Opening Up The Banks

It was a FinTech-tastic week in Edinburgh last week as – hot on the heels of the Bitcoin Meetup with Colu and the FinTech Scotland Conference – the Hack/Make The Bank hackathon took place, run by the hugely friendly team at the Open Bank Project. Well over 120 hackers and enthusiasts piled into the RBS Technology Solutions Centre in the New Town to build innovative ideas on top of the Open Bank API.

Open Bank Project Hackathon Visualisation
Hack/Make The Bank Hackathon, Edinburgh (9th to 11th October 2015)

The concept of open bank data is pretty much a no-brainer once you start to think about the implications. Providing free, standardised access to the banks in real time liberates developers, entrepreneurs and – most importantly – consumers around the world who are otherwise hampered by legacy technology deployed by financial institutions.

The team from TESOBE did a sterling job over the weekend leaving no stone unturned in their quest to create the ideal environment for those burning the midnight oil, providing a selection of massages, whisky and bagpipe accompaniment (!) in addition to the obligatory Red Bull, food and support throughout.

Ismail Chaib introducing the Hackathon
Ismail Chaib (Open Bank Project) introducing the Hackathon Prizes

I was delighted to be asked to act as a mentor at the event. It’s something that I’ve done at a few times at a number of hackathons (in different capacities) and it’s always an honour. I’m always full of admiration for anyone who chooses to come together to work – hard – over a weekend out of choice out of a simple desire to create and build something new and worthwhile.

The final pitches were great. As usual, I’m not going to share the ideas here (it’s not clear yet who wants to go forwards with these). Needless to say I was happy to see the guys from miiCard bring home the prizes for most disruptive (believe it or not, I had no say in the judging!)

All together, big congratulations go to Ismail Chaib, Simon Redfern and the rest of the Open Bank Project team; Kirsten Bennie and the rest of the RBS team who are clearly engaging positively with the upcoming disruption that’s undeniably en route; and last, but not least, all the developers and disruptors who proved that Scotland is now starting to really build on a burgeoning FinTech reputation.

Can’t wait for the next one.

Hackathon Collage

 

NASDAQ Meets The Blockchain

And yes, it is THE blockchain. Not a different standalone implementation of blockchain technology.

When news broke late last night from WSJ writer (and previous Scottish Bitcoin Meetup guest) Michael Casey that NASDAQ, the second largest stock exchange in the US, already has 75 companies signed up in its NASDAQ Private Market to test blockchain technology to simplify handle pre-IPO trading, Twitter immediately lit up with conversation.

It soon became clear that their plan is to use the Open Assets Protocol – basically a Colored Coins implementation. If you haven’t heard of Colored Coins, it’s basically a way of connecting a ‘real world’ item with a tiny amount of Bitcoin. To exchange ownership of that ‘real world’ item, now you simply need to transfer that specific bitcoin. The benefits are clear and hugely powerful: a public record of verifiable ownership in which transfers are immediate, global and of an order of magnitude cheaper than most systems in which ownership is registered.

The reality is that this is huge news for Bitcoin and the scene in general. There’s a far wider narrative here (Bitcoin v blockchain etc) that I’m not going to touch on today. But if you think back a couple of years, this, a press release containing a quote like this really was unthinkable.

 “Utilizing the blockchain is a natural digital evolution for managing physical securities,” said Bob Greifeld, CEO, Nasdaq. “Once you cut the apron strings of need for the physical, the opportunities we can envision blockchain providing stand to benefit not only our clients, but the broader global capital markets.”

Within the securities industry, T+3 is standard – i.e. payment and certificates for trades in securities must change hands no later than three days after the date of the transaction. Now, with blockchain technology at work, the potential is there to go after that holy grail of T+0 or real-time transactions – a system that reduces both regulatory and counterparty risk significantly whilst also releasing funds that are otherwise tied up during those three days in the current settlement process.

