with, we're talking we're more familiar with private and public blockchain. private in the sense that you know it's sort of like a permission close system and probably from you know accessibility uh from looking at the accessibility and integration systems but when you're talking enterprise blockchain enterprise blockchain is where is what I believe is the an intermediary between between both systems every most of the sectors where enter where blockchain is going to be going into is they are still closed systems I'll Take I'll give you an instance. Financial institutions are still very very close systems.

You cannot readily have access to NIS for example without going through someone who has you know you cannot just go and download uh API documentation for NS and just plug into into NIS because it's still sort of a closed system but not withstanding other players in that system need to come into need to be able to interact. So the banks need to be able to interact with them via a centralized settlement system which is what NIPS does. So if a bank for example is building out its own private blockchain for its own to build out it own wallet infrastructure to build out its own uh to build out for it customer. It will not be able to interact with the financial system without other people being on the same uh decentralized ledgers uh ledger technology basically or being on the same blockchain. So effectively there has to be some there has to be a much uh an overriding system that has to be built that will then connect each individual key players.

This is where enterprise grade technology comes into play. So the problem the the focus on that is not just focusing on a specific business or a specific product. It's much more general solving general business problems and improving pro profess processes amongst uh institutions or among sectors rather than you know within a specific you can build and say oh you're doing you're building for remittance and that's for remittance but then there is remittance as a system there is custody as a system there is payment as a system what exactly is the connecting factor and how do you then connect that to traditional systems that is the role enterprise blockchain uh will play going forward realistically going forward and we've seen quite a lot of moves within that sector. A lot of banks are building out their own wallet infrastructure to be able to move to that system. A lot of banks are building you know various factors various you know sort of mirror ledger systems.

But then how do we connect that under a sort of a consortium a consortium system or an enterprise system? These are still you know bing issues that still need to be uh that need to be addressed. Whether we're looking at it from the finance point of view or from data protection, healthcare uh and data transfer system point of view, there still needs to be a collective network for everybody to be able to key before any sort of tangible progress can be made by individual uh blockchain products. So if you have your own remittance system and you then have to start you're still off ramping and then you're still going through some you're still moving from USD to NRA to be able to pay into a traditional account that's a very inefficient system and that will still you're still subject to the cost of offering whether you're from USD USDC to NGN or USDT to NG you still have that problem and if you're settling in Brazil for example you still even have to sometimes move from USDC to USD then from USD to go local currencies. Those systems are still very inefficient because they are still clustered systems and blockchain uh and payment systems and blockchain infrastructure built uh as as they are being built right now are still cluster systems without integrating into uh existing traditional legacy systems which is the which is the opportunity I want us to collectively explore uh today.

So I mean once we understand that then we'll look at okay what exactly so yeah we look at exactly I think we've done with okay I'm done with all these aspects as well so of course what are the benefits the real benefits realistically as far as I'm concerned is benefit number three which is operational efficiency and cost reduction like I explained off ramping on wrapping moving between systems is still as it were costly to to builders, to developers, to business, to startups, to businesses within that space. And then you then look at what is in the traditional system. The movements moving money through under the traditional financial uh technology system that exists right now is also still very expensive and very you know and time consuming. So there is still no operational efficiency or cost reduction in that system. So blockchain in itself you know sort of solves that problem but it wouldn't solve that problem except there is some level of increased transparency and trace traceability as well as some improved security and trust.

If the banks do not trust that this system we can funnel $5 million system to be able to settle um JP Morgan in the US. Why will the banks use it? Why would traditional financial institutions use the use that as as effective as OP pay, pound pay, money points are, they are still very traditional systems and they are not you know they obviously have no use for the blockchain in ensuring payments. But then once we now go to traditional uh banks, access banks, banks who do international payments, there is a very evident use case there. So how do we get these traditional legacy systems to work with to work with us?

How are we able to key into this into these areas? How do we explore opportunities within those spaces? How are we able to grow within those spaces? We understand the benefits of integrating what we understand and what we we are building into this into into these sectors. But how exactly will that be done?

