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Is the blockchain gold-rush over?

Bryan Edwards

Last year it was FinTech. 2018 was scheduled to be the year of RegTech but the crazy inflation in the value of crypto-currencies at the end of 2017 hijacked that and this year became the year where no sentence was complete without the word "blockchain" somewhere in it, or so it seemed. But the love affair is already turning sour as reality sets in and the buzzword junkies are at last being shown for what they are: opportunists who will be onto the next big thing as soon as someone tells them what it is.

Australia's got a lot of problems. It has a small population: it's less than 30 million. Even Singapore has five million but they have to be stacked on top of one another while Australia could sprinkle people like salt from a shaker and still have many square kilometres without a single resident.

One thing Australia is not short of is people making new laws and regulations and, depending on where you look, no shortage of people to enforce them, just don't look at the banking, insurance and finance sector. True, they have quite a decent number but it's nowhere near enough for an industry that has, this year, shown itself to be open to pretty much any dubious form of conduct it it would turn a quid.

Even though the country's budget is under continual pressure, the Digital Transformation Agency, a government department, was given AUD700,000 in May this year to do research into the blockchain. Mostly, it's been preoccupied with creating buzzword-heavy statements about "MyGovID." Here's an example: "We’ve been working across government to deliver a safe and secure digital identity program. This includes the Commonwealth’s digital identity provider, myGovID. To make sure we get it right, myGovID is being built and delivered in an agile way." Thankfully, it goes on "This means we’ll be testing and refining the system in controlled environments before it becomes more widely available." Right. That was really helpful. Not. Also not helpful is the fact that there's been a renaming: it used to be called the "Digital Transformation Office." Seriously? Who spent money on that? Oh, and they can't spell "levelling." For digital people, you'd think they'd set their spell-check up properly.

That's by the by, and scene setting. Why are we sounding off against the DTA? It's because perhaps the most useful and valuable thing they have said, and they said it in plain English, is buried in the minutes of a Senate Estimates committee hearing. Except, of course, that the minutes aren't easily available. A "daily summary" says "topics discussed included" and there's a one line bullet point for everything mentioned in the sittings which, on 23 October for example, lasted 13 hours for one of several committees. It wasn't the longest.

At https://www.aph.gov.au/~/media... we find in the summary for the Finance and Public Administration Legislation Committee the single line that says the DTA discussed "blockchain technology." It was a busy day and the entire session lasted from just before 9am until just after 11pm.

Digging around Hansard, the transcript was eventually unearthed (it's not properly indexed in the on-site search engine meaning that it has to be located without the aid of any form of beacon) we found it here: https://parlinfo.aph.gov.au/pa... and the DTA's section starts here: https://parlinfo.aph.gov.au/pa...

Read it. Because Hansard is copyright, we cannot republish large chunks. Here are the things that excited us when we found a media report that said the DTA was sceptical about the blockchain.

Mr Randall Brugeaud, the chief executive officer, DTA

- "Our third priority is the whole-of-government digital platforms. Platforms will make it faster and simpler to deliver digital services. They'll improve efficiently, reduce costs and, most importantly, improve end user experience. The DTA is leading the delivery of platforms such as Digital Identity, Notifications and Tell Us Once, and delivering improves to myGov. Digital Identity will be critical. It will provide a simple, secure capability for people to access government and potentially non-government services online. It will be opt in. The use of Digital Identity will be governed by the Trusted Digital Identity Framework. We have been and will continue to engage with security, identity and privacy experts to ensure digital entity is safe, secure and reliable in accessing government services."

Comment: that's pretty much an ideal candidate for blockchain/digital ledger tech, it would seem.

" We're working with Data61 who have done a series of white papers on blockchain and they're doing specific work with us on furthering blockchain. We've got agencies together who are doing work on blockchain from Home Affairs, who've been looking at it in terms of cargo and border protection, to agencies who are looking at it for validation and verification of datasets that they might have. So there's a range of activities going on. We have been looking at blockchain for several months, most of this calendar year. We're looking at prototypes to potentially prove the technology and consider it."

