A Pandora’s box of challenges offering a Cornucopia of opportunities.
Is it difficult to know where to start when trying to write a useful post about some key activities in Blockchain and Bitcoin, because the world consists of the widest range of reader, including investors, entrepreneurs, professionals, the deepest technical and business experts right the way through to the ordinary person on the street and those that are only just discovering Blockchain or distributed ledger technology for the first time.
Also because the potential impact could be so profound, any writing (especially as short as this) will rarely do it justice. Even the terminology can be confusing (which I am not going to address here and keep it simple by using just ‘Blockchain’), but for the purpose of this article I have decided to offer some short answers to a few questions I am often asked by those new to Blockchain, and then share some observations on some of the exciting conversations taking place in and around the Kickstart Accelerator and the wider Swiss and UK Blockchain community.
- What is Blockchain?
- What will the impact of Blockchain be?
- What needs to happen to enable this to take place?
And so to the first question:
What is Blockchain? Upon reflection I decided not to take up space answering that question here, partly because I think the average reader of this particular blog probably knows quite a lot already, but if you are relatively new to the topic then a simple search will produce a lot of excellent primers, but here are a couple of useful links: (No affiliation – just liked the clarity of the description).
A short video from the World Economic Forum, here.
Investopedia has some useful definition paragraphs here:
(Note: – not all definitions on the page are relevant such as “Block Trade” but most are).
What will the impact of Blockchain be?
In my view – two words sum it up: – utterly profound.
But both in a really good way as well as in some surprising, challenging and unintended ways. If we consider for a moment that one of the key ‘useful’ things being introduced with Blockchain is the concept of moving from ‘centralised trust at a price’ to an agreed, shared ‘distributed truth’ with potentially greatly reduced repeating (and costly) need for a central trust authority, it really is a potential cornucopia of astonishingly useful opportunities. But what these opportunities will require (particularly from those that are building or even regulating these new opportunities), is a whole new level of understanding and capability, both technical, legal, business, regulatory, and not forgetting the need for great capability around the ethics around some of these opportunities. We need that in order to ensure that the purposeful or accidental misuse of Blockchain doesn’t unleash a true Pandora’s box of unintended consequences.
The other important point to make is that the pace of change is fast. And those that are predicting 10 to 20 year adoption timeframes are forgetting the drive of the “unreasonable entrepreneur,” backed by bold risk capital and the incredibly low digital barriers to entry nowadays. Also the flight of some of the best talent, fed up with fighting fires and supporting legacy, as well as almost weekly announcements of senior executives heading up or advising some of the boldest new startups.
I was asked what I thought some of the key examples were of interesting developments we have seen over recent years in Blockchain, Bitcoin and Ethereum:
- UK: Just 4 years ago at Level39 we were hearing rumblings about how Bitcoin and Blockchain were the work of the nefarious, money launderers, drug dealers and terrorists. Fast forward to January 2016 and Sir Mark Walport (UK Chief Scientist) publishes a white paper on the Blockchain opportunity. We loved that as it gave a much needed boost and a signal to policymakers, that this was something special and needed nurturing.
- 31st November 2016: 10x Banking. A really bold, well funded move by a super-talented team in a classic poacher-turned gamekeeper next-gen banking play, led by none other than Antony Jenkins – the former CEO of Barclays, who tried to fix the bank after the financial crisis, now determined to bring a fresh approach to high scale incumbents. Determined to leverage the latest and most efficient technologies for the job, something he found almost impossible as an incumbent.
- Estonia: This country is doing pioneering work that is way beyond a proof of concept for a government. We were already impressed by the X-Road ‘infostructure’ and e-Residency programme. They announced a Blockchain cloud with big players like Ericssonand exciting companies like Guardtime providing a combined solution and understanding of the challenges of key management and securing crucial data at scale. Interestingly the futuristic opening paragraphs of one of their announcements (cheekily predicting the demise of IBM and HP) gives a hint of what they think this means in the future.
- Switzerland: July 2015 the Live Ethereum Blockchain is launched, providing a richness of capability (less available in the Bitcoin Blockchain) that allowed smart contracts to become a reality, powered by the Ether token – the Ethereum equivalent of Bitcoin. This is a big win for Switzerland and is an anchor of Crypto Valley in Zug.
