The narrative around Bitcoin has, if you hadn’t noticed, shifted toward the blockchain in recent times. So if that’s case, what is the technology and what are we going to do with it?
Interest in Bitcoin as a currency, or indeed as money of any kind, is waning whereas the animal sentiments around the underlying technology are waxing. Judd Bagley of Overstock.com (a famous early adopter of Bitcoin) recently said that:
“Longer term, we need to develop more non-currency applications for decentralized ledgers such as the Blockchain, and let the public get comfortable with the ease and security of it. Once that’s happened, cryptocurrency will seem an obvious next step.”
I’m not so sure. It is not clear to me at all that a blockchain is the best way to implement a currency. And while my opinion doesn’t much matter, significant financial institutions seem similarly more interested in the idea of trading on distributed public ledgers (and thus avoiding clearing and settlement costs) than they are in overthrowing the Federal Reserve and the US Dollar. I couldn’t help but notice when one of the world’s biggest banks specifically mentioned blockchain when talking about their new London-based research initiative.
“Swiss banking giant UBS is to open a technology lab in London to explore how blockchain technology can be used in financial services.”
The very kind people at techUK invited me along to take part in a discussion about the blockchain and what the practical applications of the technology might be. It was called Beyond the Hype: Delivering on Blockchain’s Potential.They had a great lineup for the event and unsurprisingly a great turnout of people who came along to be educated about the latest developments in this fascinating space. The panel was chaired by Keith Saxton, the Chair of techUK Financial Services Council, and included:
• Richard Brown, Executive Architect for Banking Industry Innovation, IBM UK.
• Simon Bailey, Director of Payments and Transaction Banking, CGI.
What made it a great panel (in my opinion) was that a) we didn’t all agree on everything and b) none us actually knows where any of this is going. It was an opportunity to hear different perspectives and “battle test” some ideas and arguments with well-informed people.
For my part, since I have no more idea than anyone else what the blockchain will be used for, and following my Gibson-esque “look out of the corner of your eye” meme, I chose to give three very different examples of blockchain use and I thought I’d present them here too in order to invite further comment.
“Leanne Kemp hopes bitcoin will spell the end for diamond thieves. Edgelogic, her Australian peer-to-peer software company, is using the digital currency to create an online record book called Blocktrace, which allows insurers and purchasers to check the history of a precious stone — and what crimes or claims have been made against it.”
It’s a shame this wasn’t up and running in time for this weekends massive London heist (incidentally, whoever uses the word “heist” outside of newspapers?). I included this example because I wanted to illustrate my theory (and Eric Schmidt’s, it has to be said) that the nexus of the “Internet of Things” and the blockchain might well be the technology sector’s sweet spot for the next few years. The second example I used was to illustrate the strong relationship between the blockchain and identity.
“Ellis has built software that lets anyone create what he calls a “World Citizenship” passport. Using PGP encryption software and the bitcoin blockchain—a cryptographically secured public ledger that runs on machines across the internet—the project creates a mathematically iron-clad identification paper that would be extremely difficult, perhaps impossible, to fake.”
It seems logical to me that one of the key “off-chain” assets that you might want to demonstrate ownership of via the magic of the blockchain is your own identity, never mind the identity of your web site or dog. Then I deliberately chose a controversial third case study to illustrate how in some circle the blockchain has become the magic unicorn that can fix anything.
“But how can consentual sex be proven without a shadow of a doubt even if one of the parties decided to say they did not consent after the act took place?
How about recording the consent to blockchain?”
I won’t repeat my critique of this idea except to present my conclusion:
“I had a more important (to my mind) observation on the blockchain as a record of sexual consent in this way: it won’t work.”
There is an ongoing discussion and evolution of serious thought around what the distributed ledger can be used for, whether proof-of-work or proof-of-stake scales best and whether blockchain or consensus protocols are the best decentralised option. All I will say here is that in our work with clients (large financial institutions) on the topic, currency is probably the least interesting use of the ledger that gets discussed.
Incidentally, if you are from the banking and finance world and want to learn just why so much investment money is going in to blockchain, there is a super Payments Forward afternon tea discussion with a pre-briefingcoming up on this topic in London on 11th May 2015. Consult Hyperion’s Head of Consultancy Steve Pannifer will be running the pe-briefing on “Demystifying cryptocurrency and the blockchain for the uninitiated” with cryptoeconomist Jonathan Levin (you can listen to Jonathan on our podcast here). After the briefing, Izabella Kaminska from FT Alphaville will be chairing a discussion on “How far can cryptocurrencies go to heralding a new way of transacting?” with representatives from, amongst others, Lloyds Banking Group and the UK Digital Currency Association. You’d be mad to miss it – see you there.
These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.