Anything that increases transparency through a fully-digital service that simultaneously facilitates the issuance, transfer and management of private company shares whilst slashing existing inefficiencies and remaining impervious to bad actors sounds like a pretty compelling use case to me.

Yet another application that I and many others will be watching with huge interest.

 

This Is A Call

I’ve just sent out a message to all of the members of the Scottish Bitcoin Meetup. In case anyone is reading this blog that isn’t signed up (why not? it’s free! and you get to hear what’s happening in the scene as it evolves in Scotland), here’s the text in full.

Hi folks,

Hope you’re all having a great Sunday.

Where It All Started

When I started the Scottish Bitcoin Meetup back, I did so for one simple reason: I’d been convinced for a long time that we were witnessing the start of a paradigm shift across technology, business and wider society. The exact form that this disruption would take was unclear but it was beyond doubt in my mind that ‘something’ was coming. Try as I might, I couldn’t find another forum in Scotland for people to get together in person and discuss what was coming. So I thought, sod it, let’s just do it myself.

Thankfully, some of you turned up to that first meetup! And many of you have continued to do so ever since. Since those early days, we’ve managed to gather in one way or another for 29 meetups to date, with two particular highlights being the first ever Scottish Bitcoin Conference taking place in August 2014 and Design In Action’s residential Creative Currencies Chiasma earlier this year where a mix of people got together to learn together and dream big about the possibilities.

Today’s Landscape

In recent times, the main Edinburgh meetup has evolved in format, to include video calls with great stalwarts of the scene from around the world. In last couple of months, for example, we’ve chatted with Coin Center, Paul and Michael from the Wall Street Journal and Victoria from ChangeTip (check out the livestream video here if you haven’t seen it yet).

All of this is going to continue. Please do try to make it along if you’re still interested as there’s some great guests lined up over the coming months (and for those of you who keep asking – yes, I’ll do my best get Andreas at some stage…!)

However, it’s become clear to me over the past six months or so that we’re seeing an evolution in the general conversation. The heady days of speculative easy money that attracted a certain type of interest in the early days are gone, replaced by a period of intense work and consolidation across the industry. In part, this is driven by the evolution of connected and parallel technologies (such as Ethereum, MaidSafe, Eris etc) but it’s also being driven by the unavoidable fact that larger financial institutions are starting to take the technology more seriously (UBS open labNew York Stock Exchange invest in Coinbase,Fidor and Ripple, Barclays, Goldman Sachs invest in Circle etc).

I’m increasingly being invited to give talks or get into conversations with ‘serious’ institutions – in common with many who follow the scene. Regardless of the narrative in the press or the details of the specific technology, there is definitely something happening that validates the feeling that most of us have held for a long time now.

So – why the rambling email?

The Future

On Tuesday 19th May at 6:30pm, there is going to be a get together in Edinburgh to which you are all invited. But this isn’t going to be a typical Bitcoin meetup. This is a group for people who want to get together in a room and roll up their sleeves. People who want to code, build projects and businesses related to blockchain tech and – put simply – stop the talking and start the doing.

To be clear, we won’t be focused exclusively on projects that relate solely to financial services. For the most part, we’re going to be technology- and sector-agnostic. We’re simply going to be focused on solving real problems. But at this stage, the plan is to sit around a table and lay the foundations of a group that will evolve over the next few months for those who consider themselves serious (either in terms of existing talents or intention to get involved) about the future of the sector in Scotland.

One important point: this gathering is in no way exclusive. So please pass this invite on as you see fit. Nor is it for ‘experts’ (whatever that term could possibly mean at this stage in any event). The only pre-requisite for attending is a willingness to roll up your sleeves and get involved moving forwards. Ideas are ten-a-penny. This group is all about whittling down some of the best and starting to execute on them. So it doesn’t matter whether you’ve just fallen down the rabbit hole recently or whether it happened years ago.

Without disclosing too much, we’ve got buy-in externally from some big names across the Bitcoin/2.0 scene. And I’m as convinced as I’ve ever been that we’ve already got the talent in Scotland.

