On April 12th, 2016 CATO hosted the "Cryptocurrency - The Policy Challenges of a Decentralized Revolution" conference in Washington DC.
The conference was on a schedule of which I was admittedly late coming in halfway through the second panel. It began with George Selgin, Director, Center for Monetary and Financial Alternatives, of the Cato Institute, followed by Jerry Brito, Executive Director, Coin Center before the 1st panel took the stage.
Morning Panel and Speakers
The topic of the first panel was "Consumer Protection" and included:
Margaret Liu, Senior Vice President and Deputy General Counsel, Conference of State Bank Supervisors
Marco A. Santori, Partner, Pillsbury Winthrop and Global Policy Counsel, Blockchain
Melanie Shapiro, PhD, CEO, Case
Dana Syracuse, Counsel, BuckleySandler, LLP, and former Associate General Counsel, New York Department of Financial Services
Which was moderated by Peter Van Valkenburgh, Director of Research, Coin Center and covered consumer protection without anything terribly noteworthy although one mention was 2008's financial crisis and how it may not have happened with blockchain technology firmly in place within financial industry.
Commissioner J. Christopher Giancarlo of the U.S. Commodity Futures Trading Commission (CFTC) spoke next in a keynote address.
Giancarlo went over how blockchain technology has arrived calling it "distributed ledger" technology which may have confused some since "distributed ledgers" are not a new thing, in fact they have been around for many years prior to blockchain technology and there were many present who were unfamiliar with either. He referenced a recent group test consisting of several banks as organized by the DTCC.
"I believe this exercise proves that there is merit to the potential of distributed ledger technology" - Commissioner J. Christopher Giancarlo
This was an accurate statement since these tests were not done with blockchain technology and merely distributed ledgers.
Giancarlo was careful not to overspeak, he declined one question outright stating that more knowledgeable individuals were present that would be more appropriate to answer, which was commendable. He said "you're in the right place to get that question answered".
Mid Morning/Day Scheduled Panels and Speaker
Paul L. Chou, CEO, LedgerX
Jacob Farber, General Counsel, R3CEV
Joseph Lubin, Founder, ConsenSys and Co-founder, Ethereum Project
Ryan Zagone, Director, Regulatory Relations, Ripple
This panel was moderated by Marc Hochstein, Editor in Chief, American Banker and where the conference really began to get interesting after the warm-up from Commissioner Giancarlo.
Going into this conference I had previously formulated opinions of each member of the panel that by the end of the discussion had changed primarily between R3CEV's Jacob Farber and Ripple's Ryan Zagone.
Given recent media statements by R3CEV and their existence period they seem more of the anti-blockchain technology group buy at least Jacob Farber acknowledges the potential of blockchain technology and how it could change the world and possibly even get rid of banks. He followed that with that world being "yet to be determined" as a better or worse thing. The man was not without good point.
... a future world ... rid of financial institutions ... we don't live in that world now... we're nowhere near that world" ... Jacob Farber, R3CEV
When asked what problems R3CEV's Corda would solve, Farber's answer was an honest "we don't know yet" since the concept has yet to be implemented anywhere and made a commonly used comparison with the Internet and Intranets when talking about the Blockchain or public blockchains and Corda or permissioned systems whereas the blockcain is like the internet and permissioned systems are like intranets in comparison. This "we don't know yet" has also been the view point of Bank of America in regards to their patent filings on blockchain technology.
The concession that permissioned consensus ledgers "do not exist" was agreeable among the panel and what most blockchain technology experts also acknowledge. There's working code and demonstrations but nothing live.
Ripple's Ryan Zagone didn't help the case much speaking a bit to the opposite in that Ripple is a partially permissioned system but also a public system available to any financial institution. He explained that with Ripple, financial institutions can "decide" what other financial institutions can approve/decline transactions. The argument from blockchain experts is that in reality this makes a weak network subject to a security breach or "rogue executive" as one speaker put it.
Zagone also said something that couldn't have explained any better what many have been saying for a while now in that permissioned ledger would-be providers are exploiting the lack of knowledge and uneducated concerns with blockchain technology.
" .. banks need to be able to hold someone accountable ... " - Ryan Zagone, Ripple
Basically in the event of an error or problem with a transaction, banks need to be able to call somebody and hold them accountable for the issue.
Here's the problem with that theory.
When a bank has a problem now with software they make a phone call or send an email in regards to a transaction that undoubtedly uses the internet in some form or fashion. They don't call the Internet, there is no Internet to call. There is no blockchain to call either nor is there a need for a blockchain call center. If you properly submit a transaction to the blockchain (bitcoin) its undoubtedly and irrefutably transacted once confirmed. Its more powerful, secure, and guaranteed than anything else on earth.
Quoting from an earlier dinbits.com article the blockchain processes well over one octillion calculations per second:
"The fastest computer on earth currently is China's Tianhe-2 which took a team of 1300 engineers and scientist to build with a price tag of $390 Million (USD).