How exactly do we know how to go ahead? how to go about that. So what exactly are we going to consider? Ease of use and deployment. Do you want are we building systems that are very are still going to be very difficult to use where you still have to start doing uh you have to start doing character matching you know for anything to sort of go through you know because for example you could in blocking you could an entire page of text into just a hash sequence and then once that is transmitted it can then of course you know then result back into the original document.

which allows you to obviously just transmit data without the necessary necessity of actually matching each specific character using those system. If you don't understand how NIN works and how the passport system works in Nigeria for example, you understand that every single thing goes through character matching. You fill out your details on the on the on on on your on the immigration website and then it takes those details and goes to the details and then it matches those details and it comes back and it's matching character wise it's matching a to a b to b c to c. So if your name is T and you know there is a cat an additional one says P E one says PE there is an issue for that character it really doesn't matter whether all that information is correct really doesn't matter if it's the same person so how exactly is blockchain able enterprise blockchain able to correct the inefficiency in this system make it very easy to use make make it easy to deploy support multiple protocols. Can we go and use it across you know different systems?

Can we go and use it across does it have crosschain capability? Those are very critical features in deploying any sort of enterprise grade technology not even just uh blockchain focused uh technology. any sort of enterprise based technology has to be for support for multiple protocols enhanced security and compliance obviously scalability and performance integration interoperability capabilities a lot of people ignore that and I hope I'm not just rambling but I because I I feel like this is much more a conversational topic than it is you know so I'll rush through this and then I don't have a expensive Q&A so that we everybody sort of understands it integration and interperability if you follow the e uh the eara fiasco, you would understand why as much as the startup the three startup system is great, there is still a gap when you talk about legacy systems. When the CBN wanted to build out the the inra on the private blockchain, they outsource that to a company in Mona wasn't to Nigerian developers. It wasn't to Nigerian companies.

I mean I mean at least for question one it was to people it was to a company in Malta. If a company in Malta comes into Nigeria and tries to build out the ina system there are salient local local context that is that they need to understand [snorts] the way we spend money in Nigeria is not the way they spend money in Europe or in LA. If you're building out a payment system in Nigeria and you're saying you're only going to focus on cards for example, you're wasting your time because now payment is moving from cards to pay by transfer. If you say you want to use payments via accur code, you're wasting your time because effectively even if you say card system still works system is just a fraction of the market. So if you're building out solution and you don't understand the local context, there is bound to be some gaps.

That is why local developers that understand the landscape are in the best position to dream of products that will work within the local context. But then if those local developers are just building in silos and not looking at how exactly we can work, we can integrate with traditional systems or there is some level of interoperability with the traditional legacy systems. Then of course you know they are still limited by growth. You can say, you know, yes, you're doing 200 and a certain fraction millions of dollars in crypto transactions in stable coin payments. 220 billion dollars moves in Nigeria in stable coin transactions every year.

Good and fine. But even the funds that go to stable coin payments come from the traditional banking sector. We still make spend money in Naira here. So even if you have a 100,000 USD, you cannot spend it. You still have to move to Naira.

When you go to the local shops, you cannot spend that money. You cannot spend your USDT. You have to first find a way to move to Naira before you can spend. So now imagine the people that are not even interacting, the volumes that the banks are doing when they're not even interacting with the blockchain. the fraction of the country that move funds that don't even interact with the blockchain.

If the 200 billion is is still going at least a large fraction of that still going to interact with financial system now consider the fraction of the Nigerian financial sector that doesn't interact. That is the real that is what I consider the real addressable market. Not the 200 billion that you're we're talking with respect to table payments but the entire financial system in Nigeria that is the real addressable market. So if you're building a silos and everybody's trying to take a fraction of that 200 billion in crypto transactions, the banks are still, you know, declaring 1 trillion in profit per quarter from a single bank based off traditional money flows based off traditional lending, based off traditional loan system, based off traditional deposit ticket, based off traditional payments. That is the real addressable market.

That is the real you know the real target for web three that is the real target for blockchain for blockchain deployments. So let's now go to the big context of it. I've explained you know Nigeria's position as as a digital payment leader. Nigeria went ahead one of the very first countries I mean China I mean one of the top three top five countries to dream up a set digital currency and in making that move you know that okay it was a very important move at that point in time obviously still failed but it failed because the enterprise grade system for its deployment and use did not exist. The bank banks didn't have the infrastructure to hold it.

The banks didn't have the infrastructure to use it as as a means of payment. The banks didn't have infrastructure to deploy. Nigerians didn't understand. You know, the average Nigerian does not want to know what system is being used to pay my money when I go to when I go to mart and I want to pay. I don't care what pay money how they make the payment possible.

as long as the payment is possible. Who cares about that in the business? If inra has been packaged with very good system with very good system of deployment with existing infrastructure, yes, then maybe it would have would have succeeded. Who knows? Of course, aside from the political aspects of it, but who knows?