If you’re interested, please get in touch. Whilst I’m currently co-ordinating this on behalf of what will, I hope, turn out to be a sizeable number of people, I don’t intend to lead it or dictate the direction in any way. But don’t take my word for it – all will be revealed at the first meeting!

If this chimes with you and you happen to be in Edinburgh next week, please do get in touch. As ever, the more the merrier.

 

Bitcoin and Transparency in Politics

So it’s General Election day. Maybe it’s me but it all feels a bit anti-climactic here in Scotland, coming as it does hard on the heels of the Referendum. Regardless of which side you were on in that process, it feels different when you’re voting ‘just’ for the next five years (as opposed to the indefinite future) of your country.

But while we’re on the subject of politics, I wanted to just flag one thing up quickly which has intrigued me about the political process this time around that’s new. And (surprise!) it relates to Bitcoin.

Some of you might know Gulnar Hasnain as one half of the team (together with Pamir) behind the awesome CoinSummit conferences. Interestingly, during this General Election campaign, Green Party candidate Gulnar became the first UK politician to start accepting Bitcoin donations. It’s a great example of how the transparency of the blockchain can be used for good in an area that’s not always known for, shall we say, impeccable behaviour.

For example, you can see every donation that was made as part of the campaign, recorded permanently and publicly here. Every. Single. Donation.

Of course, it’s not exactly taxing for anyone to follow funds donated in this way moving forwards. And for any others to audit donations in order to provide any necessary checks and balances within the electoral system. Develop the potential a little further, scale it up and then unleash that (free) technology on a country that went through the parliamentary expenses scandal in 2009.

So, if you still don’t think that Bitcoin helps with real-world issues, it’s worth having a think about this. I predict that if we do end up with a government by the morning that can govern for a few years (far from a certainty at this stage) then by the time we go through the next major political event, this kind of transparency should be something that’s expected – and demanded – by the electorate.

Now where’s the popcorn? Looks like it’s a long night ahead.

Creative Currencies Chiasma: An Unmitigated Success!

I’ve written about a number of times before about trying to kickstart the discussion around digital currencies and particularly blockchain technologies throughout Scotland. Not because I believe in any way that I somehow have all the answers. But simply because I see it as a crucial topic for anyone who wants to understand an game-changing development that will inevitably shape the future of our society in a wide range of ways. 

Last week Edinburgh University’s Design Informatics ran the Creative Currencies Chiasma, a ground-breaking 2.5 day residential course focused on helping people to develop digital currency business ideas from a standing start. I was delighted to be asked to help out after previously speaking at a couple of the warm-up events. There’s no doubt in my mind that as a group, the participants really did something unique over that few days. I take little credit on that front though, full kudos must go to Chris Speed and Debbie Maxwell who designed and project managed the whole event under the Design In Action umbrella.

The event was unique (check out more pictures of the event here) because it handpicked people from a wide variety of backgrounds, mixing those with extensive knowledge of crypto-currencies with newcomers, locked them in a room for a few days and stood back to see what sort of new business ideas would result. With the added icing on the cake being the prospect of £20,000 funding being awarded to the best ideas.

The first night of the event kicked off with a great introductory talk by Chris as he explored the hidden potential in the flows of data (including money) through our cities, after which Patrick Stevenson-Keating gave a fascinating talk about his recent project at the Design Museum in London where he took on the task of re-imagining financial services using a design perspective. Some really great ideas there – how about a lengthy credit card that lets you pay more money the further you insert it into the card reader for example?

George Kelsey from RBS then spoke after dinner, mentioning that whilst he wasn’t a fan of Bitcoin itself (unsurprisingly, Ripple appears to be the current frontrunner for those within the bank), he remains completely convinced that blockchain technologies are going to change the world. Whilst we perhaps have differing views on the details in the future scenarios that could play out, I felt that was a pretty significant statement from an experienced bank representative.

