It’s noticeable that there have been far fewer Bitcoin Conferences taking place this year. Speaking from experience, I can understand why. Conference organising brings its own challenges, particularly when you add into the mix the topic of an emerging technology that most people don’t yet understand whose application could disrupt a variety of industries. What area(s) should you focus on when programming a coherent and informative event?
There were no such worries for the London Blockchain Conference on 24th June. It turns out that hosting this in the Barclays Accelerator and simply dropping the ‘B’ word from the title (that’s ‘Bitcoin’, not ‘blockchain’) was a smart move, evidenced by the huge turn out of representatives from a broad range of financial organisations.
How things have changed over the past few months.
But whilst the terminology might have changed slightly (and to be serious for a minute, it’s only partially up for debate whether this represents an evolution in PR treatment or the concepts themselves), there’s no doubt that traction is definitely building.
A new architecture for financial services
Hardly surprising. Because, as Simon Taylor pointed out in his brief opening, the potential for cryptographic proof equates to “an accountant’s wet dream”. Now, lofty claims about the power of a blockchain to instantly solve the world’s collective ills (or to “benchpress the earth”, as Simon put it) might not be helpful. But the simple, undeniable truth is that the existing financial system needs a reboot. So what’s the appropriate architecture to let this building commence in a digital world? Because it’s pretty clear that the system of the near future is not one that relies on masses of independently-verified, slow and expensive paper-based processes.
Undoubtedly, many in the room that day have been attracted by this shift in focus. The conversation was not, like so many in the past, one about consumer applications. Instead, this discussion sidestepped the question almost in its entirety and looked instead at the application of blockchain solutions at an enterprise level – seeking efficiencies where the industry currently shoulders significant costs and collectively dreams of reducing the settlement time for trades that travel at a snail’s pace today.
Less of a currency focus – but still unmissable
That’s not to say that there was no discussion of Bitcoin as a digital currency however. It was good to hear both Adam (Diacle) and Dan (Innovate Finance) remind everyone that the UK continues to lead the way globally when it comes to building a supportive environment on the basis of a non-interventionist policy, with money being allocated to research into digital currency. Far from being a regulator’s worst nightmare, the blockchain promises a completely different and seemingly vastly improved model for compliance (where the necessary data is verifiably correct and ‘pushed up’ as required as opposed to being extracted painfully by the regulator in a top-down model).
I don’t write about regulation on this blog often (partly to avoid people assuming I’m giving legal advice given my previous career – but mainly because, to be frank, it doesn’t really excite me). But one thing I haven’t really flagged up previously (because it’s obvious to anyone other than perhaps a newcomer to the scene) is a very valid concern that emerging regulation of Bitcoin risks somehow ensnaring those building businesses that rely on blockchain technology to certify the provenance of data (as part of a non-financial transaction – such as Provenance for example which uses Ethereum). We’re fortunate that this hasn’t turned into a major issue (in the UK) at present – but it remains an area to watch closely.
Of course, when it comes to legitimisation, you can’t go much further than demonstrating a government that is actively encouraging bitcoin businesses to relocate with a beneficial tax regime and working with Credits to create a blockchain-based company registry.
Blockchain startup tips – from your target customers
But what about the startup scene? Are the institutions starting to see an evolution and growth in maturity from those who are seeking to sell blockchain-influenced solutions into the financial services market?
Lee Braine of Barclays made a number of good points during the day. It’s time to move on from the early rhetoric of the Bitcoin startup scene. Financial institutions continue to look for solutions to a screed of vast array of problems, relating to everything from SLA’s to regulatory requirements. It’s clear that blockchain technology provides a new approach. But it’s been hard for them to engage with many entrepreneurs to date who have approached such problems from the opposite perspective – more along the lines of “we have the solution, we just need to implement it”.
I liked Lee’s comment that the blockchain is nothing more than a massive WORM (Write-Once Read Many) drive. He also had a couple of valuable pieces of advice for the Bitcoin community:
- To sell into financial services enterprises, you have to ‘bake in’ the bank’s non-functional requirements from the start (e.g. strive for security, reliability and low-latency at all stages).
- Solving part of a known issue isn’t good enough from a bank’s perspective. In other enterprise business sectors, a solution often requires a collaboration between third party vendors who collectively solve the problem in its entirety. Perhaps it’s time for startups to think in terms of forging similar alliances in order to bring blockchain-based solutions to the banks.
The message that seems to be coming across loud and clear in these discussions is that banks are (finally) starting to understand the power of blockchain technology. However, their challenge comes in trusting that the legal entity (or group) that possesses the ‘right to write’ to the (private) blockchain is sufficiently robust to provide them with trust that all of the information recorded is legally enforceable and correct (as I outlined previously). But, in general terms, they all seem to be looking for a system that provides a private ledger with designated miners, collective administration and one that focuses on the assets being exchanged, with the details of the technology itself being hidden.
Onwards and upwards
So there was definitely a much-improved level of understanding in general around the technology in comparison to a few events that I’ve been at recently, although we’re clearly still at the start of the curve. It was impressive to see the newly-launched Everledger burst out of the accelerator and set out their vision for (initially) the use of the blockchain to track diamonds “from the mine to the mistress” to prove provenance and slash insurance costs for physical items within the legacy system. And that’s without even mentioning what appeares to be an extremely promising new entrant into the world of private blockchains as a new whitepaper was released by MultiChain, developed by the hugely talented team behind Coin Sciences.
I’ll leave you with a thought from Nathaniel Popper. The New York Times reporter and author of the fascinating history ‘Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying To Reinvent Money’, pointed out that the Bitcoin ‘movement’ grew out of a desire to avoid governments and banks. Yet some of the biggest movements in the scene are by both.
I wouldn’t be in any doubt that full integration of blockchain solutions is still going to take a long time to mature. But it’s clear to me that the banks and others have started their engines.