Blockchain and the Limits of Trust

Last week I was privileged to be a guest on This Is Imminent, a new form of Web TV hosted by Simon Waller. The given topic was Blockchain and the Limitations of Trust.

For a replay of the Web TV event go here

As regular readers will know, I have been immersed in the world of Blockchain, cryptocurrency and digital assets for over four years – and while I am not a technologist, I think know enough to understand some of the potential impact and implications of Blockchain on distributed networks, decentralization, governance, disintermediation, digital disruption, programmable money, tokenization, and for the purposes of last week’s discussion, human trust.

The point of the discussion was to explore how Blockchain might provide a solution to the absence of trust we currently experience in many areas of our daily lives. Even better, how Blockchain could enhance or expand our existing trusted relationships, especially across remote networks. The complete event can be viewed here, but be warned that it’s not a technical discussion (and wasn’t intended to be), although Simon did find a very amusing video that tries to explain Blockchain with the aid of Spam (the luncheon meat, not the unwanted e-mail).

At a time when our trust in public institutions is being tested all the time, it’s more important than ever to understand the nature of trust (especially trust placed in any new technology), and to navigate how we establish, build and maintain trust in increasingly peer-to-peer, fractured, fragmented, open and remote networks.

To frame the conversation, I think it’s important to lay down a few guiding principles.

First, a network is only as strong as its weakest point of connection.

Second, there are three main components to maintaining the integrity of a “trusted” network:

  • how are network participants verified?
  • how secure is the network against malicious actors?
  • what are the penalties or sanctions for breaking that trust?

Third, “trust” in the context of networks is a proxy for “risk” – how much or how far are we willing to trust a network, and everyone connected to it?

For example, if you and I know each other personally and I trust you as a friend, colleague or acquaintance, does that mean I should automatically trust everyone else you know? (Probably not.) Equally, should I trust you just because you know all the same people as me? (Again, probably not.) Each relationship (or connection) in that type of network has to be evaluated on its own merits. Although we can do a certain amount of due diligence and triangulation, as each network becomes larger, it’s increasingly difficult for us to “know” each and every connection.

Let’s suppose that the verification process is set appropriately high, that the network is maintained securely, and that there are adequate sanctions for abusing the network trust –  then it is possible for each connection to “know” each other, because the network has created the minimum degree of trust for the network to be viable. Consequently, we might conclude that only trustworthy people would want to join a network based on trust where each transaction is observable and traceable (albeit in the case of Blockchain, pseudonymously).

When it comes to trust and risk assessment, it still amazes me the amount of personal (and private) information people are willing to share on social media platforms, just to get a “free” account. We seem to be very comfortable placing an inordinate amount of trust in these highly centralized services both to protect our data and to manage our relationships – which to me is something of an unfair bargain.

Statistically we know we are more likely to be killed in a car accident than in a plane crash – but we attach far more risk to flying than to driving. Whenever we take our vehicle out on to the road, we automatically assume that every other driver is licensed, insured, and competent to drive, and that their car is taxed and roadworthy. We cannot verify this information ourselves, so we have to trust in both the centralized systems (that regulate drivers, cars and roads), and in each and every individual driver – but we know there are so many weak points in that structure.

Blockchain has the ability to verify each and every participant and transaction on the network, enabling all users to trust in the security and reliability of network transactions. In addition, once verified, participants do not have to keep providing verification each time they want to access the network, because the network “knows” enough about each participant that it can create a mutual level of trust without everyone having to have direct knowledge of each other.

In the asymmetric relationships we have created with centralized platforms such as social media, we find ourselves in a very binary situation – once we have provided our e-mail address, date of birth, gender and whatever else is required, we cannot be confident that the platform “forgets” that information when it no longer needs it. It’s a case of “all or nothing” as the price of network entry. Whereas, if we operated under a system of self-sovereign digital identity (which technology like Blockchain can facilitate), then I can be sure that such platforms only have access to the specific personal data points that I am willing to share with them, for the specific purpose I determine, and only for as long as I decide.

Finally, taking control of, and being responsible for managing our own personal information (such as a private key for a digital wallet) is perhaps a step too far for some people. They might not feel they have enough confidence in their own ability to be trusted with this data, so they would rather delegate this responsibility to centralized systems.

Next week: Always Look On The Bright Side…

 

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)

 

Haring vs Basquiat

Following last week’s “compare & contrast” entry, another similar exercise this week, between artists Keith Haring and Jean-Michel Basquiat, the subject of the NGV’s summer blockbuster exhibition.

Keith Haring, Jean-Michel Basquiat, Other artists: “Untitled (Symphony No. 1)” c. 1980-83 [image sourced from NGV website]

Given their friendship, collaborations and mutual connections to the New York scene of the 1980s, it was only natural that the NGV went for this double-header retrospective. Since they both gained early recognition for their street art and graffiti-based work, and their images crossed over into the worlds of music, fashion and clubbing, they had a lot in common. They were as likely to be featured in style magazines such as The Face as they were to be found in the arts section (or society pages) of the New York Times.

Both died relatively young, and it’s as if they somehow knew they each had limited time, such is the intense pace at which they worked, as evidenced by their prolific output. If there is one element that really links them is their inner drive – they had to produce art, there was no choice for them, and they threw everything into it.

