Novetta Tech Talk: Blockchain and Bitcoin
Experts from Novetta and Chainalysis spoke at the Jailbreak Brewing Company on blockchain technology, what it is, where it came from, how it works, and what effect its having on commerce, banking, and, eventually, daily life.
Novetta's Peder Müller, a self-admitted "Bitcoin enthusiast," discussed the technical principle behind blockchain, strengths and weakness, and its most famous and successful application thus far, Bitcoin. He described what people are doing right now with blockchain, when it's useful, when it's not, and when it's "just snakeoil." He then explored the likely future of blockchain technology.
Chainalysis CEO Michael Gronager contributed his own explanation of how blockchain worked, why it was important, how it was likely to be disruptive, and the ways in which users and regulators were coming to cope with the technology's implications.
Here, we offer some recent background on blockchain's growing mainstream acceptance.
Background: Disruption, not Black Marketing
As is well-known, crypto currencies, including those which, like Bitcoin, are built around blockchain technology, have found their earliest adopters among techno-libertarians and cybercriminals, who find them attractive for distinct but related reasons: the promise of greater privacy, independence of conventional state banking systems, and the relative ease with which they enable international funds transfers. That the undesirable half of these early adopters continue to make much use of Bitcoin in particular may be seen in the rising use of in-game currency for money laundering by criminal cartels. There's a brisk grey market in which the cartels farm in-game currencies and sell them to gamers. The transactions are payable in Bitcoin.
But the widespread perception of Bitcoin in particular and its underlying blockchain technology as somehow inherently dodgy and disreputable is quite mistaken. Bitcoin and the blockchain are increasingly going mainstream. They're showing their disruptive potential in remittances and other funds transfers, where they're valued for their transparency and immutability. Other uses are beginning to disclose themselves.
Background: Early Adopters in the Financial Sector
That cryptocurrencies are nonetheless increasingly entering the financial mainstream may be seen in last week's announcements of their adoption by large and influential banks and payment networks. The Russian payment firm QIWI has joined the New York-based R3 financial and banking blockchain consortium. The Bank of Russia and JP Morgan Chase are independently testing Ethereum-based blockchain solutions. Wells Fargo, SWIFT, and ANZ are piloting a blockchain banking prototype. Emirates NBD (Dubai's largest bank) is cooperating with India's ICIC on a blockchain-based remittance system. Entrepreneurs remain active in the field along with the big players: a new Danish start-up, CoinsBank, has announced itself as offering a full suite of blockchain banking services, and the former CEO of the Nasdaq Tallinn stock exchange has started Funderbeam, a blockchain-based exchange she describes as "a growth engine" for startups. And Eva Blaisdell, founder of California Space Center, announced the launch of Copernic, described as "a blockchain-based, finance-focused rights management system developed for the space industry."
Background: Incipient Standards and Regulations
The US Federal Reserve indicates it's watching blockchain technology with considerable interest. It intends to publish a paper on the topic later this year. A Fed Governor this week called distributed ledger technology the "most significant development in many years" for payments, clearing and settlement.
Standards are evolving in the wake of growing acceptance. The International Securities Association for Institutional Trade Communication (ISITC) Europe and the Organisation for the Advancement of Structured Information Standards (Oasis) this week announced their intention to collaborate in defining technical standards for blockchain and distributed ledger technology. (PwC is interested in working to help ensure that such standards work toward interoperability, not simply picking Bitcoin as a de facto standard.)
Background: Applications Beyond Finance
Large companies outside the financial sector that appear to be placing large bets on blockchain technology for their future include IBM (where a declared emphasis on distributed ledger R&D has attracted favorable notice from investment analysts), Eriksson (which intends to apply blockchain technology against the problem of ensuring data integrity in clouds), and Maersk (which is piloting a distributed ledger approach to shipping manifests). Among startups, there is considerable interest in exploring the blockchain as an approach to identity and access management in the notoriously insecure and computationally impoverished devices that comprise the Internet-of-things.