Q&A: Bernard Gaughran on the evolving nexus of fintech and blockchain

The intersection of fintech and blockchain is becoming a hotbed of innovation and transformation within the financial services industry. This fusion is not only enhancing efficiency but reshaping traditional financial models by making them more transparent and accessible.

On the sidelines of the recent Dublin Tech Summit, Bobsguide sat down with Bernard Gaughran, Head of Architecture at VeChain, to discuss the evolving relationship between fintech and blockchain, the promise of decentralised finance (DeFi), and the potential for these technologies to drive sustainability and democratise financial systems.

With 27 years in software engineering and a strong focus on blockchain since 2017, Gaughran offers a unique and informed perspective on how blockchain is not just a technological trend, but a fundamental shift towards more transparent and equitable financial systems.

How has the relationship between fintech and blockchain evolved over the past few years, and what are some of the most significant developments you’ve seen?

I guess it’s been very intertwined, especially over the last five years. A classic example of that when it comes to fintech would be decentralised finance, otherwise known as DeFi. DeFi is probably one of the hottest topics in recent years, where you take traditional finance (TradFi) and apply it to blockchain. This results in a very broad range of applications where traditional use cases are executed in a decentralised paradigm. For example, decentralised lending and exchanges, where the rules of the business are codified in smart contracts on the blockchain. Many have seen this as a threat to existing business models because blockchain is designed to disintermediate intermediaries.

In terms of fintech, it’s a very active space. People often think blockchain is just about Bitcoin or NFTs, but real-world use cases in decentralised finance are where a lot of exciting developments are happening.

How can blockchain support the financial industry in becoming more sustainable?

Blockchain has unique properties like zero downtime and cost-effective transactions, making it ideal for transparent and auditable business operations.

A significant use case is supply chain management. Blockchain ensures transparency and trust without needing a central authority. For instance, in a supply chain, from farm to shelf, multiple parties interact, often without trusting each other. Blockchain’s transparency and immutability ensure all parties can trust the recorded data, making it a brilliant way to operate more sustainably by cutting out intermediaries and using cleaner technology.

In traditional businesses that operate with software that runs on servers in their own data centre, the only people who truly have access to that, can view the data, or change the properties of that system, are the company themselves. But most business models nowadays can’t afford to operate like this.

So blockchain became a brilliant way to solve the problem of different parties interacting but not trusting each other. And they don’t trust each other because they have their own competing business.

Imagine shipping produce from a farm to a store shelf. This process involves many parties: the farm, a supplier, a wholesaler, and a logistics company. Using blockchain for this transaction ensures that all this information is recorded transparently and immutably. Unlike traditional centralised systems, blockchain provides an environment where all parties can see and trust the data without needing to trust each other. This concept is called trustlessness.

If you trust the code, and the code is open for everyone to see, you don’t need to trust that an organisation is doing what they claim because it’s recorded on the blockchain. This approach allows businesses to operate in a transparent and sustainable way. By cutting out the middlemen, it also offers a cleaner, more efficient technology.

Apart from driving sustainability, blockchain also claims to democratise financial and other systems. What are some real-world applications that showcase its impact?

A classic example of blockchain’s democratising power is in cryptocurrency, like Bitcoin. Bitcoin emerged after the financial crash to disintermediate the banking system, allowing people to become their own banks. Beyond that, blockchain offers solutions such as enabling refugees, who can’t pass KYC checks in banks, to set up crypto wallets and receive transfers from NGOs or charities. It banks the unbanked, which was the initial use case of digital payments.

Another significant innovation is smart contracts, introduced by Ethereum, which enabled DeFi. Traditional institutions, like insurance companies, are now adopting blockchain for products like parametric insurance, which automates claims based on predefined conditions, reducing costs and increasing transparency. For example, parametric insurance is a way where people can take out insurance and receive a claim automatically. And quite often it’s a simple use case, such as crop insurance for farmers. So farmers may insure their crops to insure them against crops being spoiled if there’s a certain amount of rain. These types of products are now offered on the blockchain by traditional institutions because it allows them to reduce costs. It’s transparent and more trustworthy.

So, it’s not just about new companies emerging that are threatening existing tradfi, but also about established companies evolving their products and offering some of these products on-chain because it can reduce costs. It’s transparent and more trustworthy.

What emerging trends do you see as particularly exciting for the future of blockchain?

One of the exciting trends is combining artificial intelligence (AI) with blockchain. This integration can drive significant improvements in various sectors, from healthcare to decentralised finance. AI improves blockchain’s capabilities by providing advanced analytics and improving decision-making processes.

For example, AI can validate sustainable real-world actions and integrate seamlessly with blockchain to enhance transparency and efficiency. I can now use AI, for example, to verify that the coffee cup I’m drinking from is made with sustainable materials. Of course, the models are only as good as the data they’re trained on, but they’re constantly improving. I’m really excited to see how this blend of technologies can boost sustainability efforts, healthcare, and other areas, ultimately improving people’s lives.

From this discussion, it’s clear that the intersection of fintech and blockchain is paving the way for a more transparent, efficient, and inclusive financial ecosystem. Bernard Gaughran’s insights highlight how these technologies are not only transforming traditional financial models but also addressing critical issues like sustainability and financial inclusion.

As blockchain continues to evolve, applications in areas like decentralised finance, supply chain management, and smart contracts are setting new standards for trust and efficiency. The potential to democratise financial systems and empower both individuals and businesses is proof of the far-reaching impact of these innovations.

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