The Weekend Read: Jan 10

Welcome to 2016, which has already proved itself to be an odd duck: market meltdowns, Kim Jong-Strangelove and Sean Penn as an accidental undercover agent...and we are only 10 days in!

Secret Agent Penn infiltrating the El Chapo stronghold

Secret Agent Penn infiltrating the El Chapo stronghold

1. Link Catch-up: 2016 Predictions

Four articles caught my eye when wading thru the flurry of year end/starting prediction pieces. First, Euromoney's poll of 151 financial actors found that "more than half think that [blockchain] will transform banking fundamentally." Second, Andrew Keys of Consensys gives 16 blockchain predictions in this Medium post. While there is inevitable book-talking in the post, on balance I sympathize with a lot of the predictions. Third, the Deloitte blockchain team lays out their 2016 predictions, centered around three themes: (1) Leave the labs, (2) Age of consortiums, alliances and governance and (3) Next-gen platforms. Last, professional tweeter Preston Byrne of Eris penned my favorite prognosto-thinkpiece in his CoinDesk article 4 Hype-Free Predictions for Private Blockchains in 2016:

Where 2015 was the year everyone talked about blockchain, 2016 is going to be the year everyone builds on it.
There’s a lot of experimentation, improvement and optimisation left to do. In my personal opinion, we’re two budget cycles away from the first production systems in finance, and I agree with Chris Skinner, chair of the Financial Services Club, that we’re probably 10 years away from mainstream use. [snip] What this means for any financial institution or other business looking to use the tech is that the ball is entirely in your court. It’s cheap as chips to get started and there’s much to be learned, so there’s simply no excuse not to allocate budget and let your developers loose on this for a year – especially considering that your competitors already are.

2. Blockchain in the Developing World

Vice has a lengthy but important run down on how Bitcoin has accidentally enabled those who see Africa as "a playground for Western adventurers" in The Western Myth of Bitcoin in Kenya:

Africa presents real opportunities for growth in digital currency, but top-down narratives may not be the best way to find these opportunities. It fact, it’s a good way to create a bubble. People on the ground in Africa are busy working to adapt the promise of digital currencies to their own needs, on their own timelines and without outside direction by the ideas of well-meaning Westerners.

One thing that slipped my attention last year was the Reserve Bank of India's comments on the possible benefits of blockchain tech. For the relevant section, please see this link:

Regulators and authorities need to keep pace with developments as many of the world’s largest banks are said to be supporting a joint effort for setting up of ‘private blockchain’ and building an industry-wide platform for standardising the use of the technology, which has the potential to transform the functioning of the back offices of banks, increase the speed and cost efficiency in payment systems and trade finance.

3. Blockchain: Hope & Hype

The well-known legal/political activist and erstwhile Presidential candidate Lawrence Lessig spoke at last month's Sydney Blockchain Workshop. The video of his full talk can be found here. If you prefer it in tweetable form, click this link. His money quote can be found in this article when he states that blockchain is "the most important innovation in fundamental architecture since the tubes of the internet were first developed"

William Mougayar, the Flava Flav hype man of blockchain, stayed busy over the holidays with multiple postings, including a many-slided deck on the blockchain space. He followed this up with a one-two punch on blockchain innovation within banks: Blockchain Inside Regulations Is NOT Innovation and Why I’m Being Tough on the Banks Re: Blockchain

It is a lot easier to start innovating out of the regulatory boxes, both figuratively and explicitly. Some banks are starting to doing it.
Simon Taylor, head of the blockchain innovation group at Barclays and someone whose views I respect, summed it up well by leaving a comment on my previous post. He said: “I don’t disagree the best use cases will be outside regulated financial services. Much like the best users of cloud and big data are not the incumbent blue chip organisations. Still their curiosity is valuable for funding and driving forward the entire space.” I very much agree with that point, which is why I have hope some banks will contribute to the innovation potential of the blockchain in significant ways, as they mature their understanding and experiences with this new technology.

An indirect yet interesting counterpoint can be found in the American Banker piece Does Nature Want to Evolve a Bank?

The cycle of unbundling and rebundling is driven by regulation at least as much as by market forces. Nonbanks prosper in areas where banks cannot compete, often because regulations prevent the banks from doing so. "Regulation is one of those facts you have to deal with, just like in nature you have to deal with the fact that there's a mountain range there or a desert," says [Lowell L.] Bryan.

Finally, Dave Hudson's end of year meditation on the true meaning of the word blockchain ends with a very impressive passage that would serve well as a rallying cry for 2016:

We have looked at what a blockchain might or might not be, and perhaps seen some hints of what it might enable. The technology that underpins Bitcoin can be used to build many things, and Bitcoin's legacy should not just be Bitcoin itself, but that is has shown the viability of something far more fundamental. The debate over what constitutes a blockchain won't end here, but we need to move the discussion forward and we need to resist the urge to allow it be just another marketing buzzword.
To make that happen we need both clear terminology, and well reasoned usage. We need to avoid conflating many different ideas, and we need technology claims to be realistic and achievable. If we fail then, eventually, the term blockchain will be meaningless and have to be replaced. This seems like the wrong outcome. If we succeed then the idea of a blockchain will not be the end of the story. Instead it will take its place as a layer upon which better and ever-more useful systems can be built.

Happy New Year to all.