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Deloitte: Demand for blockchain will increase in Turkey

We talked with Yaman Polat, Turkey Financial Services Leader of the world’s largest consulting firm Deloitte, and Ugur Kağan Dincsoy, Turkey Blockchain Services Leader, about the technology blockchain behind Bitcoin, one of the most popular topics of the recent period.

At a time when new technologies and digitalization have begun to transform business life and even our daily lives, we have witnessed that COVID-19 has made this transformation inevitable. New business models, which we never thought of a few years ago, are rapidly entering our lives with the contribution of the startup ecosystem. Institutions that cannot escape change are investing in new business models and trying to keep up with this trend by establishing maturation centers.

“IT REFLECTS AS OPERATIONAL PERFORMANCE”

Blockchain technology is one of the new technologies that have been in our lives for the last 5-6 years, affecting the business world with its capacity, transaction performance, cryptocurrencies and end-users and individual investors. Currently, almost all of us have a blockchain infrastructure in the background in a payment application, a loyalty system program on our phones. Maybe we do not realize this as the end-user, but this change has started at the level of mobile applications and this is reflected in us as speed, reduction of errors of companies and transaction performance.

“GROWING EVERY YEAR, MAINTAINING ITS POWER”

When the concept of blockchain was used in a forum article 12 years ago, it was never thought that it would have such a powerful impact in such a short time. The concept, which emerged with Bitcoin as a payment tool in the first place and which everyone has heard now, later became a larger ecosystem, including concepts such as trust, performance, accountability, and decentralization, and this ecosystem continues to maintain its strength by growing every year. Recently, we have been closely monitoring the investments of giant companies in blockchain technologies, the interest of funds and institutions in cryptocurrencies. Trying to explain the blockchain world through cryptocurrencies, the number of which has already reached 7 thousand, means squeezing the subject into a very narrow scope. As Deloitte, we have been publishing blockchain research every year since 2016. We prepared the report, which we published in 2018, in partnership with TUBISAD, including the details of the Turkish ecosystem.

“So what is blockchain technology and what awaits us in the future? What will be the usage areas of this technology and the areas it touches in real life? To answer these questions in general terms, it is necessary to talk about some concepts. These concepts are also defined in the blockchain dictionary created by the Presidential Transformation Office. For example, blockchain, consensus systems, cryptocurrencies and crypto-wallets.”

Concepts:

  • Blockchain: It is a set of technologies that provide distributed, transparent, immutable and secure data structures. The contact information on it is verified, recorded and shared by the stakeholders in the network as immutable records.
  • Reconciliation Systems: These are the mechanisms that ensure that the processes in the blockchain network are verified and approved by a certain majority of the participants. Thus, it is guaranteed that the information is recorded in an accurate, reliable and unalterable form. The most commonly used are; proof of work and proof of stake systems.
  • Cryptocurrency: These are virtual coins created to be used as a payment tool in the blockchain network. It is called crypto money because its use in a decentralized state is guaranteed by cryptographic mathematical processes. The ownership or change of hands of a random good or service in the blockchain network is achieved by first defining it as a digital asset (token).
  • Crypto Wallet: It is cryptographically encrypted storage of the reference information required to process with cryptocurrencies or digital prices (tokens) in the blockchain network. Public and private keys are used as reference information in processes such as buying, selling and investing. Although the name of the wallet is given, no money or unit of value is kept on it.

MANY BLOCKCHAIN APPLICATIONS WILL BE IMPLEMENTED

In fact, the establishment of the legal infrastructure regarding digital money in Turkey seems to be one of the most important developments regarding the use of blockchain technology by institutions. Based on the title of ‘regulation experiment center to be established in the field of payments’, which came to the fore in the economic reform package published in March 2021, we think that many blockchain applications will be implemented in this experiment center. In addition, the determination of the digital banking concept and licensing infrastructure will indirectly have a positive impact on the blockchain ecosystem.

OFFERING NEW APPROACHES

While Turkey is in the process of enacting regulations on this issue, different practices in the world stand out. Especially in the field of crypto banking, companies with a collateral size of $10 billion offer their users new approaches to obtaining loans and deposit returns with crypto money. In addition, membership-based systems offer a different payment opportunity to their users in their own blockchain applications by receiving payments with crypto. Again, major payment system providers are moving their systems to blockchains and completing their integration to receive payments with cryptocurrencies. Countries are moving notary services and title deed services to the blockchain and investing in data accuracy and performance.

HAS GROWTH POTENTIAL WITH SAFE TREATMENT

DeFi (decentralized finance), which emerged in 2020 and experienced its golden days in 2021, has reached a size that will affect the banking sector in particular. In August, the value of locked cryptocurrencies on DeFi platforms approached $113 billion. This sector offers the end-user the opportunity to become a partner in crypto money exchanges, especially by providing liquidity to crypto money lending, lending and DeFi platforms. Although DeFi carries risks, it has the potential to grow by enabling users to conduct secure transactions without the need for authentication due to its decentralization.

OPENING NEW HORIZONS TO USERS

Another concept that we should focus on and that has been very popular lately is Non-Fungible Token (NFT). NFT enables the identification of works of art as NFT with a single personalized coin and offers the opportunity to create a digital collection for collectors. Platforms open new horizons for users and artists in this approach by enabling NFTs to change hands and auction.

INTEGRATION IN PROCESS FLOWS IS IMPORTANT

Undoubtedly, in the digital world where there are so many new concepts, there are many steps that institutions should take to prepare for this. It is very important for institutions to determine their strategies to integrate their flows and processes, especially at the blockchain level. At this stage, there are various opportunities in the blockchain world to transfer stock management, supply chain, insurance management, accounting applications to blockchain applications. The fact that digital banks invest in crypto areas in the world, card payment systems start to receive payments with crypto money, the establishment of funds investing in cryptocurrencies and the approval of these funds from regulators are important developments in this field.

“NEW REGULATIONS EXPECTED ON CRYPTO ASSET TRANSACTIONS”

We need to prepare for a revolutionary period by foreseeing that all these developments will enter our lives in a short time in Turkey and that we will encounter them with products and services that will affect the end-users and institutions. We expect that the CMB will soon announce the necessary regulations regarding bitcoin transactions in Turkey and will begin to regulate the sector. In addition, it is important to remind that it is important for institutions to make their plans and increase their product range in accordance with the expected regulation according to the developments that may affect the banking and payment world, especially in the finance sector, especially in DeFi and crypto payments.

“WE ARE LEADING THE BLOCKCHAIN ECOSYSTEM”

As Deloitte, we provide consultancy services to institutions on strategy formation related to blockchain technology, audit of smart contracts, creation and auditing of blockchain applications and processes, and the legal and tax aspects of all these areas. For the growth and development of the blockchain ecosystem, we create reports that will reflect the developments in the world to our customers as soon as possible by being a member of important organizations both in the world and in Turkey, we carry out activities for the development of the ecosystem, and we lead the growth and development of the blockchain ecosystem.

Source: Sabah / Translated by Irem Yildiz

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