After that, I gave a general introduction to Bitcoin to the group before we all decamped to another room to run through a blockchain workshop that we’d devised using a combination of lego, trading cards, stickers, Countdown and all manner of other ecosystem tweaks as trading conditions evolved! We’d tried running it out on a student class a few weeks earlier with great success. The ideas that they’d come up with after having their minds opened to the possibilities of having this secure, immutable record and programmable money were truly fascinating given the short time they’d been given. The same happened here, no doubt nicely lubricated by a few drinks. The attendees at the Chiasma didn’t disappoint with their thoughts on the future..

The evening then evolved into a further investigation of the potential for cryptocurrencies into the wee small hours. It shows what happens when you get the right people into the same room – I could tell that the level of engagement was going to be immense when the earlier dinner chat at my end of the table revolved around the existential threat of AI, drones, 3D printing and the re-engineering of the financial system….

The next morning, it was up bright and early to set up camp within the RBS Technology Solutions Centre. I certainly wasn’t alone I’m sure in feeling slightly strange ideating through concepts that could fundamentally disintermediate the banking industry whilst within the belly of the beast, so to speak. But I have to say that RBS were very accommodating and freely provided the location for the event – regardless of what their motivations might have been, it’s a genuinely step forward to see a financial institution engaging in such a positive way with the topic. This would not have happened a couple of years ago and it shows you just how far things have progressed in recent times.

The next couple of days were a bit of a blur to be honest. A healthy mix of education, unrestrained ideation and problem-solving with, very interestingly, many relative newcomers immediately identifying similar areas that have attracted more seasoned Bitcoiners over recent months as being ripe for the exploration of new business models. For example, some of these included looking at ways to rebalance existing financial inequality, strengthen a variety of communities, reward previously unmeasured positive behaviours, harness the power of smart contracts and transparency, cut through the jargon, track the providence of money and secure records on a permanent basis.

I’m not going to write anything about the ideas that were developed throughout the remaining time as each of the individuals involved in the teams that made up the eight final pitches now has the opportunity to work up the concepts into a more robust proposition before applying for further funding that will support future development. However, it’s worth saying that I was very impressed with the progress that was made. Bitcoin – and cryptocurrencies in general – are difficult to grasp. It’s one thing to turn up at a Bitcoin conference or a hack weekend when you have that background knowledge and you’re surrounded by people who are steeped in the culture and daily echochamber of the Bitcoin scene. But for so many relative newcomers to openly embrace the process of education whilst simultaneously grasping the immediate potential gives me real hope for the future in terms of the way with which such ideas will be able to spread.

With such a significant paradigm shift taking place, it takes a few brave organisations to stand up and provide a framework for others to coalesce around. It’s a vital role and full credit goes to Chris, Debbie and the rest of the team for pulling this together. I suspect those involved will think back to those two and a half days in a decade or so and then truly realise how lucky they were to be involved at this point in time.

Thanks to everyone who took part. Let’s hope we can do it again some time.

How The Blockchain Removes Excuses

Check out this short video with Chris Ellis on the excellent IamSatoshi site. It’s only 5 minutes long. Chris has long been an insightful commentator and active participant within the scene (see the World Crypto Network and his recent World Passport). If you’re still struggling to understanding why the blockchain is so significant, watch this and see if this helps with the concept of timestamping.

Chris makes the point that the blockchain acts like gravity in a way. It helps the ever-increasing mountains of data being produced to maintain internal consistency by ensuring that important information is now timestamped using Bitcoin’s distributed network. Or, to put it another way – anyone now has the ability (for free) to record important documentation on the blockchain in a way that doesn’t reveal the details as such but simply the fact that it existed at a particular point in time.

This timestamp concept is crucial. We now have an open free system that anyone can access which represents the truth. Anyone can confirm whether specific information existed at a particular point in time. A quick search can confirm that the majority of the network was fully cognisant of that fact. And as a side-product, we automatically prevent the fabrication of claims around the sequence of events that are all too common in our current systems.

