Joshua Jahani, NYU Professor, Investment Banker, and Author recently sat down with Lucas Henning, Blockchain Architect at Deloitte Consulting, to discuss the implications of blockchain technology in the global economy over the foreseeable future. Below is a transcript of that interview.
Joshua: How do you think Blockchain will affect life in the next 30 years?
Lucas: Blockchain technology will affect our day-to-day life by removing intermediaries, increasingtraceability and returning the ownership of data to the actual owners. It will let users regain control over their personal data and prevent third parties from abusing or monetizing their information. In 30 years, it will be normal to have instant access to tamper-proof sources for every fruit in your fridge and every part of your car. We can already see the impact in the financial world where blockchain allows for real-time cross-border payments and token sales. ICOs are one of the most common blockchain use-cases and only one example of how crypto investing successfully replaces conventional financial models. We will see these financial use cases becoming more mature in the future. And the financial service industry is just the beginning.
Joshua: What other industries will blockchain affect?
Lucas: Blockchain will revolutionize business, radically redefine enterprises and change the way we work across all industries. We can already see its enormous disruption potential in many of the world’s most critical industries such as healthcare and insurance. There is also a massive potential of cost reduction for the logistics industry which today loses money by inefficient information exchange and slow processing of replenishment and material data. Some of the challenges are not solvable without blockchain due to mistrust and traceability requirements. Blockchain technology is the missing part that connects competing participants with each other and allows for a fast, affordable and trustless validation of supply chain assets.
Joshua: What kinds of regulation do you see as most relevant to the blockchain world?
Lucas: Unlike conventional systems, blockchain is not regulated by a single authority. Rather, it is governed by code, its underlying rules and a community of developers and operators. With the advent of blockchain technology, a new democratic and decentralized form of regulation will evolve. That said, regulators have been trying to find alternative ways to curb the growth of blockchain environments by imposing rules on key entities of the ecosystem (for instance the SEC ceasing the Munchee ICO in December 2017 or the South Korean government considering shutting down cryptocurrency exchanges in January 2018). While this might work in the short term, regulators need to come to an understanding of how to define and approach this evolving technology. A positive example is the recent launch of the European Blockchain Partnership including 22 nations, focusing on education and a better understanding of blockchain.
Joshua: Will those regulations stifle innovation?
Lucas: It is more the lack of regulation that causes uncertainty and fear in the market and amongst evolving blockchain companies. Regulations will foster innovation and eventually lead to reliable blockchain systems that blockchain businesses need. Unclear compliance and the question of liability can deter companies from using blockchain. Industry leaders often hesitate since multi-billion-dollar hacks raise questions about security and regulatory protection.
Joshua: Speaking of hacks, what security challenges does the technology face?
Lucas: The biggest security challenge for blockchain is human error. Contrary to popular belief, hacks are rarely related to the blockchain platform itself, but almost always occur on a higher layer. Meaning the blockchain protocol itself (e.g. Ethereum) has never been hacked. Hacks that we have seen were always related to vulnerabilities on higher layers, i.e. wallets, exchanges, smart contracts or websites.
Code is law and a mistake can be much worse than in conventional systems. The lack of industry standards, code frameworks and audited libraries make it hard to write reliable code. The continuous improvement of software standards and patterns (e.g. the ERC20 token standard) is elementary to avoid vulnerabilities and hacks in the future. Existing standards should be used where possible. We have seen too many hacks related to custom extensions and non-standard code (with the most recent example being the batch overflow vulnerability in an extension of ERC20 in April 2018). With blockchain, software quality becomes more important than ever. Code reviews and security audits should form part of every company’s software lifecycle.
Joshua: What can architects do to prepare the world for the change blockchain will bring?
Lucas: Architects should educate themselves, contribute to the community and maintain high-quality software standards. In a rapidly evolving environment like blockchain, education and continuous learning are more important than ever. Architects should learn from past vulnerabilities and support the community in the form of articles, code frameworks and software libraries. Blockchain is a new incredibly powerful tool and architects should take great care of cultivating its vision and establishing a great environment around it. Educating others and establishing security standards will significantly increase the reliability of blockchain technology and prevent vulnerabilities in the future.
Joshua Jahani and Lucas Henning’s interview is the beginning of a planned effort for more educational awareness around blockchain technolog. More information will be released as Joshua Jahani and NYU develop new curriculums for the subject in 2018.