Blockchain Prediction

Dr. Neil Wasserman: Universities should play an essential role because they can be independent of pecuniary motivations, and they have the wherewithal to address problems of both intellectual and social interest. In addition, universities play a role in creating basic understanding of the issues that aren’t necessarily addressed in the short term by companies themselves.

Finally, universities have the advantage of offering many different perspectives, potentially involving many disciplines. And, blockchain is a technology that can benefit from an interdisciplinary point of view.

NW: The potential applicability of blockchain to facilitate business is very broad, which is why it gets so much attention. And, in a lot of ways, it already is in major usage—if you define major usage as companies globally paying attention to the technology. But, if you’re talking about moving from experimentation to implementation, there are some steps that need to be taken.

One of the things I emphasize to students, however, is blockchain doesn’t have to be visibly adopted by a large population. It can operate in the background, like machine learning, for example. Machine learning isn’t a consumer technology, although consumers are affected by it. Every time I interact with Amazon, I’m using machine learning without being aware I am.

Blockchain will stay in the background in a lot of ways, so it will become useful but invisible.

NW: There are two factors.

First, it must be demonstrated that blockchain offers a unique advantage over the existing way of doing something. And, clearly, blockchain is a better way to do some things—like the blockchain application for shipping management that IBM collaborated on with Maersk, the Danish shipping company, and several small healthcare applications that address the issue of accessing data from multiple sources.

Whey then, isn’t blockchain used everywhere? That’s the second factor—because there are a lot of obstacle to implementing a new technology; that is, substituting blockchain for a technology that already exists. It’s hugely expensive to change your business operation, from a management attention standpoint and operationally.

The question is, does blockchain offer sufficient advantage to break through those obstacles?
Blockchain’s path to adoption is probably somewhat unpredictable—like the Internet in the early ’90s. Who could have predicted that we would have gone from applications like email to, say, Amazon Web Services or Apple platforms or Facebook? Fundamental technologies—including blockchain—grow slowly. It may take a decade—or two decades—for blockchain to evolve in a way that has wide application.

NW: The original blockchain was developed to support the bitcoin environment. And, blockchain in the bitcoin implementation is probably the most inefficient storage mechanism for data that could be conceived because it’s replicating data everywhere. But, early on, people recognized the limitations—namely, transaction rates, power consumption, data storage and some other technical issues.

There’s been a lot of innovation in alternatives to the bitcoin environment to address transaction rates—along with identity, storage and more flexibility for achieving consensus, but more technical work is needed.
I believe, however, the most important aspect of blockchain to address is governance.

NW: In a few words—standards and testing regimes. There are almost no standards or standard operating procedures pertaining to what a smart contract is or what the enforcement or adjudication mechanisms are.

And what about testing? The standard testing mechanisms in dev ops for other kinds of software don’t exist for blockchain. If you’re using a smart contract in a critical environment, like managing inspections in a hospital or a nuclear power plant, for example, what if it’s not done correctly? How much are you putting at risk because the smart contract’s execution is uncertain in terms of the conditions that it’s actually satisfying?
Testing regimes that have applied to other kinds of software development haven’t really developed and become standardized in terms of the blockchain development environment. That’s critical because blockchain is all about confidence—building trust. If you have uncertainty in terms of what a smart contract can execute, then you’ve impinged on the trust aspect of the blockchain implementation.

It’s still the Wild West for development, and in a critical application that can matter. Hopefully, we’ll develop a more standardized way to doing things with blockchain, so it becomes more predictable.

NW: That, I think, is still uncertain. Likely, a combination of entities. What we do know is there are initiatives underway in terms of IEEE and ISO standards by the traditional standards bodies for IT.

We also know there is quite a bit of attention given to blockchain by governments from a regulatory perspective. A concern of government is blockchain has the potential to make a lot of transactions and cash flows invisible. If cash flows are invisible, then governance from a governmental standpoint becomes difficult.

Then, there are uncertainties in term of what’s legitimate in the blockchain world. What are the rules for investment? How do you legitimatize a transaction? Just because two parties agree that a transaction occurs doesn’t mean that it satisfies security or legal requirements.

Governance issues clearly are another factor that will contribute to blockchain growing slowly into the mainstream over a decade or two.

NW: I’m very interested in the international aspects of blockchain, because it’s fundamentally an international enterprise. There’s lots of interest in Eastern Europe, the Middle East, Israel and China—which, having visited recently, I believe will be one of the innovative centers in the industry.

What struck me about the situation in China is there is a tight integration between government promotion of technology, and there’s a lot of government investment in AI and the blockchain. And, although the Chinese government has basically banned cryptocurrencies, they see blockchain as an opportunity, not a threat.

There are other countries that are explicitly paying attention to blockchain development, like Sweden, Estonia, Romania, the UK and Denmark. Russia, too. There are obvious restrictions in Russia in terms of political freedoms, but that doesn’t seem to stand in the way of governmental support for blockchain innovation.

All that leads me to believe that many U.S. companies will depend on development resources in other countries to support blockchain development.

NW: The assumption that we in the U.S. are in the technological lead regarding blockchain might not prove to be so secure as the years past.

The current economy in the U.S. comes out of the investment made in science in the post-World War II era, when there was a tight relationship between government foresight and investment in basic research and science an industrial development. Silicon Valley basically comes out of that.

I see the U.S. declining in its emphasis on that kind of investment and China, for example, accelerating. In China today, the physical and communications infrastructures are so much more advanced than in the U.S.

NW: Well, yes, existing infrastructure can be an obstacle to development. Think about the physical world. If the Chinese government wants to build a high-speed rail connection between City A and City B, it just draws a straight line and knocks down everything in between. You can’t do that in the U.S. There are parallels in the technology world.

NW: I enjoy teaching blockchain because my students are very creative. What I try to teach my students isn’t how the blockchain works but how it doesn’t work. That is, to identify the problems and challenges because those are the areas they can apply themselves to most usefully.

Some of my students focus on solving real-world problems with blockchain. One used blockchain to track space debris. It’s not an application I would have thought of, but avoiding collisions in space is a real-world problem and the student came up with an elegant blockchain solution. Others address global issues, like trading systems and capitalization of assets in emerging market countries, which are both real opportunities for blockchain innovation.

What excites me is solving problems that couldn’t be solved easily before, like medical interoperability, transportation integration and educational incentives and certifications.

There are so many interesting applications that are emerging from different places in the world.

NW: As the immortal Yogi Berra said, “It's tough to make predictions, especially about the future.” Nevertheless, I think there’ll be widespread use of blockchain in certain areas—perhaps in voting systems, transportation integration and healthcare.

And, I hope that blockchain—along with other technological innovations—will be active in addressing climate change issues. With climate change, we have tens of millions of people and whole agricultural systems at risk. We’re just getting a small taste of this with temperatures that are 20-degrees higher than normal in the Arctic, droughts in Germany and other places in Europe. Climate change is a planetary consequence.

There’s quite a bit of attention from the World Bank and other areas on using blockchain in the climate control world. Hopefully, countries will coalesce around global solutions and employ blockchain to contribute to controlling what we call the externalities of economics: What is the real cost of emitting carbon into the atmosphere and how do we incentivize not emitting carbon? How do we tax carbon? How do we integrate transportation systems and control the use of buildings so they have less impact on global climate?

In 10 years, I hope that’s where the blockchain will be because it’s the area in which blockchain can make the biggest contribution from a human perspective.