Data 61 fits release valve to BlockChain hype bubble


If you’ve ever fidgeted through a conference presentation on the wonders of BlockChain and distributed ledger technology, yet left confused about what it all really means, there’s good news: CSIRO and its Data 61 ICT research unit acutely feel your pain.

Hype around what’s been dubbed ‘FinTech’ might have a vise-like grip on investors in start-ups, banks and ministers looking to bask in the glow of innovation, but ask straight-talking scientists for some hard facts and the answers you get might not be ‘brochure ready’.

So it was this week, when the Australian government’s top technology minds bowled-up two key reports after digging around the Blockchain ecosystem for around a year.

The Data 61 examination was done in conjunction with Treasury and other agencies in the financial services space that clearly have a vested interested in staying on top of further disruptive online changes.

Yet the report that’s come back is a pretty firm reality check on what the foundation technology behind Bitcoin might deliver. And what it simply won’t.


Behind the buzzwords

“It feels to me now that BlockChain feels like what the internet felt like in the late nineties,” Data 61’s research group leader for software systems, Mark Staples confided at the launch of the two very candid reports.

Ouch. Talk about raining on the FinTech parade. That won’t be in the prospectus of start-ups jockeying for old money investment to make transactions new again.

Even so, the government never pretended it was not going to look at the risks as well as the opportunities and various scenarios for the emerging technology. Or apply scientific rigour to it.

Staples’ statement might affront a growing FinTech sector orthodoxy that distributed ledgers are the next huge thing to disrupt national economies, but what his view actually demonstrates that policymakers and the public sector are now taking rapid technological developments, and their implications very seriously.

So seriously that official consumption of digital Kool-Aid is now being more strictly rationed, not only by scientists, but by ministers informed by their assessments.

At the Data 61 report launch Assistant Minister for Industry, Innovation and Science, Craig Laundy was under no illusions.

Tipping point or dud?

Laundy told the audience that while distributed ledgers were at a “tipping point” BlockChain on the whole had copped a “dud rap”, partly because of “resistance” from industries facing disruption if they took off.

Laundy’s assessment is that organisations need to embrace and prosper or “ignore and perish” when it comes to disruption. He also called out payments network Visa as a business that was actively investigating a technology that could dis-intermediate it rather than resisting and being caught short.

Disintermediation – or cutting out the middle-man – is a theme that Data 61 chief executive Adrian Turner also homed in on.

“What BlockChain can facilitate is the removal of third parties, trusted intermediaries, that’s were the structural change and operational efficiency can really come into play”

Effectively that means service industries that thrive on helping people navigate through systemic complexity are all under threat. Accountants, tax agents and most the financial services and property sector’s back-office functions like settlement, clearing custody.

It’s both a book-keeper’s ultimate dream and worst nightmare. Small wonder Treasury folk are all over it like a rash.

What’s (really) in it for government?

There’s a few important things. And a lot more which, realistically, look like they won’t happen.

The core offer of a BlockChain is that it can stand-up the authenticity of a transaction by using multiple sources to keep verifiable records of what went on. It’s essentially collectivised database that both processes and records transactions in many places at once and makes fiddling basically impossible.

At it’s most basic level the more hands that touch a distributed ledger, the harder it is to fake because everyone can cross-check.

Beyond the more obvious regulatory and financial mechanical efficiency, Data 61’s Turner sees merit in creating more cohesive government data structures that will allow cross jurisdictional interoperability.

Records, especially the electronic kind, are huge here. Health records, education records, transport, police, consumer affairs and real and personal property registers all come into play.

“For government BlockChain can potentially be used as a common reference point to bring together different levels of government data – local state and federal in new registries of open data,” Turner said.

From Data 61’s perspective, after bonding with Treasury, there is real opportunity and not just on the regulatory side. Turner noted that Australia currently held the secretariat for BlockChain standards.

Standards might be at the soporific end of innovation and technology but without them, or common adoption, nothing cohesive ever happens. Just think of the historical mess in eHealth or the struggle to get national frameworks like Standard Business Reporting off the ground.

The trust economy: mistakes will still happen

The power of non-repudiation and a permanent and tamperproof record may well have appeal in settling equities market trades, but a vision of total perfection isn’t something Mark Staples sure will suit all humans or their behaviour

The law is one area where there is both enthusiasm and caution.

“Once something is written to BlockChain it can’t be unsaid,” Staples observed, adding that a lot of testing scenarios were based on positive case scenarios rather than negative ones.

Staples is interested in what happens when things don’t go to script. He says BlockChain needs to be tested “in the rain”.

A case in hand in are registries for humans where mistakes can be made and decisions contested, overturned and reversed. When it comes to courts, the law and law enforcement things are not so simple.

“How do you remove a registry entry?” Staples questioned, citing erroneous court orders and vexatious complaints.

“Half my conversations with industry are telling people that BlockChain is not suitable for what they want to do.”

Success looks like… invisibility

A common question in evaluation is ‘what does success look like?’ for an exercise.

Many of the technological innovations we reference today are either highly visible or something we use – like smartphones, online transactions or tapping for a retail payment or train fare.

Success for BlockChain could well be when things don’t need to happen or are completely automated behind the scenes. Shares will still be traded, mortgages settled, payments remitted – there will just be far fewer people involved.

There will be efficiencies gained, but there’s a strong chance a lot of people won’t appreciate what’s changed, except perhaps for redundant accountants, tax agents and registry clerks.

“When BlockChain is successful people won’t even know it’s there,” Staples says.

That’s what they said about Public Key Infrastructure (PKI) and its online digital certificates.

It really does feel like the late 1990s again.

About the author
Premium

The essential resource for effective public sector leaders

Can you afford to miss the next briefing from Mandarin Premium? Sign up today.

Get Premium Today

>