Mainly used for crypto-currencies, blockchain is also being implemented elsewhere and the movement does not seem to be slowing down any time soon. Faced with strong international competition in the sector, what are Switzerland's competitive advantages? Emilie Raffo, co-founder of the company ChainSecurity and expert in the field, provides the answers.
This summer's extreme fluctuations in the price of iconic cryptocurrencies such as Ethereum and Bitcoin have rekindled a mistrust of them. At a time when states are stepping up their regulatory efforts, the technology on which they are built has already entered the digital economy. Emilie Raffo, co-founder of ChainSecurity, a company specialising in auditing blockchain software, explains the technology's prospects, particularly for Switzerland and its SMEs.
Cryptocurrencies are the best-known application of blockchains. What other uses are there?
Emilie Raffo: Digital currencies like Bitcoin or Ethereum remain benchmarks for the general public, but there is more to decentralized finance than just cryptoassets themselves. Smart contracts, whose validation processes are partially or totally deployed on a blockchain, allow, for example, to offer savings accounts, digital assets or loans without intermediaries. NFTs can also be used as collateral to obtain a loan. Other non-financial applications are rapidly developing as well, like the one proposed by Lens Protocol, a blockchain designed to foster the creation of decentralized and collaborative social networks. For influencers and content creators, this is an interesting perspective: while Twitter or Facebook can close their accounts at any time, this solution frees them, allowing them to regain full control of their profiles by redefining how they manage and monetize their work. Other uses are also emerging through decentralized governance systems, which certain cryptoasset users are already applying within their companies, by jointly and transparently deciding on the slightest change thanks to a voting system.
Do the complexity and hermetic nature of blockchains hinder their development?
Raffo: Just as anyone can use a computer without the knowledge of programming, users of blockchains do not need to be technically proficient to benefit from them. As a B2B technology, however, more widespread adoption of blockchains relies on the ability of companies to develop useful and easy-to-use applications. For now, most of the industry's growth still depends on crypto-currencies, especially since anyone can create their currency or product based, for example, on an existing blockchain like Ethereum. There are thousands of cryptoassets: only the market will determine which ones are useful.
You co-founded ChainSecurity whose mission is to audit contractors' blockchains. What is the reason for this?
Raffo: Once a blockchain-based application – such as a smart contract – is deployed, it's too late to turn back. Our job is to ensure that the code for these contracts works well and is not vulnerable. Developers commission us to identify possible errors, fix the code and ensure the technical soundness of their project. For our clients, this provides credibility for their work with users and investors. This approach is also part of a more general trend, which has led a growing number of cryptofinance players to do everything possible to reassure all stakeholders. In a world where a multitude of companies can create their own financial products, the issue of trust is becoming essential again. This in fact explains why lawmakers around the world are beginning to regulate crypto-currencies, after a period of vagueness that has lasted several years.
What are Switzerland's strengths in this rapidly changing landscape?
Raffo: The sector is undeniably dynamic: while in 2017 there were around 300 companies active in the blockchain world, the figure is now around 1'200 companies, employing over 6'000 people. However, the skills and expertise needed to move into the blockchain ecosystem remain scarce. Switzerland, in particular, has an important role to play in terms of education. Universities such as Basel – which was one of the first to offer courses on blockchain – and Zurich are working to overcome this talent shortage. SMEs in the field are also interested in collaborating with academic experts to make their mark. ChainSecurity is a good example of how an SME can link up with the world of research and higher education. Few specialists are capable of conducting audits like the ones we propose. Our proximity to EPFL and EPFZ – of which ChainSecurity is a spin-off – allows us to draw directly from the pool of graduates, engineers and doctoral students in computer science. A joint Master's degree in Cybersecurity created by the two schools is also an excellent indicator of the Swiss ecosystem at a time when competition is getting tougher.
How do you deal with the competition?
Raffo: Blockchain experts can work anywhere in the world. While Switzerland today has to compete with other locations like Dubai or Lisbon, which rely heavily on the digital ecosystem and offer a very affordable cost of living, our country can provide exceptional quality of life and economic prosperity to attract these specialists. In a sector with very high added value, Switzerland also offers competitive remuneration as well as a legal, tax and regulatory environment that is highly valued by cryptoeconomy players, especially in Zug. Tax incentives in particular have enabled the canton to attract over 430 blockchain companies creating a true Swiss "Crypto Valley". Other cantons are following suit, such as Lugano, which recently partnered with stablecoin issuer Tether and plans to establish a center of competence in blockchain and cryptoassets.