They each developed their own distinctive visual styles, much imitated and appropriated throughout popular culture, graphic design, video and advertising. Haring is known for his dog motif and cartoon-like figures, Basquiat for his iconic crown and text-based work. They also placed great emphasis on issues of identity, gender, sexuality and broader sociopolitical themes.

Where they perhaps differ is that Haring relied on more simplistic imagery (albeit loaded with meaning and context), using mainly primary colours, flat perspective (no shading or depth), and strong repetition. On the other hand, Basquiat’s paintings reveal confident mark-making, bold colour choices (not always successful), and an implied love of semiotics (even more so than Haring’s almost ubiquitous iconography).

Of course, we’ll never know how their respective work would have developed over the past 30 years – maybe what we now see is all there was ever going to be? As a consequence, there is perhaps a sense that they plowed a relatively narrow field, that they did not develop artistically once they became gallery artists. I’m not suggesting their work is shallow or one-dimensional (even though it can simply be viewed and appreciated “on the surface”), but it would have been interesting to see where their work took them.

Finally, we are still very close to the era in which they were active, and in that regard their true legacy will be in the influence they cast on late 20th century art and beyond.

Next week: Hicks vs Papapetrou

 

Blipverts vs the Attention Economy

There’s a scene in Nicolas Roeg’s 1976 film, “The Man Who Fell To Earth”, where David Bowie’s character sits watching a bank of TV screens, each tuned to a different station. At the same time he is channel surfing – either because his alien powers allow him to absorb multiple, simultaneous inputs, or because his experience of ennui on Earth leads him to seek more and more stimulus. Obviously a metaphor for the attention economy, long before such a term existed.

Watching the alien watching us… Image sourced from Flicker

At the time in the UK, we only had three TV channels to choose from, so the notion of 12 or more seemed exotic, even other worldly. And of those three channels, only one carried advertising. Much the same situation existed in British radio, with only one or two commercial networks, alongside the dominant BBC. So we had relatively little exposure to adverts, brand sponsorship or paid content in our broadcast media. (Mind you, this was still the era when tobacco companies could plaster their logos all over sporting events…)

For all its limitations, there were several virtues to this model. First, advertising airtime was at a premium (thanks to the broadcast content ratios), and ad spend was concentrated – so adverts really had to grab your attention. (Is it any wonder that so many successful film directors cut their teeth on commercials?) Second, this built-in monopoly often meant bigger TV production budgets, more variety of content and better quality programming on free-to-air networks than we typically see today with the over-reliance on so-called reality TV. Third, with less viewing choice, there was a greater shared experience among audiences – and more communal connection because we could talk about similar things.

Then along came cable and satellite networks, bringing more choice (and more advertising), but not necessarily better quality content. In fact, with TV advertising budgets spread more thinly, it’s not surprising that programming suffered. Networks had to compete for our attention, and they funded this by bombarding us with more ads and more paid content. (And this is before we even get to the internet age and time-shift, streaming and multicast platforms…)

Despite the increased viewing choices, broadcasting became narrow-casting – smaller and more fractured viewership, with programming appealing to niche audiences. Meanwhile, in the mid-80s (and soon after the launch of MTV), “Max Headroom” is credited with coining the term “blipvert”, meaning a very, very short (almost subliminal) television commercial. Although designed as a narrative device in the Max Headroom story, the blipvert can be seen as either a test of creativity (how to get your message across in minimal time); or a subversive propaganda technique (nefarious elements trying to sabotage your thinking through subtle suggestion and infiltration).

Which is essentially where we are in the attention economy. Audiences are increasingly disparate, and the battle for eyeballs (and minds) is being fought out across multiple devices, multiple screens, and multiple formats. In our search for more stimulation, and unless we are willing to pay for premium services and/or an ad-free experience, we are having to endure more ads that pop-up during our YouTube viewing, Spotify streaming or internet browsing. As a result, brands are trying to grab our attention, at increasing frequency, and for shorter, yet more rapid and intensive periods. (Even Words With Friends is offering in-game tokens in return for watching sponsored content.)

Some consumers are responding with ad-blockers, or by dropping their use of social media altogether; or they want payment for their valuable time. I think we are generally over the notion of giving away our personal data in return for some “free” services – the price in terms of intrusions upon our privacy is no longer worth paying. So, brands are having to try harder to capture our attention, and they need to personalize their message to make it seem relevant and worthy of our time – provided we are willing to let them know enough about our preferences, location, demographics, etc. so that they can serve up relevant and engaging content to each and every “audience of one”. And brands also want proof that the ads they have paid for have been seen by the people they intended to reach.

This delicate trade-off (between privacy, personalisation and payment) is one reason why the attention economy is seen as a prime use case for Blockchain and cryptocurrency: consumers can retain anonymity, while still sharing selected personal information (which they own and control) with whom they wish, when they wish, for as long as they wish, and they can even get paid to access relevant content; brands can receive confirmation that the personalised content they have paid for has been consumed by the people they intended to see it; and distributed ledgers can maintain a record of account and send/receive payments via smart contracts and digital wallets when and where the relevant transactions have taken place.

Next week: Jump-cut videos vs Slow TV