Australia’s Blockchain Roadmap

The Australian Government recently published its National Blockchain Roadmap – less than 12 months after announcing this initiative. While it’s an admirable development (and generally, to be encouraged), it feels largely aspirational and tends towards the more theoretical rather than the practical or concrete.

First, it references the US Department of Homeland Security, to define the use case for Blockchain. According to these criteria, if a project or application displays three of the four following requirements, then Blockchain technology may offer a suitable solution:

  • data redundancy
  • information transparency
  • data immutability
  • a consensus mechanism

In a recent podcast for The Crypto Conversation, Bram Cohen, the inventor of the BitTorrent peer-to-peer file sharing protocol, defined the primary use case for Blockchain as a “secure decentralized/distributed database”. On the one hand, he describes this as a “total oxymoron; on the other, he acknowledges that Blockchain provides a solution to the twin problems of having to have trusted third parties to verify transactions, and preventing double-spend on the network. This solution lies in having to have consensus on the state of the database.

Second, the Roadmap speaks of adopting a “principles based but technology-neutral” approach when it comes to policy, regulation and standards. Experience tells us that striking a balance between encouraging innovation and regulating a new technology is never easy. Take the example of VOIP: at the time, this new technology (itself built on the newish technology of the internet) was threatened by incumbent telephone companies and existing communications legislation. If the monopolistic telcos had managed to get their way, maybe the Post Office would then have wanted to start charging us for sending e-mails?

With social media (another internet-enabled technology), we continue to see considerable tension as to how such platforms should be regulated in relation to news, broadcasting, publishing, political advertising, copyright, financial services and privacy. In the music and film industries, content owners have attempted to own and control the means of production, manufacture and distribution, not just the content – hence the format wars of the past in videotape, compact discs and digital file protocols. (A recurring theme within  Blockchain commentary is the need for cross-chain interoperability.)

Third, the Roadmap mentions the Government support for Standards Australia in leading the ISO’s Technical Committee 307 on Blockchain and DLT Standards. While such support is to be welcomed, the technology is outpacing both regulation and standards. TC 307 only published its First Technical Report on Smart Contracts in September 2019 – three years after its creation. In other areas, regulation is still trying to catch up with the technology that enables Initial Coin Offerings, Security Token Offerings and Decentralized Autonomous Organizations.

If the ICO phenomenon of 2016-18 demonstrated anything, it revealed that within traditional corporate and market structures, companies no longer have a monopoly on financial capital (issuance was largely subscribed via crowdfunding and informal syndication); human capital (ICO teams were largely self-forming, self-sufficient and self-directed); or networks and markets (decentralized, peer-to-peer and trustless became catch words of the ICO movement). Extend this to DAOs, and the very existence of, and need for traditional boards and shareholders gets called into question.

Fourth, the Roadmap makes reference to some existing government-related projects and initiatives in the area of Blockchain and cryptocurrencies. One is the Digital Transformation Agency’s “Trusted Digital Identity Framework”; another is AUSTRAC’s “Digital Currency Exchange” regulation and registration framework. With the former, a more universal commercial and government solution lies in self-sovereign identity – for example, if I have achieved a 100 point identity check with Bank A, then surely I should be able to “passport” that same ID verification to Bank B, without having to go through a whole new 100 point process? And with the latter, as far as I have been able to ascertain, AUSTRAC does not publish a list of those digital currency exchanges that have registered, and exchanges are not required to publish their registration number on their websites.

Fifth, the need for relevant training is evident from the Roadmap. However, as we know from computer coding and software engineering courses, students often end up learning “yesterday’s language”, rather than acquiring flexible and adaptable coding skills and core building blocks in software development. It’s equally evident that many of today’s developers are increasingly self-taught, especially in Blockchain and related technologies – largely because it is a new and rapidly-evolving landscape.

Finally, the Roadmap has identified three “showcase” examples of where Blockchain can deliver significant outcomes. One is in agricultural supply chains (to track the provenance of wine exports), one is in education and training (to enable trusted credentialing), and one is in financial services (to streamline KYC checks). I think that while each of these is of interest, they are probably just scratching the surface of what is possible.

Next week: Brexit Blues (Part II)

 

Cryptopia – The Movie

A quick plug for Torsten Hoffman‘s new documentary, Cryptopia: Bitcoin, Blockchains and the Future of the Internet. After a series of preview screenings around Australia and  New Zealand last last year, the film has its world premiere tonight in Melbourne.

Five years after producing Bitcoin: The End of Money As We Know it, the director has gone back and interviewed a number of key figures who appeared in the last film, to update their stories, and to dig deeper into the whole Blockchain, Bitcoin and crypto narrative.

I haven’t yet seen the latest film, but I first met Torsten when he was screening the previous documentary on the meetup circuit. He was kind enough to show me some early edits of Cryptopia, and I have to say the new content looks very promising.

Given the speed at which Blockchain and Bitcoin markets move (a week in crypto is often referred to as a year in any other asset class), it’s actually important that we stand back and take stock of where we are in this new paradigm for FinTech, decentralisation and distributed ledger technology.

Even if you can’t make it to the Melbourne premiere, look out for Cryptopia the movie as it tours globally.

