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DTA, ASX clarify blockchain expectations, lack unified definition

Posted: 25 October 2018 1:29 pm
News

"We're not entering the fourth dimension here."

OPINION

The Australian Stock Exchange (ASX) and Digital Transformation Agency (DTA) has vigorously performed a vicious dunk on blockchain followed by a victory dance over its listless corpse by pointing out that it's interesting and pretty great technology, but still remains firmly bound to conventional laws of physics.

Preliminary studies indicate that the odds of blockchain ushering in the next coming of any deities are still near zero.



Not buying the hype

'We're not entering the fourth dimension," said ASX deputy chief officer Peter Hiom, to the relief of everyone in attendance who was not appropriately attired for time travel. "It's a database architecture that lets you do a bunch of things much more efficiently than you can at the moment."

He's describing the ASX's blockchain upgrades for its aging CHESS system.

"There is a blockchain that is synchronising my data store with yours, but the data store itself is a database that exists today," Hiom explains. "It's actually taken an awful lot of risk and cost out of your back office because it is never the case that what you've got doesn’t match what I've got."

"It's a very clever architecture, but it is just a database architecture," Hiom said of the ASX's blockchain upgrades to the aging CHESS system. "It doesn't sound very sexy when you say it that way, but that’s kind of what it is."

Whether it could be described as a blockchain system might be a question of semantics. The unconventional position of private blockchains such as the one ASX is working on might see them better described as blockchain-inspired systems.

The Bloomberg headline accompanying the glowing review was "A stock exchange building out blockchain isn't buying the hype."

Man, tough crowd.

Dunking on an overhyped blockchain gone cold

"Blockchain is an interesting technology that would be well worth being observed, but without standardisation and a lot of work to come, for every use of blockchain you would consider today there is a better technology – alternate databases, secure connections, standardised API engagement," Digital Transformation Agency's chief digital officer Peter Alexander said at a recent hearing.

He's describing the results of an ongoing $700,000 exploration of potential applications for blockchain technology in current government systems.

It's worth emphasising that the alternate non-blockchain solutions he's describing are being described as blockchain by folks elsewhere.

"It's at the top of a hype cycle. A lot of the engagement [with government agencies] is comparing blockchain against existing technologies... Our position today, and this is an early write-up, is that blockchain is an interesting technology that would be well worth being observed, but without standardisation and a lot more work, for every use of blockchain that you would consider today there is a better technology," he said.

"We're not saying that blockchain doesn't have potential but today, without standardisation, there is the challenge of blockchain becoming a little fragmented. When we get to the standardised blockchain then the opportunities for it will grow."

This lack of standardisation is commonly referred to as the "digital island" problem, and it's been widely recognised in blockchain by authorities like the World Trade Organisation.

It's also worth noting that the "hype cycle" comment, which is being interpreted in many places as the DTA dunking/slamming/urinating on blockchain, is most likely a reference to models like the Gartner Hype Cycle that chart a potential path for emerging technologies. You can accurately declare just about anything to be overhyped at some point.

The Gartner Hype Cycle as of August 2018

Government business

The DTA was tasked with narrowly exploring the application of blockchain systems for individual government agencies today, and found it currently wanting.

"Generally speaking when the government is engaging with someone, we want to have a trusted relationship with them. We want to know who they are and give them a personalised service," he said. "Blockchain is good for low trust engagement – you don’t know who you're dealing with but have a series of ledgers that can give some validation and support."

juicy crypto words

Alexander also noted that most of the pushing towards blockchain was coming from vendors and companies, rather than governments and actual users.

"It would be fair to say that a lot of the big vendors are pushing blockchain very hard and internationally most of the hype around blockchain is coming from vendors and companies, not from governments and users and deliverers of services," he said.

Which solutions qualify as "blockchain" when being pushed might be mostly a question of marketing and the working definitions being used by Alexander and the team at the DTA. But that nuance might be a little much to unpack at a press conference.

For example, it's reasonable to assume that a system which lets the data of different government agencies "talk" to each other would almost certainly be extremely useful, and could be described as "blockchain" or "blockchain-inspired."

But given the digital island problem and general state of unreadiness around public blockchains so far, it's a relief to know people won't have to join a virtual queue on the Ethereum blockchain to get a Medicare card or wait for x number of confirmations from bitcoin miners before receiving a Centrelink payment.

The DTA's sane, pragmatic and cautiously optimistic take on blockchain was reported in various places as "DTA dunks on blockchain hype saying for every use there is a better alternative," and "DTA goes cold on blockchain." Note that this exploration was only $700,000. By contrast, AI and machine learning got a $30-million budget. The headline would have one believe the government was ecstatically throwing itself into blockchain before getting cold feet and backing off.

It's worth reiterating that there isn't a unified definition of blockchain, and it looks like the solution the ASX is describing as blockchain or distributed ledger technology wouldn't be considered a blockchain according to the DTA. Without a working definition, all these "XYZ incinerates blockchain and urinates on ashes" headlines are quite inane.

The main point to be established is probably whether a publication is using a definition of blockchain that encompasses so-called "private blockchains" or if they're going for a more pure definition that only encompasses fully public blockchains.

Most dictionaries seem to favour the more pure definition of fully public blockchains only, and sticking with that would probably help avoid some of the confusion associated with buzzword marketing these days.

"Blockchain-inspired" has an increasingly nice ring to it.


Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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