Blockchain tech has proved to be rather promising and lucrative so far. As the big names in the industry are moving towards it, so are some countries. Across the world, governments and global nonprofits are turning to blockchain platforms to power e-voting, help citizens make collective decisions, and fight fraud in food supply chains. One of the countries that is embracing blockchain tech in all its glory is Malaysia. The country is looking to use blockchain in three of its largest industries; renewable energy, palm oil and Islamic finance. This new initiative will be lead by the Malaysian Industry-Government Group for High Technology, known as MIGHT.
The most convincing reason for this blockchain based initiative seems to be the hope tied to it, that it might not only help boost Malaysia’s economy but also increase transparency and sustainability in the sectors. Mastura Ishak, Programme Director at Malaysian Industry-Government Group for High Technology, studies what kind of impact this platform will have on the country’s key industries.
Blockchain is interesting because it allows small players to have a say about what’s going on
Said Mastura Ishak, program director at MIGHT.
Discussion is key in MIGHT’s initiative to incorporate blockchain in the existing industries, therefore MIGHT holds discussions with energy companies in order to comprehend the usage of blockchain tech to invoke transformation in the renewable energy sector. Presently MIGHT is in the process of monitoring the progress of energy companies that “are trialing the blockchain tech under ‘proof of concept’ initiatives,” Ishak shares.
Blockchain has the power to fasten the adoption of renewable energy. Putting energy on the blockchain implies that sellers must declare exactly hoe they generate the electricity, which breeds transparency. This will give people the opportunity to purchase electricity on blockchain directly from sources of their choice, like renewable energy. Buyers can even connect with private solar panel owners to buy their excess electricity. These one on one blockchain-based transactions are much more efficient and waste less electrical energy as compared to distributing electric power over long distances from power stations.
Agriculture and palm oil
According to the official figures, palm oil contributes to huge chunk of Malaysia’s agricultural income, 43.1% to be exact and is thus the country’s biggest export far exceeding other exports like livestock and fishing.
Placing certifications for palm oil on blockchain can potentially allow sellers and consumers to track the source of their palm oil, as well as monitor all transactions for palm oil supply chains to ensure that they are sustainable. This will thus allow the government to track the sources, and regulate these practices accordingly in order to be more sustainable.
Furthermore, blockchain can also help the agriculture industry. And since agriculture contributed to 8.1% of its Gross Domestic Product in 2016, according to the Department of Statistics, blockchain can help further boost that. Similar to the case of palm oil, the agricultural industry can put their produce and certification on blockchain.
This is very interesting, as there has been quite a mix reaction from Muslim countries around the world concerning blockchain and cryptocurrency. The Muslim laws forbid the act of interest collection and mandate that debt creation must be backed by underlying material goods like gold, rather than intangibles like futures, which Western banks use. Their contracts face strict requirements to avoid interest and uncertainty, and every loan agreement requires at least three contracts involving multiple parties for it to be considered valid. These extra steps have created higher legal and administrative costs for major Islamic banks in Malaysia.
Now, Malaysia is interested in taking the challenge to explore how blockchian can mitigate these costs through blockchain, all the while staying in compliance with the Islamic laws. According to Ishaq,
How do you look at Sharia compliance in Islamic banking? Using blockchain to actually capture this market is important.
One way banks can achieve this balance is through smart contracts. For example, banks can develop smart contracts that are automatically executed and enforced on the blockchain. This will prevent tampering and ensure transparency as well.