Australian government to spend $700k on blockchain research. Why?
The blockchain investment in the 2018 Federal Budget might be wasted money, and a wasted opportunity.
The 2018 Australian Federal Budget, handed down on Tuesday evening, has left fintechs disappointed in some ways and satisfied in others. Among it all, it was announced that the government would be investing $700,000 to better investigate the potential of blockchain technology in its own services.
The relatively small investment was quickly compared to other areas, such as AI and machine learning, which are seeing more considerable allocations.
"I was hopeful that next year the Federal Government will identify blockchain technology as a key enabler to deliver easier, faster and more secure and transparent government services to customers and a similar budget would be approved like this year’s $29.9 million which has been set aside for AI and Machine Learning," said Katrina Donaghy, co-founder and CEO of Civic Ledger, a company that works with governments to identify areas where blockchain technology can outperform legacy systems.
However, the problem might not be quite as simple as "not enough".
The problem with lumping "blockchain" into its own category
One of the issues might be that blockchain is being lumped into a separate category, even though the nature of the technology crosses multiple other areas, in many industries. Blockchain technology is a toolkit, much like AI or machine learning, but it can also serve as the fabric underlying these systems. Distributed ledger technology might be essential to getting the most out of other technologies.
This is emphasised by the nature of distributed systems, whose full benefits are dependent on scaling and mass adoption, explains Jonothon Miller, co-founder and managing director of Bit Trade, one of Australia's oldest providers of bitcoin and blockchain services. A relatively meagre initial spend might suggest that the federal government either doesn't have the appetite or the understanding to really put distributed ledger technology to work.
"Blockchain is a technology that could bring very interesting efficiencies to the public sector and Bit Trade welcomes this initiative, but the quantum of spend is very low for a technology that needs scale and mass adoption to achieve these efficiencies," he said.
Others pointed at large investments in areas which could directly benefit much more from blockchain technology.
James Lynch of CastleCoin pointed at house prices, and the ongoing balancing act of throwing money at infrastructure projects on one side, and investments in skilled labour to carry it out on the other.
"The skills shortage in the construction space is one of the key contributors towards the current cost of infrastructure in Australia," he explained. "This is simply a matter of supply and demand for skilled labour and will be combated by the investment into human capital development by way of trade, apprenticeship and education incentives."
"Already roadmaps are in place for extensive infrastructure expenditure which is fantastic for economic development, however the adverse effect on this with respect to housing is an increase in building and construction costs as the shortage of skilled labour becomes further amplified by the increased demand for these skills."
Blockchain technology, he pointed out, could deliver enormous efficiency benefits across both sides of the scale to help the other investments go much further.
"There are a number of use cases for the application of blockchain technology to supply chain management which would greatly serve to assist in the management of infrastructure projects which can greatly assist with managing costs. There are also use cases for and application of the management, tracking and allocation of resources through blockchain technology, in particular human capital. Accessible records of skills and qualifications often improve resource allocation."
Similar benefits could be brought to construction financing, as other Australian startups have realised.
"It is good to see the Government recognises the importance of evaluating the adoption of blockchain technology for its own services, however it falls well short in terms of investment size and importantly doesn't adequately support the broader need for Australian businesses to adopt blockchain technology," said Brigette Panetta of Mayfair 101. "Given the rapid uptake of blockchain in overseas markets we are concerned Australia will be left behind yet again because of a lack of focus, understanding and investment by the Government."
Problems are connected, and so are the solutions
The miniscule allocation towards blockchain technology might show a complete lack of understanding on the part of a government which doesn't seem to understand what it is, how it works or why it matters.
Tax cuts also made their way into the budget, to the tune of about $10 a week for those earning up to $125,000 a year, which will cost the government $140 billion over ten years. At the same time, there was no effort to address the problem of Australia's quickly growing homeless population.
It's not an unsolvable problem either. Even disregarding the largely-irrelevant and largely-unwanted tax cuts, there was plenty more that could be done.
For example, the connection between housing (un)affordability and homelessness is well documented. Yet the government wastes money by pushing down hard on both ends of the infrastructure-labour scale and failing to have any real impact on housing affordability. At the same time, it disregards the technology that could bring enormous efficiencies to the system, and actually help those skilled labour and infrastructure investments go far enough to start solving the housing affordability crisis.
Most problems, such as housing affordability and homelessness, are connected. The best solutions are too, and there's never been a better time to invest in connecting technology that can tackle problems from multiple angles.
From one angle, Australia looks at risk of being left behind. From another, it's actively being led in the wrong direction.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, XRB
- Brace for impact: Cryptocurrency industry faces heavy regulatory blow
- Blockstream unveils Liquid Securities: Security tokens for Bitcoin sidechains
- Bitcoin astounds by rising $1,000 overnight
- Deloitte: The blockchain debate is over, and blockchain won
- Bitcoin bears and altcoin bulls took a thrashing this week