With the technology, everyone on the planet now has the potential to access to the same information that was previously restricted or incomplete that they need to be fully informed about a variety of decisions that they will inevitably make in their lives. No more pulling the wool over other people’s eyes.

On a basic level, that means that a charity for example now no longer has any excuse not to record events on the blockchain in order to build cast-iron proof of its activities – and expenditures – at a later date. Seeking such a level of accountability should prove to be uncontroversial when it comes to looking at any charitable organisation. However, during the next few years the promise of the technology is that commercial organisations will be required to show publicly whether they are willing to adhere to the same ethical standards.

On a higher level, the power to share information fairly across space and time on the blockchain means that the balance for power within societies will also inevitably change. You’ll often hear the argument that Bitcoin can do little in the developing world where food and running water remain of greater importance than fancy new currencies. But Chris’ point is that this is an over-simplification. The reality is that the very information that will be captured on the blockchain is of crucial importance and should not be under-valued. Whoever controls the information controls the system. Such control impacts on the beliefs, actions and freedoms of those within that society.

The promise of the blockchain is that such transparency and accessibility of truthful information on a global scale will inevitably reset that position.

The Problems of Long-Term Digital Archiving

I imagine that backing up and protecting data is a pretty standard concern for most people these days (note: I don’t however mean that we’re all actually doing something about it however). But for anyone who has collections of family memories on either backup hard drives or such consumer-friendly cloud services like iCloud, those risks have obviously been identified already.

Yet the reality is that it’s still unlikely that the precautions that we’re taking today to preserve this data is going to be sufficient in the longer term. Whilst the first paper that we’ve discovered (from 2nd century China) has survived to this day, what are the chances of a stash of your favourite JPG’s surviving for hundreds of years? If so where and how will they be indexed?

And, even if we do manage to preserve such a collected human history, as Vint Cerf has just pointed out, there’s a very real chance that we might end up storing a vast amount of data with absolutely no idea what that data actually is. Or to put it another way, we might have created a file using Photoshop but that fact – together with the details of the software used itself – is then lost over the passage of time, rendering the data useless in the future.

There’s an interesting proposal to carry out a type of X-ray analysis – whereby a snapshot could be taken of the digital environment in which the file was created (i.e. the software, the computer model, the operating system etc) in a way that could then be easily checked far off into the future. However, the sort of business that carries out such an essential service would be one that would have to survive for hundreds of years. That’s not a sort of business that we’ve ever seen to date.

I can’t help but think that there’s a blockchain solution for this in some way.

 

Bitcoin, Accounting and the Blockchain

I usually find that the easiest way to explain Bitcoin is to focus on the blockchain. By sidestepping questions about the nature of money until later on the conversation, people usually get the value immediately of a permanent global record that’s accessible to all and incapable of being forged. Most within the business community understand why a ledger is so valuable.

Single-entry bookkeeping

It’s easy for people to understand the limitations of single-entry accounting where you keep track of your affairs by simply compiling a long list of numbers that you then add up. For all but the simplest personal undertaking, the risks of using this system are unacceptable. Mistakes can be made in adding up the figures or false figures inserted by others stealing money whilst covering their tracks. There are few safety nets. With little evidence available, it can be extremely hard to identify where any issue lies until it is far too late.

Double-entry bookkeeping

This problem was significantly reduced some 500 or so years ago when the vastly more robust method of double-entry bookkeeping came into widespread usage. Popularised by the pioneering Medici Bank in Italy, every transaction that is carried out by a business using this system requires a change to (at least) two accounts within its records. You debit one account and credit the other. In short, money can’t just appear (or disappear). It always has both an origin and destination. Anyone auditing the books now can quickly identify areas where the story doesn’t add up.

So what’s this got to do with Bitcoin?