Next week: Tarantino vs Ritchie

Startup Vic’s Impact Pitch Night

Last month’s Startup Vic’s Pitch Night focused on Impact investing. Hosted by Startup Vic and the Giant Leap Fund (part of the Impact Investment Group), it was held at the Goods Shed with support from Stone & Chalk, Weploy, Pawa, Pak360, Waste Ninja and Marketing Entourage. The MC on the night was Mike Davis of the Humans of Purpose podcast, with an opening address by The Hon, Martin Pakula, Victorian Minister of Jobs, Innovation and Trade. The Minister made some announcements regarding the establishment of Angel Networks in Victoria.Given that Impact investment is demonstrating a propensity to generate better returns, this is a topic of growing interest alongside ethical investing, corporate social responsibility and the move towards ESG (Environmental, Social and Governance) reporting.

The Judging Panel was drawn from Work180, YourGrocer, Australian Impact Investments and Impact Investment Group.

Pitches in the order they presented (websites embedded in the names) were:

The Neighbourhood Effect

With the goal of making the transition to green living easier, this startup has been featured here before. It comprises an app-based solution and uses behavioural science to map a user’s carbon footprint. It also uses gamification to make recommendations linked to location and lifestyle preferences.

Generating revenue from referral fees and subscriptions, the team are targeting energy retailers and banking services among the first commercial partners, and have already attracted $100k via paid pilots and Crowdfunding. The judges sought clarity on what exactly the product “does”, and how localised the solutions can be.

Gecko Traxx

Unusually for these regular pitch nights, this is a tangible, manufactured product – a solution for portable and affordable off-road access for wheelchair users. It takes the form of an accessory attached to the existing wheels – expanding the surface area and increasing traction. With a James Dyson national design award, and as a member of the University of Melbourne Accelerator Prgram for 2019, the team already have15 re-sellers lined up. With a proposed retail price of $599 (and costing $95 to manufacture) the device is NDIS eligible, making it more accessible.

The judges were keen to understand the addressable market as opposed to the profile and size of the actual user base – for example, does the device appeal to users of both motorised and self-propelled wheelchairs? How does it fit in with other categories of assisted mobility products and devices? Had the team considered crowdfunding? What is the startup’s status as a NFP? What is the marketing plan?

Sempo

This startup offers a solution for inclusive payments and savings for the 1.7bn people in emerging markets who remain unbanked. Using Blockchain technology, Sempo claims to be backed by a global reserve token pegged to multiple local currencies – but it wasn’t clear which assets comprise the treasury ecosystem.

Part of the use case is to get cash to victims in crisis quickly without the associated NGO costs. With 4% transaction fees (as opposed to the typical 20% incurred by other soluitons) Sempo seeks to avoid regulatory controversy since it is not claiming to be an unofficial local currency.

Typical transaction costs comprise a 1-3% exchange fee, and a 0-1% transfer fee. Part of the solution is to grow local, in-market capacity, particularly for remittance services. With an AfterPay investor on board, the founders are seeking a $2m seed round. The initial focus is on the Pacific region, a major impediment are the compliance and regulatory costs – in meeting both the in-country and original jurisdiction obligations.

One use case is giving refugee access to bank accounts – when asked about KYC obligations, the founders responded that they can code KYC into the Blockchain without the need for “formal” KYC.

Bring Me Home

This startup makes surplus food accessible and affordable to everyone – utilising fresh food that is unsold in shops, cafes and restaurants. According to the founders, globally, one third of all food is wasted – if this represented a country, it would rank 3rd after the US and China in terms of carbon emissions.

Structured around a commission-based app, users become advocates. The market segments are B2C (consumers and SMEs) and B2B (food production, manufacturing and wholesale distribution). Seeking a $1m seed round, the founders are also running a crowdfunding campaign.

There are specific versions of the app for vendors to help them manage their inventory and schedule their daily listings in advance. Peak demand is between 2pm and 6pm, and after 8pm – underlining the need for vendors to get their offers uploaded in a timely fashion.

The app is starting to see some significant retention – of the 12,000 users, 75% are in Victoria, with half in Melbourne. 15% are deemed returning customers, of which 45% represent repeat business. Currently, the service is in 126 venues across Melbourne.

The judges asked how the business can ensure they are dealing with true surplus supply, and not just creating artificial demand. In response, the founders stressed that vendors need to map to their usual “full display”, rather then offering “made on demand” products.

The People’s Choice award went to Bring Me Home, while the Judges made Sempo the overall winner.

Next week: Musical Memories – Of Time and Place

The Finnies

The third annual FinTech Australia awards were celebrated in Melbourne last week, following the organisation’s relocation from Sydney during the past 12 months. Any concerns the organisers and sponsors may have harboured (given the switch in geography) were easily allayed, as the event was sold out, with over 300 guests in attendance.

The overall winners were definitely B2C brands – challenger banks, consumer lenders, payment providers – with Airwallex, Afterpay (which despite some recent negative press was named the FinTech of the year for the third time) and Up Bank taking out more than a third of the awards between them.

Despite the 30 per cent increase in the number of entries (over 230 in all), it did feel like the Fintech community is still something of a village, as several award presenters were themselves presented with awards. Maybe something for the organisers to think about for next time, as it’s not always a good look when winners end up presenting to each other.

On the other hand, the organisers are to be commended for the running order – unlike some industry events, the awards were all presented in a single session, and not dragged out from soup to nuts. It was also a great decision to use the Victorian Innovation Hub as the venue, as well as have grazing-style catering instead of a sit-down dinner. And the choice of live band was excellent, as past, current and future bankers cut a rug.

Next week: Brexit Blues