So when we have such forwardinking approaches, you but then the infrastructure for white scale adoption does not exist, then there is still a gap. And now we are rolling out of course more Bin engineers but are we able to adequately understand the addressable buckets are we able to adequately understand the gaps and I may be wrong really but from eyeballing it 80% of crypto-based startups are much more financial institution inclined very you know maybe the other faction is now working on real world assets. You know both the Nigerian financial system is divided into two payments the banks and shares equity. Nigerian shares have been the have been one of the best performing um properties over the past 30 years particularly you know except for banks that fail most banks are health they most banks are giving returns most banks their secrecies are going up u MTN most of people watching MTN have done 3x since they bought since since MTN IPO a large chunk of the traditional funds, traditional business funds are still being held in the securities market. We are still and the security market is obviously being proactive.

Now um Agama has been very very very and Aama being the DG has been very very vocal about his approach that capital market operators must move to blockchain. He's not saying oh let's consider blockchain. He's saying blockchain is here. You either adapt or you die. So how many blockchain developers are are trying to understand the system of share transfer, the system of share issuance, the system of of settlements, the liquidity that powers the uh capital market and trying to innovate or build around that or trying to um or are you approaching are you actually applying to some of these?

Are you applying to NX? working applying to C CCS telling them that I understand this thing. I understand your market. I understand the blockchain market. I can in fact I plug in consult help with moving from here to here with adoption.

Even if some of these bigger firms will move into will bring in um external consultant external companies to sort of build they would build that but they still need in-house engineers they still need in-house developers to understand to manage to adapt to ongoing changes when the consultant comes in builds deploys there are still obvious like quite a lot of opportunities is still being missed there I had a conversation with someone at Norm Bear last year where they wanted to build out. They were actively seeking consultants to build out. They were actively seeking um people to help them to consult to build out their own infrastructure towards acquiring a virtual asset license and you see quite a lot of moves like that very salient moves but exist and only people within with knowledge of that sector with knowledge of operational capability within that sector are just able to key. So you then when you then look at the regulatory moves between the sex special assets uh landscape you then the CBN's new approach to of course very I've been reliably informed that the CBN is also working on its own uh token system and token payment system for virtual assets is also then working on with FIRS on exactly how they can integrate a very similar system with taxing VATS on transactions with special asset service providers as well. Those are still are in the works and the only system that exists the only way that system would exist is if there is a high level foundational uh traditional infrastructure that everybody then has to plug into and then everybody then has to build out of and it then creates a network.

We have capital after market operators in in Nigeria are excess of 800 from stock brokers to uh to payment houses to to um capital market to trustees to custodians quite a lot of them in the in in the you know in the capital market space. How exactly are we looking at our business within that space and building with these guys and building for these guys is also like a very critical thing and regulation is usually an indicator of that and then once you see the direction regulation is going you'll be able to understand where the next possible opportunities lie with and the next person obviously going to talk about the new tax act so you'll see with respect to tax there has to be systems will need to be built around that to be able adequately tax who is already working towards that line who is already trying to understand the taxation system towards understanding how to build uh you know how to key into that so that you can readily tell FIRS and say look yes we have a solution here we can help you do this we can work towards this a lot of guys already I think analysis already does some sort of like tax system as well to be able to help you tax you know a tax focused uh system to be able to to crypto tax. So a lot of systems have been built a lot of systems beyond the traditional exchange payments rabbitant you know that's very wide basically um so yes the value proposition the core value proposition of whatever enterprise based system is going to build is the trust problem between organizations everybody has to come together best approach is obviously consortium based systems where everybody comes together to build out The other aspect is bleeding from the regulators or coming from the regulator point of view. And no matter what is like it's a web. It's a web.

The current new system will go to a bank. A bank will give a micro finance bank. A micro finance bank will give a PSSP or PPA S like any a payment service provider. uh anything you will just it just becomes everybody then be begins to integrate but the foundational integration is based on the understanding of how the settlement and money flow and the traditional banking ledger system works because blockchain itself is just a mirror system is not exactly distinct is not a new innovation in sense it's just a new way of doing what's been already done a much more secure much more transparent way of doing have already been done. We already pay.

We already move on. Can we just do it more effectively? So understanding how to do it more effectively and understanding what is already being done. You cannot say you are building a more efficient system if you don't understand the system you're trying to replace. You know, so that is obviously creating a single source of truth across entities.