Whilst double-entry bookkeeping has been the foundation of corporate accounting for centuries, Bitcoin – or more accurately the blockchain itself – now provides a way to introduce an even more powerful method that has been discussed for a number of years – triple-entry bookkeeping. The simplest explanation here is (inevitably!) found on another of Richard Gendall Brown’s excellent recent posts. However, for those of you who want my summary rather than his (far clearer) explanation, here goes:-

  • Let’s imagine Company A buys goods from Company B. In today’s world, that means:-
    • Company A will change its accounts accordingly – by recording the cash going out/goods going in.
    • Company B will change its accounts accordingly – by recording the goods going out/cash going in.
  • But what if the record of that transaction also gets recorded by a third party?
  • Third party = the blockchain, which verifies (cryptographically seals) each transaction and issues a receipt.

Result: every transaction would have a corresponding entry on the books of the other that would have to be verified by the blockchain. Now every transaction is effectively recorded in three places.

Now things can get really interesting. As a public, secure, global platform, the blockchain can then be interrogated by auditors investigating whether transactions truly took place. With such details living on a digital, permanent and trustworthy platform, the potential for cost-saving (and automation) in this area becomes fascinating.

Place questions of transparency to one side for a moment. We could have a system which contains a permanent record of all corporate transactions that have, as a matter of fact, taken place. Systems could then be developed to analyse data on a massive scale – and perhaps even provide an early warning when areas of significant risk start to develop within large businesses or even economies.

Could we do this tomorrow?

Not quite. The basics of the technology are there but, as Richard points out, there are current limitations that need to be overcome. For one, there is a radical transparency here that may not be suitable for all businesses (although it’s not hard to imagine charities viewing this as a feature). We also have a few questions around the scalability of the technology which need to be addressed. Finally, to be clear, whilst this system provides conclusive proof that a transaction itself actually took place, the valuation of such transactions on the books of each individual business would remain for the determination of the auditor. Nonetheless, the timesaving (and cost) in auditors’ fees would surely be significant.

It seems more likely to me that blockchain technology itself (as opposed to Bitcoin’s blockchain) will be used here. You could certainly imagine there being value in different types of transactions being recorded on hundreds of standalone blockchains. 2015 will inevitably see far more debate around the value of fully decentralised versus ‘semi-decentralised’ (!) systems, given the release of technologies such as those created by Eris Industries and the increased involvement of both financial services companies and regulators in the scene. I can imagine that the creation of a blockchain that seeks to record every single transfer of every company share listed in the UK might provoke some heated discussion from those who are currently invested in the current process, for example.

Ultimately, we identified centuries ago that relying on internal ledgers were significantly flawed. Building a system that required double entries provided us with much greater comfort. Now with the advent of the blockchain, once we start to apply ourselves to addressing some of these questions, we have the potential to take that efficiency to another level still.

Bitcoin and the Trust Web

I always try to share something that I found either valuable or interesting every day on this blog – even if it’s only of interest to me. Today, however, I’m pretty sure it should be of interest to everyone as the standout article was undoubtedly the one by David Cohen and William Mougayar published on Techcrunch entitled, ‘After the Social Web, Here Comes The Trust Web‘. William published one of my favourite articles on Bitcoin last year (here) and it’s great to see Techstar‘s Cohen also co-authoring the piece.

The article does a great job of summarising – and simplifying – the value of Bitcoin and the promise of blockchain-related developments for the newcomer. It frames the innovation that’s taking place as unstoppable force and one that represents a renaissance for technology, computer science and cryptography.

I couldn’t agree more.

It also helpfully distinguishes between the most visible revolution (the new manifestation of money) and the less-visible but even more important revolution that the blockchain is kickstarting, not least by virtue of the fact that the technology creates a new way to write software.

In case you don’t have time to read it (you should), here’s a few key points:-

Focus on new models, not old

If you truly want to see innovation in action, don’t see how Bitcoin fits uncomfortably within the existing paradigms. To understand the real potential, look at how Bitcoin and blockchain technology is forging a brand new path. Tackling regulatory concerns and obstacles placed by incumbents is ultimately futile in their view. Bitcoin does not require permission. Technology is neutral by definition and in this case simply functions as a low-level protocol (a set of rules that govern how a network communicates), just as the Internet relied on the TCP/IP protocol. The real magic happens when clever people build useful things on top of it.

“It’s better to invent new things instead of fighting all things, and it’s easier to create new systems that circumvent the old ones”.

The concept of decentralised consensus

Normal practice over the years has been to rely on one database to confirm whether a transaction is valid or not. With Bitcoin, the authority and trust that would otherwise be in one centralised database has been transferred to many nodes. These nodes record transactions publicly and sequentially, with the technology (cryptography and blockchain) ensuring that no duplication of recording takes place within the decentralised network.

The future of money?

Bitcoin provides a solution for half of the world that remains unbanked, with a simplicity that has been proved to be valuable by well over half of the population in Pakistan and Kenya (in easypaisa and M-Pesa respectively). Whilst legacy banking either can’t or won’t service this demographic, the $400bn + remittance industry will also be disrupted by the cost savings that Bitcoin brings.

In addition, with legacy infrastructure costs making small online payments uneconomic, Bitcoin and cryptocurrencies in general represent a far more cost-effective way of sending small amounts of money – whether that involves tipping or donations.  It’s hard to imagine anyone wanting to pay more over the medium-term when they have an option.

Finally, it’s a fact that when the Internet was created, there was no native currency created that could work in an integrated fashion with it. Bitcoin represents that solution.

Smart Property / Digital Rights

An asset that knows who owns it is known as ‘smart property’. By recording ownership on the blockchain, suddenly you can use your unique cryptographic signature to prove your ownership beyond doubt. Others can then confirm that you own this property by simply checking the blockchain, whilst your explicit consent is required before any such rights of ownership can be removed from you.

It’s not hard to understand just how powerful an auditable database is likely to be that enables you to “establish a persistent link between [your] identity, reputation, a digital file and its meta-data“.

Smart contracts based on proof of work

In one sense, proof of work is simply a right to participate in the blockchain system. Using the technology that underpins Bitcoin, it’s possible to create contracts that are self-executing, relying on the blockchain for verification as opposed to any centralised judge or court, for example.

Decentralised peer-to-peer marketplaces    

These days, semi-centralised businesses such as Amazon, eBay and Uber rule their niches. With Bitcoin and the innovations that are currently being developed within the ecosystem, person-to-person marketplaces are evolving quickly that make the role of middleman redundant. The nature of this technology is such that trust is not required for a transaction to take place between two peers and therefore this cost is saved.

As pointed out in the article, one of the fascinating areas of decentralisation technology comes from the shift that we are collectively starting to experience: we previously relied on the centralised organisation for a wide range of things that are now being delivered by the decentralised marketplace (think of trust, rules, identity, reputation and payment choices).

Cryptoequity and DAO’s

I’ve touched on both before but I’ll save the detailed explanation of the possibilities of issuing a reimagined form of share equity that is recorded permanently on the blockchain or Decentralised Autonomous Organisations (businesses that run autonomously without human involvement according to a strict set of rules enforced by software) for another time given the complexity of both topics. But it’s worth noting that both have the power to completely restructure certain industries.

Decentralised identity

As has been previously noted, we have a problem with online identity. Millions around the world currently rely on centralised institutions to log-in to services, mostly for the simple fact of convenience (Facebook or Twitter log-in’s, for example). But of course, doing so provides such companies with extensive data about our activities and interests that they then monetise. Bitcoin provides the start of a solution – an alternative way in using the blockchain to decentralise (and – crucially – control) our own identities and reputations.

It’s great to see a mainstream website such as Techcrunch put out an informed and detailed article about the potential in the area. Hopefully, there will be many more to follow. There’s no doubt it’s been a bumpy start to 2015 in the court of public opinion when it comes to Bitcoin – but then again, what’s new?

