The Blockchain and Us: Interview with Steve Wilson, Lockstep Consulting, Constellation Research

Transcript

I think the most important thing about Bitcoin that I keep saying to people and the initial remember is very very political the problem that Nakamoto tried to solve was that he can share electronic cash for them so you've got people that want to use ones and zeros and nothing else now that problem was actually sold about 30 years ago by a cryptographer called David trauma and children came up with the digital reserve in the middle of every transaction that was super computer and they would make sure that every time one

person said they were trying to cash to another person they could only do it once the problem is called double spend the double spending means how do you stop identical ones and zeros being reused very very hard problem Sean assaulted which sean did it with this central reserve a digital Reserve Bank now man Komodo is an anarchist and looked at that and said I don't want to reserve bank i don't want government I don't want more dresses so it was political and you need to remember that the problem that Nakamoto tried to solve he wanted to solve it in a particular way he wanted to solve it without any administrators so you come up with this algorithm that basically crowdsources the monitoring of the composition people

seem to think that that Bitcoin created decentralization was actually the other way around Nakamoto said I want decentralized money it has to be decentralized that don't want for Central Admin so it was actually a design assumption you know it's like saying the locomotives created the train network will note the other way around we wanted to move things across the country so we built the railway and people interpret Bitcoin the wrong way around so I think that's one thing to bear in mind and lets the fairly lengthy detailed things that I've just said but there are several really much simpler things too I think explain the Bitcoin enthusiasm nakamoto was a mystery

character right and so it's very sexy right from the side you've got something that was technically ingenious and seemed to come out of nowhere it seemed to be sure a lot of really clever people at their own game and so people imagine that Nakamoto was a single perhaps tragic character and that's fantastic I mean we love it to the story right Plus what he did was very very what P she did was very very clever in so that earned a lot of respect the Nakamoto was clearly an anarchist anti-establishment and I think any establishment is sexy and none of the paper was incredibly well-written

so you know it was compelling what really energized people was that neck of motor solved an unsolvable problem the idea of having electronic cash without an umpire was thought to be unsolvable people have said it's never going to be done so when you solve an unsolvable problem in technology that creates amazing innovation and energy it happened with the Wright brothers flyer so the very first power aeroplane just amazed people they thought it was magic they didn't you know photography was the same photography in the 1850s was thought to be magic it was incredible and yet it was a no an artificial machine so the Wright brothers liar created incredible innovation but if you

look at what happened in five years after the fire most of those second-generation aeroplanes with jokes and you know the inventors came out of everywhere trying to copy the flyer you see this with block people are running out of everywhere copying the blockchain and really making a terrible mess of it most of the time we got to remember what Bill Gates said right people overestimate what can be done in one year and they underestimate what can be done in 10 years and the under estimating is that you can't predict what will happen in ten years up so I say to people i mean block training to be seeing nearly 10 years old but i think they've got another ten years to run before we we see what its long-term impact is in at the moment the Futurists are trying

to have a bit both ways they want to get on something now and change the world now using the original prototype and the prototypes not fit for purpose you know when when you say Bitcoin works to that trust you've got two people Alison bought them they don't know anything about each other and I want to know each other because they want to remain strangers online and they can move electronic money and that is magic but it does not mean that they trust each other so remember the Economist magazine and 12 months ago the economist at a special issue and the front cover was called the trust machine and I just didn't know bitcoin is the antitrust machine it is about achieving a very

important outcome of moving real money without trusting anybody and you cannot jump from that to say well well we can create trust in new ways because we're transparency of government will have consensus Rover electronic voting and I'm afraid a bit fundamentally misguided because the blockchain was never designed to create trust it's just not what it does so if so it's a really weak junk to go from the weird world of crypto money all the way through the government because it's not what the blockchain does the blockchain is so that you can move money without trusting people it doesn't create trust it it allows people to do important things

without trust but only one thing which is to move bitcoins in other areas of security and technology we've talked about trust for a long time technological trust social trusts you know do I trust you I've never met you before and you're going to take these words of mine and turn it into a thing I don't know what you're going to do but you know and i'll talk about you seem like a nice guy or in your words i like your work you know I trust that this is going to turn out okay that is not what blockchain does it's just not in that space and people only think that it is in that space because we think very vaguely about digital we

don't have really good intuitions about digital and people use this word trust they also use the web consensus they misused the word consensus in blockchain consensus means that everybody has the same copy of the Bitcoin ledger and they have reached agreement that every single bitcoin movement is a counter cruel and you know takes 10 minutes or 15 minutes to do that work and it takes eight or 10,000 computers to reach consensus but i'm afraid that sociologists and you know techno social commentators and a whole lot of sort of self-taught amateurs have taken the word consensus