Translation: we're not really sure what it does or how it does it but we're in touch with others who say they do and some who are experimenting.

- I would say our finding of blockchain is that it is an interesting technology and a set of technologies from ledger to programmable currency. We've also done some work with the Commonwealth Bank who have been looking at blockchain programmable currency, particularly in disability payments. It would be our position today, and this is early in our write-up of this, that blockchain is an interesting technology that would be well worth being observed.

Translation: I refer to my earlier statement.

But, without standardisation and a lot of work to come—for every use of blockchain you would consider today, there's a better technology—alternate databases, secure connections, standardised API engagement. Blockchain is an interesting technology but it is early on in its development.

Comment. That's one of two vital phrases in the presentation. The second is highlighted below. No translation is necessary but, joined with the second, there is an extraordinarily important point to make.

- It's at the top of a hype cycle, and the uses of it—outside trust—and I should be really clear: one of the advantages of blockchain is it is great for low-trust engagement. But, generally speaking, when government is engaging with someone, we want to have a trusted relationship with them. We want to know who they are, we want to know what they're entitled to and we want to give them a service that is personalised and meets their need. Blockchain is good for low-trust engagement, where you don't know who you're dealing with, you have low trust with that person or business but you have a series of ledgers that can give you some validation and some support. "

Translation: it's great for situations where you don't know who you are dealing with. In fact, in the case of government, we don't need it because we know who we are dealing with.

Comment: this pre-supposes that the on-line MyGovID digital identity process is infallible. If any reader thinks any government-run on-line process is ever going to be infallible, please let us know so we can laugh at you.

- " we're not saying blockchain doesn't have potential; it's just today, without standardisation, there is a challenge of blockchain becoming a little fragmented. When we get into a standardised world of blockchain, which is coming—Standards Australia are looking at blockchain, as in a standard set for blockchain domestically and internationally. When we get to a better standardisation, the opportunities for blockchain will grow."

Translation: it's the Wild West and as it stands, we're all pissing in the wind.

I think it would be fair to say a lot of big vendors and technology vendors are pushing blockchain very hard. They see sales opportunities in it. Internationally, most of the hype around blockchain is coming from vendors and companies, not from governments or users and deliverers of services who are saying, 'Blockchain's the solution to our problem'.

Translation: the big software and hardware companies and their pals in consultancy are charging us to sell to us a thing for which we do not have a demonstrated need.

And here's the vitally important point: governments and companies should not be investing time and resources developing something that is so early and so uncertain in its development cycle. They should be waiting until it's a mature concept. They should not engaged in activities best left to entrepreneurs and start-ups funded by venture capital and should not be putting what amounts to taxpayer-funded risk capital into such activities. And they should not be paying for commercial enterprises to develop and test their products in government projects.

It's important to realise that, in the presentation to the Committee, the ATO said that it regards research by Gartner as expert. Well, here's the thing: one week after the ATO said the above to the Committee, one of Gartner's most senior researchers, David Furlonger, was speaking at an event in the Gold Coast. "This is still very early days here; this is part and parcel of the noise that you often experience when we're at these paradigm changes," he is reported as saying. "I think that it's still not appropriate for the vast amount of enterprises to consider blockchain technology in its current level of maturity." Read https://www.zdnet.com/google-a... for more of his speech.

Our boss, Nigel Morris-Cotterill, has long said that much new tech is just something shiny that innocents think is great, like those who took coloured beads from explorers on sailing ships, only to find that they lost their kingdoms. Furlonger adopted a similar analogy this week: "He also likened a vendor spruiking a blockchain solution to purchasing a new phone -- it's just a shiner version of something already owned," said ZD Net.

Is the blockchain gold-rush over? No, but it's clear that it should be put on hold while someone finds a safe means of production - and a need for a solution to a problem where blockchain is a better answer than the familiar. And that should be the job of entrepreneurs and their investors, not the taxpayer.

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