 

Liquifying the Physical World with the Internet of Things

Yesterday I outlined various factors that are hampering the growth of the Internet of Things. However, there is a solution in the form of the blockchain, as IBM have identified. To recap, blockchain technology could elegantly solve the problems that lie ahead for a number of reasons, not least because it introduces:-

  • one definitive ledger that records every possible transaction permanently;
  • peer-to-peer technology that massively reduces cost and increases security by removing centralised, expensive and vulnerable organisations;
  • increased computing efficiency as P2P utilises idle processing power from around the network;
  • enhanced privacy as details are no longer surrendered to organisations acting as pinatas to hackers.

In this second post, I just wanted to finish with a few areas that the Internet of Things is likely to disrupt moving forwards and why it is therefore so significant. Again, kudos goes to IBM for setting this out so clearly in their report.

Disrupting the Physical World

In today’s world, buying digital content using the Internet has become entirely normal for most. But the Internet of Things is now looking to turn the physical world into one that is “as liquid, personalised and efficient as the digital one“.

The report identifies five key areas for disruption that will drive the transformation resulting in “the liquification of the physical world”.

1. Unlocking excess capacity of physical assets

The Internet has let us find, use and pay for digital content (books, music, films etc) instantaneously and the public has become increasingly comfortable doing so. But the Internet of Things provides us with the ability to find, use and pay for physical items.

With physical items (rooms, vehicles, whatever) online and actively updating systems as to their availability directly, the opportunities to monetise these under-used resources is huge. Just look at the growth of the Collaborative Economy,

2. Creating liquid, transparent marketplaces

Driven by mobile and social networks, demand will release supply that was previously constrained in the rapidly expanding peer-to-peer economies.

3. Radical re-pricing of credit and risk

All this monitoring will mean that each individual will start to receive customised credit according to their life, history and situation. Rather than relying on one-size-fits-all models, people who were previously excluded from enjoying this will now be able to access consumer credit that is priced reasonably. Money will flow in areas that it has never been able to before.

4. Improving operational efficiency

The sectors that have traditionally been slow to incorporate technology are likely to experience the most significant changes with the Internet of Things. The report highlights farming in particular. It currently requires significant capital expenditure and technology but could benefit from a wealth of data that sensors across equipment, weather conditions, field monitors and many other areas could revolutionise the industry overnight.

5. Digitally integrating value chains

Rather than losing valuable time waiting for a replacement to be shipped after an object breaks, sensors will monitor performance of objects and automatically source, negotiate the price and take delivery of replacement parts and therefore minimise any down time. There will be a rise of connecting ‘recipes’ between services and products (look at IFTTT for a simple example of the value in the concept)

The Importance of Design Thinking

As with every revolution, the key is utility and not techno-wizardry. The IoT will be driven by an improved user experience and improved functionality in devices. The fact that a device is connected to the internet is irrelevant to most people. Compare that with cookers that turn down the heat when the pot boils over or smart toasters that cook toast according to your preference  – in these cases, solutions that increase safety and quality of food will be appreciated by users and drive the growth of the IoT.

With the IoT, each device should be acting in the best interests of its users and not third parties. Crucially, the machine-to-machine communication should be invisible to most users whilst designs of interfaces that deal with machine-to-human interfaces must be designed to facilitate far greater degrees of interaction.

I’m going to wrap up by simply copying the report’s suggestion for the sort of businesses that will do well in this brave new world. Put simply, they are most likely to enjoy success if they do the following:-

  1. Enable decentralised peer-to-peer systems that allow for very low cost, privacy and long terms sustainability in exchange for less direct control of data.
  2. Prepare for highly efficient, real-time digital marketplaces built on physical assets and services with new measures of credit and risk.
  3. Design for meaningful user experiences, rather than try to build large ecosystems or complex network solutions. 

In the near future, I’ll be delving into how IBM’s thinking has evolved (in the form of the Adept project). But in the meantime, given the fact that predicted growth of the IoT means that it will affect each and every one of us, I hope you found something of use in the last couple of posts.