In Singapore, a pair of global banks built a blockchain trade finance prototype for letter of credit origination in 2016. The actual build of the prototype was estimated to take 15 weeks, and successfully finished on time. But agreeing the intellectual property rights, as well as other aspects of the contract, took more than twice as long as the actual build. And despite the success of the prototype, obtaining architectural approval to move forward with a production solution took over a year and a half.
This account serves as an excellent illustration of the main challenges facing the adoption of blockchain, and distributed ledger technologies (DLT) in general, as a new standard for transaction accounting. More and more, people and enterprises around the world are coming to understand DLT’s transformative potential. Enterprises, governments, and system integrators alike are discovering through experimentation: not only are DLT solutions relatively straightforward to develop, it is becoming increasingly common that they cost less to build than their technological predecessors. And the market for technologists with genuine DLT delivery experience is growing rapidly. But despite it becoming increasingly straightforward to conceive of, and then build, DLT solutions, the actual adoption of those solutions is progressing far slower than anticipated.
Probably the single greatest obstacle causing this slowdown is a lack of standards against which potential DLT solutions can be compared. The importance of this gap becomes readily apparent when one considers how enterprise applications are typically released into production. One of the main jobs of any enterprise architect is to validate that a proposed solution is safe to use; this check is made against a large and growing set of dimensions: security, data privacy, regulatory compliance, availability, business continuity, and so on. In providing this validation, the architect must rely upon more then their opinion, no matter how expert they might be. She must demonstrate and record evidence that the solution meets a set of relevant industry or governmental standards in each of these domains.
To provide an illustrative example, let us consider one of these domains: data privacy. One of the things an architect must prove before agreeing to release a solution into production is that the solution provides adequate protection for the data of both the enterprise and its customers. And one of the most common prevalent global standards for data privacy is that an application must never make customer data available outside the enterprise’s firewall. Since a blockchain application will, by definition, have that data physically resident in every node of that blockchain’s network – and many of those nodes are likely to be owned by the enterprise’s direct competitors – how are architects able to certify this application is safe for production? The simple answer is: they can’t. Through cryptography and sound design, the blockchain application might actually do abetter job of protecting customer data than its traditional predecessor, but without an independent and evidence-driven basis for approving it to release, it won’t matter. This is what blocked the advancement of the trade finance prototype, and this is what is blocking the advancements of numerous, otherwise excellent, DLT solutions around the world.
Seeking a way out of the impasse
In tracking the growth and adoption of many innovations over history, one is often tempted to think of governments and regulators as impediments to progress. But here in the UK, the initiative to break this impasse may be coming from lawmakers themselves. Two members of parliament, Rt Hons Grant Shapps MP and Damien Moor MP have established an All Party Parliamentary Group on Blockchain to better inform parliamentarians about blockchain/distributed ledger technologies and their impact on industry and civil society. The APPG on Blockchain will particularly focus on engagement with the government to ensure the right regulations and policies are put in place. The group had its first formal meeting in January of this year, and its mission statement reads as follows:
The mission of the APPG Blockchain is to ensure that industry and society benefit from the full potential of blockchain and other DLTs, making the UK a leader in Blockchain/DLT innovation and implementation. We bring evidence, use cases, and future policy scenarios while considering industry and societal implications as well as environmental opportunities.
The APPG Blockchain agenda and work plan
The APPG Blockchain’s Advisory Board and Expert Advisors Group include experts from industry, academia, public policy, and of course the lawmakers themselves. Its work is facilitated by an innovation and policy hub called Big Innovation Centre, who is also the Secretariat for the All Party Parliamentary Group on AI, and whose team has a long track record of facilitating public policy work on transformative innovations.
The initial roadmap for the APPG Blockchain covers 2018 and 2019. The first goal is to build within the Advisory Board a shared understanding of blockchain’s capabilities, limitations, and transformative potential. This goal will be accomplished primarily through a series of evidence sessions held at Parliament itself, in which the experts provide lawmakers a briefing in their respective areas of expertise. The first three of these evidence sessions have already been conducted; more are planned through the balance of 2018.
Having achieved this shared understanding, the APPG will then construct a roadmap for building pragmatic solutions to achieve the group’s mission. These solutions are likely to encompass such diverse topics as policy, regulation, industry practice, and infrastructure development. Should the APPG Blockchain achieve its mission, it may end up providing exactly the kind of clarity and guidance that DLT needs to achieve its full potential, both in the UK and globally.
More information on the APPG Blockchain and its work can be found at http://www.appg-blockchain.org/