Yesterday’s event on blockchain, which was framed by SIIA’s Issue Brief, enticed great attendance and sophisticated audience involvement. You can view the event on Facebook here. It is worthwhile taking a look even just at the first ten minutes with Congressmen Schweikert’s and Polis’ interventions. Their commitment and passion for this technology’s potential is palpable. We are lucky to have this bipartisan approach to reviewing blockchain.
We were also lucky to have an all-star cast of panelists: Robert L. Strayer, Deputy Assistant Secretary of State for Cyber and International Communications and Information Policy; Brian Trackman, Attorney Lead, Counsel, LabCFTC and CFTC Office of General Counsel; Thomas Savage, Lead Blockchain Researcher, Centers for Disease Control; David Egts, Chief Technologist, North America Public Sector, Red Hat; Jon West, Head of Platforms, Technology Department, Thomson Reuters; Angela Angelovska-Wilson, Chief Legal Officer & CCO, Digital Asset; Dan Conner, Distributed Ledger Architect, Disledger; and, Salman Banaei, Executive Director and Head of Government and Regulatory Affairs, IHS Markit.
There was a rich conversation and there were at least four different takeaways. First, public policy does have a role to play, especially in encouraging experimentation and appropriate standards development. Second, there may or may not be a single “killer app” for blockchain as email arguably has been for the Internet. If there is going to be one though, it might have to do with digital identity where the individual is empowered. Third, “permissioned” or “private” blockchains, at least for now, might be the way to ensure that privacy concerns are addressed. Some analysts argue that they have cybersecurity disadvantages compared to “permissionless” or “open” blockchains, but solutions may be being developed to address this concern. Fourth, there remain a host of technical and public policy issues that will allow blockchain to scale up. But there seemed to be consensus around Bill Gates’ view that people tend to “overestimate what can be done in two years but underestimate what will happen in ten years!”
No doubt about it, public policy has a role to play. The State Department held a blockchain event last fall. The Commodities and Futures Trading Commission (CFTC) has a fintech lab that does a lot of work on blockchain. The Centers for Disease Control is experimenting in this space. Standards development is an area where government and the private sector can and must work together. Government can promote the creation of voluntary stakeholder-driven standards as the United States seeks nationally and internationally. There was agreement that there is a role for standards development in areas such as cryptography and data formats, but that it was important not to, in effect, pigeonhole the technology into one standard too early. An example of how the private sector is participating in this effort is Red Hat’s participation in projects such as Hyperledger and Ethereum to enable enterprise-level or scaled up blockchain solutions.
Second, the conversation about how blockchain can enable individuals to own their digital identity was particularly interesting. There is a lot of pathbreaking work going on in this space, including internationally. For instance, Singapore’s EKYC project was discussed. It might not be a suitable choice for everybody in that Americans, for instance, might not want to store their data in what some might perceive to be a government repository. However, if there were a way (and blockchain offers this promise) for individuals to control for themselves their data and keep it private, that could be a “killer app” for the blockchain industry.
Third, there was a great deal of discussion on how blockchain’s transparency can be made to work with privacy rules such as the sectoral privacy rules in the United States or the EU’s General Data Protection Regulation (GDPR). And how can an “immutable ledger” be made consistent with the EU’s right-to-be forgotten or right to erasure. Today’s answer seems to be to develop “permissioned” or “private” blockchains that have central administrators. The majority of the applications being developed in financial services use permissioned blockchains, so this is what Digital Asset is, for instance, doing for the Australian Securities Exchange as it builds a permissioned distributed ledger for the Exchange.
Finally, panelists seemed to agree that blockchain, at least in the medium term (say five years out) will have cost saving benefits, for instance for the financial industry. Thomson Reuters Blockone IQ, a blockchained “oracle” of verifiable market data is an example. So are IHS Markit’s payments and processing blockchain projects that it is developing and Disledger’s enterprise scale distributed ledgers. Going forward, there could be more disruption as blockchain potentially enables closer seller-buyer relationships. As one participant noted: companies like Uber and AirB&B are essentially software companies getting a piece of the economic activity. Blockchain can potentially enable many more examples of this phenomenon and perhaps even be used to disrupt recent disrupters such as Uber and Airbnb.