than they've overloaded it and may they use the word as we do in social discourse so they think the consensus means that you and I have agreed on what this movie is all about and we've agreed that you know we reach consensus that block chain is really interesting and with rich consensus that there's a story that needs to be told well no way does block train do any of that sort of thing so again when somebody says the blockchain could be used to reach political consensus I'm afraid it's just nonsense that's not what it does clearly you can put anything on the blockchain you want people say to me just this

morning somebody said to me thousands of people are doing things on the blockchain see there you are you blind and I said no I know that you're putting things on the blockchain in society putting pieces of code into Bitcoin transactions and you'll you're agreeing with these things represent diamonds the Diamonds themselves are of course not on the blockchain what's on the block chain is somebody promising you that you know exists whose code represents a diamond and that is the sort of thing that Nakamoto themselves said don't do that on the block chamber in the paper Nakamoto in the paper in the abstract of the Bitcoin paper if you still need a third party to prevent double spins and live out then the algorithm losses

expenses is a direct quote but you know you can do this but I wonder why you would bother having eight or 10,000 computers running around the world soaking up a huge amount of world's electricity in order to reach consensus about something that in fact one person Oregon you one person in the diamond mine or in the diamond broker dug up this three-carat stone and they knew unit in water Bloods upland they lied and said no this is a real diamond and then they put that fact on the block train you don't need eight or ten thousand computers to all agree on about the facts because the facts aren't set

of your own so you can you can put anything on the block chain but it's not just a regular database if you want to just have a spreadsheet of them land titles or identity tokens or diamonds or food you know some people are trying to put food on the Love Train paddock to plate pedigree that's great but you're just treating it as the database because the reason that is what it is is that you're trying to reach consensus about purely digital asset where you don't want to trust anybody the r3 consortium that was founded by about 40 or 50 very big banks about 18 months ago now that

is fantastic work and it's what we call a third-generation distributed ledger so they were absolutely inspired by block changes and the aviation industry was inspired by the Wright brothers what they did it are three was that they ranked a lot of money and they SAT back and they said and blockchain apparently allows people to do things without any trust at all but we know in banking that we've got some trusts and some regulation but we've got too much regulation in banking it wouldn't have been more efficient if we could has 40 or 50 banks get together and agree about the state of a financial instrument and exchange a little bit of information but not not every piece of information

wouldn't it be quicker and more streamlined today they've been inspired by the object properties and they basically rebuilt it from the ground up they absolutely rebuilt it so you know I can pair this is a bit of a stretch but blockchain to our tree is a bit like the Wright brothers flyer to say on the space shuttle the special is amazing that it is a very very specialized thing and you don't get in the special to fly from London to New York the artery consortium very very smart people working in financial services they saw some problems that they could solve

using something like the blockchain it rebuilt from the ground up they wrote a paper a few months ago this is by the way what we build is not a block chain so very careful to actually fill it out so that's the way that signs and technology and innovation works right you have an unsolvable problem a gift solved a lot of people run around getting overly excited a lot of other people say hey let's just be calm and considered about what problem we're trying to solve so you come up with our tree and so you know look out for them look out for block chain for I say that the Bitcoin blockchain was pic tures block chain one you know athyrium was one foot size there's something called

ripple that was 0 'clock chain two very very specialized on financial services and then I'm artery hash grass HYFR ledger these are local option three there's not even blockchain anymore so that's where you have to use the technical term distributed ledger but you know I'm still not convinced that you'll do anything like electronic voting on any of these technologies and I don't think that you can do health care on any of these technologies ever yet so maybe young distributed ledger technology for will be interesting and it will be something that we haven't seen yet you know if this is a bloody big book we just be finishing capsule to

and you know the conclusion of chapter 2 would be this has been a very interesting and very important innovation and chapter 3 will start to explain why I'm the rush mad rush to use the ridge block chain is I'm is going to I think it's going to fall in a heap but what will continue to develop a biz their generation very exciting things are three and hyper ledger very exciting every cloud has a silver lining and if the silver lining of the hope of the height is that it created a lot of interest in a lot of investment in you are MDS and that's great I think that that's probably a very generous interpretation i think a lot of money is

being wasted on first generation misuse of this technology and people should have been more prudent and more careful with you know it is what it is without a doubt the very very good thing that's coming out of the original invention is that it is inspiring a lot of innovation and you know like with any innovation ways i preside about the wright brothers flyer if you look at the first generation aeroplanes most of them were just article but 10 15 20 years after the flyer you had a real airline industry and i think the same thing will happen so the freighters say that we look back on a lot of these first-generation blockchain applications as like early vintage vehicles and

they'll all be will have a little sympathetic truffle about a lot of them I think but I'm very optimistic about the future one just say to people you need to be very patient and more modest about the problems that you're trying to solve so in health care yes you need trust yes you need decentralized redundant data is unique security but there's much more to the story than that we know you shouldn't be spending a million dollars on a bobtrain database until you do some really nice requirements analysis and become a good customer you know a lot of a lot of health care people are rushing in existence is being a bit naive its

