How Blockchain is Helping Solve Japan's 'Galapagos Syndrome'

Japan's 'Galapagos Syndrome' means that some tech firms are unable to compete internationally, but one blockchain consortium aims to change that.

AccessTimeIconFeb 2, 2017 at 2:10 p.m. UTC
Updated Dec 10, 2022 at 8:01 p.m. UTC

Like the islands that inspired Charles Darwin’s seminal work on evolution, "On the Origin of Species", Japan’s technology sector is a diverse place that, historically, has had some interoperability issues.

The same isolation that led to the evolution of the giant tortoise, the marine iguana and 13 unique species of finch in the Galapagos Islands has led to similarly surprising diversity of tech in Japan, ranging from feature phones with solar panels to tiny cars and ATMs from which Westerners can't withdraw funds.

This local quirk is called 'Galapagos Syndrome' in Japan, and while this chronic uniqueness has led to an impressive array of fascinating technology, it has also prevented much of these innovations from being adopted around the world.

Behind 'Galapagos', as the trend is called for short, is a desire by the Japanese government for the island nation to maintain its distinctiveness in an increasingly global economy, according to Yoichiro 'Pina' Hirano, founder and CEO of Tokyo-based Infoteria, a middleware provider that helps connect the front and back offices of 5,700 companies around the world.

As it turns out, the key to overcoming the Galapagos trend might be found in the nation's varied blockchain ecosystem.

Hirano is the co-founder of the Blockchain Collaborative Consortium (BCCC), which aims to create platform-neutral blockchain interoperable solutions for a diverse set of industries.

According to Hirano, who was once an early employee at Lotus 1-2-3, the Japanese government doesn’t set out to isolate Japan and its 127 million inhabitants. But a policy of standards selection and investment has largely cut off the nation’s technological developments from the rest of the world.

In conversation with CoinDesk, Hirano said:

"The Japanese government wanted to differentiate the new technology from the [rest of the world], so they put their budget to some unique features for Japanese companies. But the other result is bad interoperability, or bad compatibility. So that makes a 'Galapagos' product."

Locked-in industry

In addition to an investment strategy that Hirano said incentivizes global market differentiation, as well as a disproportionate percentage of Japanese companies actually being owned by the government, he said other decisions have led to the country being cut off.

Japan has also implemented unique technology standards that make it more difficult for foreign competitors to compete in the local market, while simultaneously making it harder for Japanese companies to expand internationally.

The BCCC has adopted a different philosophy. The consortium aims to be blockchain neutral, with multiple large-scale projects currently being developed to enable international business. Support for the initiatives is expected to come from founding member Microsoft’s Azure cloud computing services and others.

Of the 120 companies Hirano now lists as members of the consortium, the vast majority are based in Japan, with a few outliers, like Microsoft, based in Seattle, and ConsenSys, based in New York.

However, all are committed to the same cause: breaking down Japan’s Galapagos Syndrome by building on distributed ledger tech.

The BCCC’s founding charter states:

"We who believe in the future of blockchain technology, strive to help Japan stay competitive and contribute to the evolution of blockchain technology by sharing information, competing fairly, promoting blockchain, actively expanding the scope of blockchain applications, and supporting funding for blockchain research. We will coordinate with other blockchain organizations around the world."

Building a crypto-yen

Formally launched in April of 2016, the BCCC has grown from 34 founding members to 120 today, many of which are active participants in building two blockchain proofs-of-concept (PoCs) revealed to CoinDesk.

The first PoC is a project aimed at creating a digital version of Japan's national currency, the yen.

In total, Hirano expects about 30 companies will participate in the 'Digital JPY' project.

While the Bank of Japan is not currently participating in the PoC, Hirano said he explained the plan to the central bank on 19th January and officials there reportedly expressed interest.

"They said they cannot join," Hirano told CoinDesk. "But they want to observe."

A second PoC currently being developed is a blockchain implementation of Japan’s Smart Cities initiative to automate large groups via the Internet of Things powered by a shared ledger. Hirano expects about 20 team members will join that project.

While many of the BCCC members are currently doing independent blockchain research and constructing their own PoCs, Hirano said the consortium efforts are of a different sort.

"We want to exchange that knowledge and we want to make some inter-company proof-of-concept work," he explained. "Especially in the financial industry, blockchain implementation needs to be inter-financial [effort]."

Skills shortage

As the BCCC's projects have progressed, though, one common problem has arisen: a lack of staff trained in the art of the blockchain.

The problem is so pronounced that, in May, Reuters reported that a shortage of blockchain engineers was causing Japan to fall behind other regions' efforts, including Europe and the US.

To help BCCC members solve the problem, the consortium last year launched Blockchain Daigakko, an educational effort devoted to training students to help give them the skills to build with blockchain.

So far, 99% of the 100 students who have graduated have come from the consortium’s own membership, according to Hirano, and returned to those jobs after graduating the two-month class. Courses are taught by BitBank adviser Jonathan Underwood, a native of the US who moved to Japan eight years ago.

Hirano breaks down blockchain developers into two categories: those who build blockchains, and those who build on blockchains. Member demand largely focused on those who build on existing blockchains, and so the class curriculum is designed accordingly.

"For the companies, for the industries, blockchain engineers who can use and who can implement blockchain are very much needed," said Hirano. "People feel the shortage."

Leaving Galapagos behind

As Japan’s years-long escape from Galapagos Syndrome has faced its obstacles, blockchain has increasingly been seen as a way to connect the nation.

In addition to recent reports that Japan’s central bank has been "test driving" distributed ledgers, the Japanese government itself is funding travel costs for three of its country’s native blockchain startups to attend the “Project for a Bridge of Innovation between Silicon Valley and Japan”, an international cooperative effort.

But the problems of interoperability cited by Hirano are far from exclusively a Japanese problem.

Because the network effects of blockchain are amplified by the number of users, the push for better networks is truly global. Global accounting firms, standards bodies, startups and legacy institutions have all been working to ensure a fabric of blockchains is interconnected.

While nationally specific standards and proprietary blockchains can be used to create benefits for those that employ them, Hirano argued the benefits are only short-term and will eventually restrict growth.

Hirano concluded that, for blockchain consortia to truly blossom, they should learn a lesson from Japan's Galapagos Syndrome, adding:

"It’s not easy, but that is our big mission in Japan, to make blockchain powerful and take the full potential of blockchain to any company."

Giant tortoise image via Shutterstock


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