The Blockchain and Us: Interview with David Birch, Consult Hyperion

Transcript

I think the long-term trend in financial market is towards decentralization and distribution and provided you can regulate the respective about that but the good thing I think really the kind of democratization capital where that will take us I think it very hard to tell at this point but my suspicion is it means a full of resurgence of the notion of community I'm de Beauchamp director of innovation a consult Hyperion which is a uk-based specialist consultancy in the electronic transactions filled with offices in New

York our clients are you know generally speaking the larger organizations the banks and credit card companies and transit operators and the mass market people who want to use new technology to make transactions cheaper faster better so if you take the case of the blockchain the Bitcoin blockchain if its fundamental raison d'être its revenge double spending so that if if I send you some bits you have the bits and I don't write so in in the virtual world you can replicate bits as many times as you like but in the block came word you can't I can't replicate those bits I send them

to you you've got them now I don't have them that's much more like the real world than the virtual world you know in the real world there's only one of me there's only one of this chair if I give you this chair I don't have it anymore so in a weird way the blockchain world is more analogous to the real world than it is the things in the virtual world and although I don't know what the answer to this is it does lead me to suspect that there may be some relationship between these kind of burgeoning Internet of Things possibilities and and what's going on in the world of shared Ledger's maybe they're connected in some way what I'm particularly interested in is

the relationship with regulation because the shared ledger offers a way of running markets which means that they might have an ambient accountability that they might have regularly you know instead of having the through a traditional audit and accounting and so on you can imagine the combination of Ledger's and the applications that run on ledges I mean what people i think misleadingly call smart contracts you can imagine this is a new way of operating and if it saves a few percent on the operating costs well you know whatever that's great it's not the big thing but if we can if we can take a third or a half off the costs of

regulating markets then fact a very profound change in the way things work it's the regulatory cost of the costs that are that are out of control so so my interest in the technology came more from the kind of institutional side of things I think the cost of know your customer kyc in London is about 2 billion per annum and the cost of AML at you money laundering compliance of one form or another is about 5 billion per annum and those costs are just astronomical and they they just keep going up and up and up and up so if we want to make better market that's a good place to start but I think it goes a bit further than that

because we have markets where in many ways the market participants make money through information asymmetry rather than providing services to that marketplace and if we bring transparency actually we tend to use a phrase translucent transactions King a translucency you could you know so you can sort of see that is it but you may not see all the details of the transaction at one place and the idea that you have this kind of translucency that you construct markets that don't rely on hiding information and and front-running and all this sort of stuff that's very interesting and so then you have these kind of more efficient

markets and the market participants make money by providing services to those marketplaces the way that many markets work now is essentially a hack to get around the limitations of old technology I mean because we didn't have a network that connected everybody up quite effectively because we didn't have mobile phones that could authenticate all the participants in a transaction we didn't have all that stuff so we come up with hacks in clearing houses and so on to make things work so how we structure those markets it's not in itself a technological decision but the new technology means that we can come up with different ways of structuring

markets you know we all belong to many kind of obel overlapping communities of one form or another and I can sort of imagine financial markets that are more suited to the needs of those individual communities each producing their own kind of instruments and assets that we would all use and that sounds like it would be complicated and confusing and it it would be if we were doing this physically with pieces of paper and I came to Zurich with London money and I tried to spend some Facebook dollars and that would all sound crazy and but actually of course you wouldn't be doing that you're your robo advisor sitting in your phone would be doing that and so

having portfolios of assets across different communities means prettier overall more efficiency and markets are more closely matched at their communities problem has been with us since the absolute beginning of the internet you know we've had the internet for years now and on the Internet still nobody knows whether you're a dog or not and you know identity fraud is completely out of control de debris so you know the area where we need some new thinking it's in the foot of items in the identity space so maybe the technology brings something new into that space and we need it fairly quickly because we

haven't fixed the identity problem for people but we're about to put 10 billion trillion gazillion things on the internet and if we if we can't solve the identity problem for a few billion people I don't know how we're going to solve it for a few trillion things so we need some new thinking in the identity space what I really really want is an effective I've always wanted this is an effective microtransaction solution you know this this idea that you you're reading somebody's blog and the reason you know you read the first bit now it's brilliant i want to read on i press the button and they get a dollar or they get ten cents or they get one cent or something like that like if you could

just press the button and the person on the other end gets ten things you know i would like something like that because i think people are talented and interesting and and if there was some way of rewarding the production of content without going through those kind of intermediaries I mean I know it's a bit sort of hippie-ish but I've always wanted a micro transaction solution on the web I used to call it the red button you know what if there was a red button on your keyboard just send whatever you were browsing it sent them tens then that's the kind of thing that I want so if I if I was have one pipe dream out of the out of a Bitcoin revolution it would be micro transactions so maybe lightning network possible denied [Music]