customers of the insulation so I don't think there's a big boat it's going to be missed you can put anything on the blockchain you like you can also do something like cook a roast beef on top of your engine you know you can these are making some foil and cook it on your engine then you get a mediocre result and you and you can damage your engine and you can do it but it's not what the angel is they were designed for and you know I'm afraid I'm being a little bit cheeky but I'm afraid of some of these Bitcoin applications are not much better than that I should repeat that I'm very optimistic about some

third generation technology it's really good because it's been done by people that are inspired and disciplined so you'll see fragmentation of this you'll see a lot of special-purpose digital ledger technologies that are 62 different purposes you know i think what i'm saying is quite sober and quite sane because it's the story of every technologies it may all go down this pathway and we have to remember that some really really cool things I'm just never happen look at college fusion 20 years ago tho those chemists look like they dissolve the holy grail of energy and something was going on with it let's prove that to be a saint hope if you're very Darwinian you could say look what

we've got here is like a Cambrian explosion and there's a lot of random mutations it's a very very strange sort of six legged three arms tentacle sort of submarine monsters are emerging and some of those things will trip will survive and some of them will die and go extinct and if you're really cold Darwinian you say you know at the end of the Cambrian explosion we wound up with some with stable species so you can take that view if you like you know we're not like that we're agents we are conscious angels and we should be predicting the future rather than just letting it happened and yeah I think that we need more critical thinking and better

application of blockchain than just letting these things that are randomly randomly and burst out all over the place we continue to see a lot of distraction and a lot of false hope and to block chain easy right healthcare healthcare is a hell of a problem but you know things like public hospitals are the most complicated organizations on the planet there's many many layers and their standards and there are procedures and there are accountability you know one of the biggest things in health care is accountability if somebody gives me a diagnosis how good is it can I get a second opinion where's the evidence where's the quality what happens if a

bit of surgery fails it's all about accountability blockchain is utterly fundamentally philosophically opposed to accountability it does not even provide you the way to get your keys back it's a NASA mode to block chain all of those things that are just mentioned and that's time it's not a criticism the block chain no bitcoins with its place in the world I think it's a good thing but these will contain anonymous money it's good for the unbanked it's good for the remittance industry but you can't take something of this designed for one purpose and throw it at health care so i think that the hype is bad because i continue to see conferences and companies asking for money and a lot of

distraction trying to launch bobtrain in their areas which it just doesn't belong Hey look I'm happy to be wrong and I'm a scientist man well I'm a scientist and I I'm used to being wrong I'm used to making hypotheses and testing them and being wrong so I could well be wrong and I know that it's in twentieth time banking around the world is using a new artery network instead of the Swiss network then people could rightly say you see blockchain did change the world and that's a high school with a generous interpretation of you know the legacy of blocks out I would be very happy for

that but I I I stand up and say the blockchain in its original form is not going to do electronic voting it's not going to change democracy it's not going to produce identity for the 1 billion people in the world that have no digital identity you can't do that it's not what it was designed for what's going to happen there is the cell phone accountant cryptographic keys that we put in that we put in the hands of refugees via smartphones that will change the world if we have a chief smartphone $20 smartphone that you know non-government organizations can put in the hands of refugees or disadvantaged pupils then

moved from one place to another and then they can use that as keys for internet banking that'll change the world but some what train on its own doesn't do any of that sauce so yeah I stand to be corrected but I don't think that it's going to change the world in in the way that that the futurists say I think it's going to be a long much more steady journey that we go down and you're going to see multiple technologies inspired by this thing we've solved an unsolvable problem and that was inspirational but we've seen lists some other cycles where people will sudden jump out of this silo will jump out of their comfort zone and so people treat it as like a like a

blank slate tabula rasa to impose my own world changing schemas on to block chain the trouble is that block chain is no tabula rasa it was a very very specialized algorithm that did one thing and it doesn't even do it very well if you care about electricity consumption it might be an efficient way to buy a cup of coffee it has all of these externalized costs that will drive economist may eventually like who's really paying for the power so it's not magical it did a magic thing if you've solved in cash without an umpire that's magical but it's not magic it's the picture of applied cryptography that produces digitally side records and it

crowdsources the oversight of electronic cash it's very very specific and no engineer should pick up a tool that was finely crafted for one particular job pick it up and use it for anything else you've got a you've got to look at that marvelous new tool set it down think about what it does and think about how you can copy it and it would ask read it please look there are things of laughlin dos we want to copy that another very specific area and then uniting Quebec's what innovation and digital transformation or without being clear about what problem you're trying to solve and what the properties are of a good solution [Music]