The Debate Is Over— Now To Rebuild The World

The Debate Is Over— Now To Rebuild The World

AKA … “using cryptography properly”

Your old road is
Rapidly agin’.
Please get out of the new one
If you can’t lend your hand
For the times they are a-changin’.
- Bob Dylan

Over the past few years, we have had a debate over blockchain, but in the background it has been building itself into a machine which can create a more trusted world. The Internet we have created a piecemeal world or bits and pieces of security, and which never quite tie-up. It has the creditably of using an IP address as an identifier of a human. The new world will use cryptography to provide a solid foundation, where everything can be trusted. The debate is nearly over, and we now just have to get on with actually building it.

Call it what you want …

And so call it what you want … Blockchain … Distributed Ledgers … DAG (Directed Acylic Graphs) … it is really just a way to rebuild our digital world in a more trusted way. Personally I would call it “using cryptography properly” … but that doesn’t have the same ring to it. For me, cryptography is fixing many of the security problems that we have created, but it has a much greater role:

creating a safer and more robust world

This will be a world that puts the citizen, and the identity and rights, at the heart, and not one that is build on protocols and systems.

Bruce Schneier highlights our current problem and that are entering a new phase:

Trust and cooperation are the first problems we had to solve before we could 
become a social species. In the 21st century, they have become the most important problems we need to solve — again. Our global society has become so large and complex that our traditional trust mechanisms no longer work.

Banks building on blockchain

So when the CEO of JP Morgan (Jamie Dimon) defines that they are building their own blockchain, you know there’s a change coming soon. The major problem with many banks is that the cryptocurrency debate is one that needs to be kept separate from the blockchain debate, as they are separate things. While Blockchain 1.0 was all about cryptocurrency — Bitcoin — Blockchain 2.0 was all about smart contract and privacy, and much more in line with the way that financial organisations work.

We thus have the opportunity to codify companies and public services, and in a way that works in a trusted, robust and secure way. Our industry, though, still blindly follows centralised data stores, centralised applications, and centralised services, as that is the way it was always been done.

It is now times to roll up sleeves and just go on with it. The potential for banks is that transaction time could be cut from days (or weeks) to just a few seconds, and for there to be clear audit trails for payments.

The CIO of JP Morgan (Lori Beer) now defines blockchain as one of the three priority areas for their company (alongside AI and APIs). For JP Morgan we see new financial institutions evolving, and they are ones which are now focused on a complete digital integration. At the core must be improved control over customer data (KYC — Know-Your-Customer) and have a strong identity and privacy infrastructure, where it is possible to analyse data, but preserve privacy. This is not an easy thing with the existing data infrastructure and requires a strong integration of cryptography at all levels. Along with this, the improved audit trails of blockchain supports a better validation of transfers between banks (and thus comply better with Anti-Money-Laundering rules).

JP Morgan has thus been developing a blockchain solution using Ethereum, but have identified that it did not give the scalability and privacy that they require. For them, a solution is required which will give them the ability to make millions of transactions every day. With Ethereum new methods are being put in-place to support both the privacy issue (zk-SNARKS) and the scalability (Sharding), but these are unlikely to provide the full solution. For JP Morgan the opportunity is thus to build a blockchain-focused finance infrastructure, and then build new and innovative products on top of it.

For them, the goal is:

“In a few years, blockchain will replace the existing technology.”

JP Morgan, though, distance their blockchain development from trading with cryptocurrencies. One is low risk (blockchain), the other requires new business models (cryptocurrencies). For cryptocurrencies, as with governments, it is a wait-and-watch approach. If they take off, then the banks will be in there and make active use of them. For just now, they are too risky. If governments could stabilise them against currencies, banks would see them as the perfect way to trade.

Conclusions

The debate is over. We need to rebuild our banks, our health care systems, and our public sector. Otherwise, we will have the same old Internet, and which is full of the same old security problems. Countries and industries who do not adopt will quickly fossilise, while those who do will develop new solutions which will win in the market. JP Morgan is just one example of a company reading itself for a new world. Those who don’t will see an old world.

Getting involved

If you want to see some of the methods involved, come along to our Meetup in Edinburgh on 17 October 2018 [here] and a conference on 28 September 2018 [here]:

We also have the Blockpass Identity Lab being launched on 26 September 2018, so perhaps think about supporting a collaborative research project within it?

And if you like twiddling bits, there’s a Hackathon on 29/30 September:

So go help build the future … this one is citizen-focused.