- In June 2016 the DAO is created, built on Ethereum: – it is a stateless, “Decentralised, Autonomous Organisation” that had no traditional management structure or Board of Directors. It was intended as an investor-driven venture capital organisation and was crowdfunded via a record-breaking crowdfunding campaign, which valued the DAO at around $150M. It’s boldness and speed took our breath away.
- Then in June 2016 a vulnerability in the way the DAO was written allowed an anonymous person/team to drain around one third of its funds, causing the Ethereum team to recommend and community to execute a controversial “hard-fork” to correct this exploit, effectively creating two cryptocurrencies in the process. The exploit was a shock to all, (except of course those that were warning/preparing to fix the potential exploit), but despite of – in fact because of these challenges and difficult experience, Switzerland now contains a highly valuable concentration of some of the most experienced talent in the field which will position it well to lead in the field of Blockchain and smart contracts. If you are interested to learn the latest on this including an attempt by the hacker to cash out, here is a short article covering the latest:
- Switzerland: July 2016, Zug, the Kanton of Switzerland, determined to become the home of choice to Blockchain/crypto companies launches their service that allows residents to pay some of their local taxes via Bitcoin. Whether or not this ends up being a well used facility, it sends a powerful signal about the forward thinking, competitiveness and flexibility of Switzerland’s Cantons towards the sector.
- Switzerland October 2016: SBB Train kiosks to sell Bitcoin! An exciting development, with local firm Sweepay, for further information see here.
- San Francisco: At the end of 2015 the Linux foundation launched the Hyperledger project to allow open-source development of Blockchain-based distributed ledgers, and attracted some high profile contributors of code including Digital Asset Holdings, IBM, Intel, and Blockstream.
- November 30th: The date by which R3, the consortium of over 43 banks commits to contribute its Corda Blockchain code base to the open source project. A surprise move but a welcome one for the industry, signalling a step towards common standards, something the internet has enjoyed and that Blockchain needs to succeed. Good one R3!
- Probably the big announcement of the year to expect is the upcoming Fed’s position on Blockchain.
One of the questions we are most often asked (by government, corporates, investors, and startups) is “when or how long will Blockchain take to enter the mainstream and what are the barriers/things we should be thinking about.”
I will take a stab at a qualitative answer below, but first let me share an anecdote:
A few months ago I was chatting with one of the members of our team in London during our preparations for the Kickstart Accelerator in Zurich and he asked me the same question. Bear in mind this is someone who during their interview told me that they had read the original Satoshi Nakamoto white paper and had written a paper on the subject. My answer at the time was: – “when it becomes as transparent to us as TCP/IP, and we can just enjoy the benefits of Blockchain technology and all its applications in business, government and society.”
His reply was interesting because it actually made my point perfectly: He said:- “what’s TCP/IP?”
So there you have a simple answer: The equivalent young person in a reasonable number of years who are “digital natives” will hopefully automatically assume they can enjoy the benefits of things like:
- Much lower cost secure instant transfers of money/value across geographies
- Total transparency of where their charitable donations are used
- Absolute provenance of the diamonds/artwork etc
- Frictionless conveyancing of their real estate transactions
- Unlocking of more global trade and finance for supply chains
- Smooth, efficient functioning government (Ok maybe just ”improved’ government is more realistic)
And many more use cases as we experiment and test the technology as it applies to the widest range of industries and uses.
So how do we get there? Well one way is that we continue to encourage the major corporates to engage with some of the most innovative startups such as those in the Kickstart Accelerator, and push to test and try these new solutions together.
Another thing that needs to happen sooner rather than later is that national regulators need to really grasp what Blockchain really means. Challenging concepts such as trans-national distribution of data, stateless domicile, unclear place of supply and use, trustless trust, more on this here and a whole new grasp of fifty shades of “identity” in the new world.
Some are getting there, such as the UK through its regulatory sandboxes and the sharing of knowledge between countries. And I for one am rarely pushing for regulators to be asked to do more; but this stuff is so important, and rather than knee jerk reactions to try solve problems once they have happened we need to encourage them to engage and embrace the technical, geographic, operational and even ethical parameters of this fast emerging field, so they know what to encourage and not regulate, and what to protect.