It still fits the same. It still fits the same thing. the central system that everybody connects to enabling new business models through digital assets. That is where everybody will still end up you know settling into when you build with the when you build the enterprise base with banks with the consultants at the end of the day three four five years you leave similar to what GB did with FL being the banking sector you know that at the end of the day you worked in the banking sector you understand how the payment system works you understand how the traditional infrastructure works you then want to build on top of that new business models will be then begin to emerge from enterprise based technology and they'll be more effective realistically because of their of them being built with a central source and with the most liquid source, the most effective source, the CBN is not going to allow foreigners or foreign blockchain control the Nigerian financial sector. It's not going to it's not going to happen.

The SEC has already has a mandate that for anybody to get a license under the SEC, you have to be a Nigerian company. We have to see that you're a Nigerian company owned by Nigerians and the only other people under foreign entities that will get such privilege are foreign entities that extend the same privilege to Nigerians. You know is the concept of nationalization. We will control critical infrastructure by ourselves before others. So realistically new models you know a by bit a kraken will not be able to connect into the financial sector but a traditional Nigerian business will be able to do that has a better chance of connecting into the traditional system than a buy bit than a binance you know than a kraken and that's just facts you know that's just the fact a lot of people already obviously ke into that I mean the Chinese are very notorious we've been able to infiltrate systems but yet but the systems will still it will still exist you know reconcilation and delay cost reducing cost that's specifically sweet that is uh settlement in Nigeria is done four times a day by over the weekend there is no settlement so you all can understand how inefficient that system is and how blockchain can allow instant settlement without human oversight and how that can revolutionize what the current settlement system in financial sectors can be you know reducing the delays reducing the cost reducing even the human factor in settlement because if it moves it moves you're not waiting for nibs to tell you the funds have been moved or for lumping up transactions and then moving it because of the cost and things like that once it moves on the blockchain it is moved you know so obviously like quite a lot of inefficiencies and quite a lot of solutions that can be brought in into play so understanding legacy systems is you know like is what I'm talking about you have to understand what is being used right now you know currently there are you know we have we have T24 flex cubes quite a lot of uh you know enterprise technology being used by the banks at the moment you have to understand how they work and you have to understand how to integrate into that.

um the FNS which is one of the uh wallet infrastructure providers you know I had a conversation with them on the Nigerian market and they have the position that Nigeria the banks do not have capacity to integrate anything and I thought that was a joke until I had a conversation with the tech team at Premium Trust and I can tell you for a that there there is a there are spaces for blockchain developers right now because inhouse capacity as a lot of Nigerian banks technically you know some exist I mean sterling has I believe first bank has access is building out but you have premium trust that doesn't have any you have you know alpha which is relatively new who knows how many they have but there are still gaps there is still the need. They are still always growing, you know, developers and looking for developers that could allow them exploit into the new wave and that is still a very very very open space, you know, very very open space because if you understand how the blockchain system works and then you understand exactly how they can system whether by integration or or whether through what I call mirroring where you're just able to mirror everything that happens here on that system towards you know phasing out one system. A lot of mirroring system will go on before any sort of blocking enterprise system can enter into the traditional financial uh institutions. It would first be a mirror system before it will be anything else and that is exactly where to start from. So they are already starting with us.

they already saying how can we have a wallet typed to every account holder you know those things are already going on and you just need to understand the landscape uh to be able to plug in so I just run through the okay names cast systems of course payment is also in itself um um there then another critical area I spoken about securities I spoken about banking I want to talk about identity identities don't protection is very critical. We have inefficient NIMC. We have BVN that exist. We have NIMC. We have your you have your password ID.

And then soon we are going to have new integrated taps ids. How many ids does does one need? You know, how many ids does one need? And I then got you know got to understand what uh the ZK protocol which is the zero zero knowledge and then imagine the impact something like that would have by identity management where you effectively can have centralized identification and you can then plug in only specifics when you're trying to get something done. You can only share specific datas that are necessary for that specific purpose.

only pushing out information as necessary while anonymizing the others that are not necessary. For if you look at driver's license today, that's all your details. You know, you have all your details. There is a real potential, you know, for blockchain to revolutionize digital identity, KYC and data protection whether through the Ze protocol or some some other level of experimental cryptography that one can actually just practice is an alumni of web web3 and you know very you know very lovely lovely uh breakdown he gave us about ZK But you see a lot of three people doing you know doing experimental things as far as I'm concerned and you know for you to zero into that space you know it's experimental you know there are still things around it but you then become an expert in that new phase you know those are one of the things like we want to see much more of you know our own people building out experimenting with new aspects of cryptography. Yeah.

