Three revolutions, simple but overwhelmingly strong, have governed our lives (to paraphrase Bertrand Russell):
- the Agricultural Revolution: where the cultivation of land and food powered the formation of cities and economies for the first time
- the Industrial Revolution: where machines transformed our productive capacity and drove community-wide improvements in the standard of living
- the Digital Revolution: where computers and the internet saw the creation of a whole new economy beyond the physical realm.
In this article, I make the case that we are at the dawn of a fourth revolution:
the Autonomous Revolution:where blockchain will enable autonomous technology to transform our concept of value and wealth
For a refresher on blockchain, please revisit my previous articles in this series:
- part 1 (here) a primer on the fundamentals of blockchain technology
- part 2 (here) an overview of the blockchain technology enablers.
The Australian blockchain landscape
Until recently, blockchain has been very much a fringe technology in the Australian financial services landscape. The common perception of it has been heavily influenced by the more colourful episodes in Bitcoin’s history.
In 2016, blockchain is going mainstream. If you want proof of this, you only needed to click on the Sydney Morning Herald (SMH) website last Saturday. Right there on the front page was this:
How has blockchain reached this tipping point? The answer lies in two cross-border blockchain-focused collectives that Australian financial services companies have increasingly tapped into:
- COALA: the Coalition of Automated Legal Applications, a regulatory-focused think-tank undertaking collaborative research into blockchain, smart contracts and decentralised applications.
- R3 CEV: a global blockchain project whose participants include some of the world’s largest banks, including Australian giants CBA, NAB and my own Macquarie.
The burgeoning visibility of blockchain in the Australian public consciousness is owed largely to the work and experimentation being driven out of these collectives and their participating organisations.
Two recent examples have received broad media coverage:
- 11 banks completed an experiment using R3’s private blockchain to simulate trading with each other. R3’s blockchain has been built using Ethereum (read more on Ethereum in part 2 of my series) and hosted on a virtual private network in Microsoft Azure’s Blockchain as a Service module.
- ASX is building a blockchain for Australian equities and has taken a 5% equity stake in Digital Asset Holdings (a blockchain start-up headed by former JP Morgan executive and inventor of the credit default swap, Blythe Masters). Blockchain is seen as a credible and potentially superior alternative to the ASX’s existing clearing and settlement system (CHESS).
To reinforce the increasing ubiquity of blockchain, regulators are paying close attention too. In relation to blockchain, Greg Medcraft (Chairman of ASIC and the IOSCO Blockchain Taskforce) has been quoted as saying: “institutions should harvest the opportunity and mitigate the risk.”
What will be the water cooler moment for blockchain?
In December last year, I was lucky enough to attend COALA’s inaugural Australian blockchain workshop in Sydney. More than anything, I was struck by how many smart and intelligent people truly believed in the transformative potential of blockchain. Quotes such as “Blockchain is the biggest innovation since the internet” (Lawrence Lessig, Professor of Law at Harvard Law School) were thrown around casually as though this was a truth as self-evident as gravity or relativity.
Despite this, conversations about blockchain are still confined to a niche space of the financial services industry. You definitely won’t hear blockchain being discussed around the water coolers and coffee tables of the general population…yet.
Imagine, it’s 2017 and you’re browsing the latest articles on SMH again:
An evolutionary security lists on the ASX
Robocorp (RCP) listed today, representing the first evolutionary security to trade on the ASX’s newly built blockchain exchange. RCP is a decentralised autonomous organisation with fully transparent corporate milestones and an automated dividend payment policy. RCP’s digital prospectus states that:
- shareholders receive $1 per share once RCP’s gross profit reaches $100m
- a 3 for 1 share split will occur once RCP reaches a $500m market cap
- all fully paid ordinary shares in RCP will be converted to hybrid notes if the corporate debt/equity ratio exceeds 75% for more than 2 quarters.
You scroll a little further on your iPad and see a flashy advertisement:
Smart Will: the autonomous digital will
Tired of scrawling all your dying wishes onto reams of paper? Tired of lawyers with million dollar smiles and 3 piece suits? Tired of your grandchildren squabbling amongst themselves? Then you need Smart Will.
Using secure, transparent and irrevocable blockchain technology, Smart Will allows you to create an autonomous digital will to distribute your assets in accordance with your wishes without the hassle and mess of big, complex legal documents. With Smart Will, you can choose to automatically distribute your assets when you reach a certain age; when your estate gets to a certain value; or upon your death.
Your Smart Will executes automatically as the conditions are fulfilled and verified by the blockchain network. Picture this, once your Smart Will has confirmed your untimely demise with the Registry of Births, Deaths and Marriages it will arrange for your prized van Gogh portrait to be released from our secure vaults and transported to the NSW Art Gallery, in accordance with your wishes. Smart Will: easing your troubles, today.
What is the key to unlocking the autonomous revolution?
As these futuristic examples illustrate, the blockchain will accelerate the autonomous revolution across a number of robotic channels. From artificial intelligence and self-driving cars to smart contracts and autonomous corporations, blockchain will provide the infrastructure to enable computers and internet-enabled devices to continuously interact with each other without the need for trust as we currently understand it.
However, the real key to unlocking blockchain’s potential and transforming our concept of wealth and value lies in a little known project called the Interledger Protocol: “The idea is to create a single worldwide network that can not only unite all digital currencies, but all companies and individuals who use those currencies.”
Whilst the project is specifically focusing on payments, its power lies in the philosophy behind it – creating a global protocol layer that allows any blockchain network to communicate in the same language:
“The Internet can move almost any financial instrument as easily as it moves texts and emails. We just need consensus on how this should happen.”
In 2016, I predict blockchain will move from being a conversation about “what’s possible” to a conversation about “what’s next”. Financial services organisations (from the big banks to a dizzying array of fintech start-ups) will increasingly experiment with blockchain. For now though, blockchain’s water cooler moment will have to wait until greater consensus is reached. Bring on 2017 and the dawn of the autonomous revolution.
Please comment below to share your thoughts on blockchain’s potential to transform the Australian wealth management landscape in the coming years. What do you think will be the first blockchain water cooler moment and when will it happen? Is blockchain the key to unlocking the autonomous revolution?
Revisit part 1 and 2 of this series: