Time flies…

So – it’s been a while huh?

My only excuse for the lack of action round these parts in recent months is the same one that’s recycled by bloggers around the world. Namely life off-blog (believe it’s known as ‘real’ life) got crazy-busy over the summer months.

Can’t share all of the activities on here yet but here’s a quick roundup of some of the cool things (well I think so anyway) that have been taking up some of my time recently:

1. Paul Puey, CEO of my favourite Bitcoin wallet company Airbitz popped across from San Diego to chat at the Scottish Bitcoin Meetup a couple of weeks back, delivering a great talk on keeping Bitcoin decentralised.

Paul Puey (Airbitz CEO)
Paul Puey (Airbitz CEO)

2. We followed that up with the good news from The Royal Dick at Summerhall that it was to be the first bar in Edinburgh to accept bitcoin. And I’m glad to say that the meetup group took it upon itself to, er, thoroughly stress-test the new technology to the fullest. Let’s just say, we ensured that future customers wouldnt be at any risk of having a fractured experience in the future with staff who had no experience of dishing out drinks in return for bitcoin. Happy to report that everything held up beautifully under the strain.


360D Conference, Glasgow SECC (September 2015)
360D Conference, Glasgow SECC (September 2015)

3. I gave a talk on Bitcoin at the 360D Conference at the SECC in Glasgow earlier this month. Getting out of a sick bed to deliver it, it unfortunately wasn’t my finest performance but still seemed to provoke quite a bit of conversation afterwards.

4. I helped organise the Blockchain Workshop at this year’s Turing Festival and watched with disproportionate pleasure as 25 or so developers – all but a couple of whom had never had any exposure to blockchain tech beforehand – learn how to mine, send money and create simple smart contracts in little under 6 hours, all under the watchful eye of Konstantin and Ken from Ethereum. A fantastic example of the potential that this technology is providing for everyone.

5. Nine major banks announced they’d agreed to work together under the talented eye of new CTO Richard Gendal Brown at R3CEV in an ongoing investigation around how blockchain technologies can be incorporated into their current businesses. BIG news when you consider where we were 12 – even 6 – months ago. In case you’re wondering, the banks are: JP Morgan Chase, Goldman Sachs, Credit Suisse, State Street, UBS, Commonwealth Bank of Australia, BBVA, Barclays and Royal Bank of Scotland.

6. A few weeks ago, I took part in a British Interactive Media Association (BIMA) panel on ‘Can FinTech Make Banking More Human’ in Edinburgh, exploring disruption across the sector.

The Ivy, London
The Ivy, London

7. I gave another talk on Bitcoin and the promise of Blockchain technology at The Ivy of all places in London as part of an event put together by the Tayburn Agency and Engine. Thanks to Nadine and the rest of the team for inviting me down. I tell you – for all the furore about this so-called ‘geek money’, it doesn’t half get you into some interesting places 😉

Swiss Embassy, Bitcoin & Blockchain Event
Swiss Embassy, Bitcoin & Blockchain Event

8. I went along to a fascinating event run by the Swiss Embassy in London on, yup, you guessed it (no prizes) the B thing. Fantastic panel (Mike Hearn, Christian Decker, Richard Gendal Brown, Vitalik ButerinRobleh Ali from the Bank of England and Oliver Bussman of UBS). Held under Chatham House rules (hmm, hate that concept – really, in a world of permanent mobile and social network connection, are we really going to still hang onto the pretension that we can restrict such conversations and attribution spreading?), I can’t really say too much of value about the discussion – other than it was a fantastic event, with loads of old and new faces from the scene in attendance. Interesting to note Switzerland’s drive to become a base for crypto-based businesses in the future as well.

And yeah, there’s been a lot more. But this is turning more into a diary entry now so I’ll wrap it up.

So we might still be no clearer to finding out where this roller coaster will finally stop and what the scenery will look like if it finally does. But to me, the outlook’s never been so positive. As a great man once sung – keep on keeping’ on

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.