So sector so regulatory compliance and technical requirements of course we'll still see quite a lot of these still being built out uh by the SEC by the CBN token participation whether it's Ty token utility token payment token you still see a lot of all that investor protection mechanisms um regulators have three roles basically they have market development consumer protection is very very critical and then money laundering and terrorism uh prevention has standard financial protection is very very critical. They want to protect the consumers to make sure that they're not being exploited. They want to protect the market. Then they now want to protect us for people utilizing it to fund know criminal elements and things like that. So they have very wide rules.

So you see quite a lot of that coming into play. So when you're then using doing security tokens, when you're doing security tokens, the consumers and the investors, you then have to protect the consumers. They have to make sure when they're pumping money into these things, they're not pumping money into MM or into other level of, you know, shitcoin or ponzi basically. So that's very, you know, that's very critical. And a lot of those things you also then have to when building out products, you have to build out products that's key into this.

You have to establish that your product obviously provides protects the consumers whether they whether being traditional investors security instruments or you know general consumers with respect to payment tokens exchange customs obviously you have to consider that when building out your when building out your infrastructure then disclosure automation um a lot of people who have worked with KYC automated KYC go a lot of all these things will understand what I'm talking about to starting discret measures that need to be filed with the NFIU with the EFCC the central control you need to get money a lot of things that needs to be done are you automating that into your system such that you know when triggers when certain events occur you know those reports are autogenerated cannot keep you in line with regulators okay because f compliance I think I'll just leave this for the next person to come and explain uh you know that but yeah but This is going to I mean from January next year we can expect that if you're building out a solution that doesn't you know you know have any sort of automated tax computation or transaction monitoring integration with their systems you know we'll be in for some issues we can expect that you know there will be some issues in that in that regard yes so how do we identify and develop opportunities so I'll take this one uh very closely. One is the most critical one as as I believe is future trends to monitor. You just have to be able to understand where exactly the are indicators going. In some instances that would be difficult because you may not really really be able to capture exactly where the indicators are going to but you need to just watch it. There is a vast ecosystem expansion.

Kenya just signed their vast uh bill into law. It's now an act. What exactly does that mean? what is the AI blockchain convergence uh interlockchain communication protocol I you see bridge working on that uh crosschain capabilities you see a lot of that and regulation technology evolution like I said with fs with CPN with SE everybody wants to be looking at what everybody's doing they want transparency but they want to be able to monitor to protect not just consumers but also um counter financial uh terrorism and moneyaundering very critical to them so a lot of regulation technology will also be over So you just have to be able to do that and then when you find something you then have to go into computing how exactly what is the return on investment for this space. Can I speak to a few people?

Can I engage with stakeholders to understand where exactly are we doing? Can I do it alone or do I need a few people within that sector to come together which is where the construction for me strategist then comes into and then of course pilot project you then have to start with a pilot project and see whether you know it will it will work out fine and then if it does and then it before you any before any sort of real life uh go to market I think my time is actually fast so let me just yes I think that's pretty much it so yes what exactly are we going to what do I expect for us to be doing um after Today Learn about existing market in construction. You need to build your knowledge on existing market in construction exist. What exists right now? What are we trying to reduce?

Then partnerships understanding the roles of brokers, custodians, registers in the entire financial systems. Who owns the banks are considered custodians because they hold in funds and they move some to we have brokers who handle stocks, securities. We have registers. The entire financial sector is ripe with this thing. I mean I mean this can be expanded to even supply chain management.

How do people's you know authentication of supply chain from China to Nigeria? How do we confirm that what we getting from China is authentic? You know blockchain can help with that. But you have to be able to partner with whether you're partnering with airport authorities partnering with shippers council to be able to build something or partnering with NASDAQ or partnering with um some companies to be able to build out something. partnership is very wide and the sector is very ripe you know for pling as far as I'm concerned because everything just works right now and then traditional system still exist but if you can make it more efficient and cheaper then there is a space for that so legal advice we study Nigerian financial regulation and compliance requirements to be able to build in tandem with regulation if you build outside that's fine but always build with the understanding that as I'm viewed in regulation is still going to come.

So I need to be ready and be able to take it and I need to be protected from ICBC from NDL from you know from the police from SE from CBN you know from NFIU from everybody from FRS you need to consider protection from those people. Yes. And yeah that's the end of my talk. [music]