You'd need around 20 thousand of those puppies to come close." - dinbits (3/1/2016)
They have valid concerns but instead of educating those with these concerns the opportunity to sell them something else takes precedence and they end up with a weaker and potentially less secure solution overall. There can be on-ramps and off-ramps that use the blockchain including sidechains that would benefit these organization far more without sacrificing security. Paul L. Chou, CEO, LedgerX, put it best when speaking on the panel in that "of course we store KYC information that is not broadcast to the public ... KYC is the responsibility of the financial institution" but they still leverage the full power of the blockchain as a system of record.
Joseph Lubin was slow to say much on the panel but did explain how Ethereum is looking at "sharding" the Ethereum datasore which could also be argued as a weakening feature. Perhaps older data or unused data (much like bitcoins segwit) works, but system-of-record data less than say 7 to 10 years of age doesn't sound like a particularly good idea. His most interesting comment was stating that blockchain technology, defined at the time as a permissionless ledger, potentially "provides freedom" when asked what one of the key benefits of the technology would be in the future.
Ryan Zagone's did offer one sensible statement in that "there are no winners or losers" in the space since there are so many use-cases in which the panel seemed to agree with.
This was the most interesting panel of the day and a proper opening act for what should would be called the headliner if it were a concert. I used that comparison for good reason, the next speaker was the rock star of the conference.
Enter Patrick Byrne
If there were such a thing as a rock star of blockchain technology Patrick Byrne might have earned that tag during this presentation. When he took the stage the entire mood of the day went from one end of the spectrum to another.
First of all this came the day after Byrne announced his indefinite medical leave so his presence at all was in question. Not only did he show up, he delivered. His presentation was stellar both in delivery and content. He focused heavily on the bitcoin blockchain calling it simply the blockchain and how it can potentially disrupt everything.
"...the blockchain can make a good version of wall street..." - Patrick Byrne, CEO Overstock.com
Not only was his delivery spot on and the content of his presentation phenomenal, he was entertaining. He was humorous and earned more laughs than all other speakers and panelists of the day combined. He was relaxed and comfortable albeit noticeable that his continued cough indicated he was not in the best of health.
More importantly he went where nobody else would. Others hinted around what he blatantly blurted out that this technology could be the end of the middlemen and possibly even financial institutions and others of the like all together (R3CEV's Farber also made reference to the possibility of the latter before denouncing it as a world we don't live in). He pointed out seemingly straight forward tasks being over complicated, over priced, and leading to possible corruption and where the system in place today is badly in need of improvement.
He took a few jabs at regulators early but ended with stating that regulators are now very cooperative since they realize this "does their job for them" and pointed out how during the Clinton administration when the Internet faced similar regulation they "...didn't regulate the Internet because they realized it would all move to China" so they decided "We're not going to do it".
He also made a comment saying that he heard the world was about to find out who Satoshi Nakamoto really is, which was interestingly placed since that never really came up. Possiby one of the most profound things said was in response to Perianne Boring's question on where he saw the technology in 5 years and beyond.
Byrne responded that this technology could ultimately mean "The consent of the governed".
He ended with a "thank you" to CATO for allowing him to finish his professional career with them indicating an indefinite medical leave may indeed be a permanent one.
Afternoon Panels and Speaker
The third panel of the day was called the monetary challenge and consisted of:
Perianne M. Boring, Founder and President, Chamber of Digital Commerce
Eli Dourado, Research Fellow and Director, Technology Policy Program, Mercatus Center at George Mason University
William J. Luther, Assistant Professor of Economics, Kenyon College and Adjunct Scholar, Cato Institute
Moderated by George Selgin, Director, Center for Monetary and Financial Alternatives, Cato Institute
Eli Dourado equated bitcoin to the Guatemalan Quetzal and Perianne Boring, who likely had one of the best questions of the day (for Patrick Byrne), explained the inability to charge back with bitcoin and discussed how Microsoft and other companies have an ability to pay contractors this way much more efficiently. This is a statement that I can actually support first hand having paid overseas contractors in the same manner and it is much easier to do it this way.
The fourth and final panel tackled "The 4th Amemdment Challenge" regarding privacy and freedom of speech.
Andrea Castillo, Program Manager, Technology Policy Program, Mercatus Center at George Mason University
Jim Harper, Senior Fellow, Cato Institute
Eric Lorber, Senior Associate, Financial Integrity Network
Zooko Wilcox-O’Hearn, Founder and CEO, Zcash
Moderated by Jerry Brito, Executive Director, Coin Center
All four had valid and interesting point of view, however, the most notable here was likely Zooko Wilcox-O'Hearn who explained ZCash, of whom dinbits.com has been reporting since their inception, who explained how their system is going to be different in that the sender of a given transaction can allow only who he or she wishes to allow and not the entire planet.
Mick Mulvaney, Vice Chairman, Subcommittee on Monetary Policy and Trade, U.S. House of Representatives was the lone politician speaking at the conference and was informative. Nothing like Patrick Byrne and his presentation earlier in the day but certainly a good speech on regulation and his view was that without regulation the technology could not move forward since the markets would not know how to operate. Which many would argue the exact opposite and that regulated markets who govern the rest of the population are the problem to begin with. In any case regulation to a point is not a bad thing exactly.
Overall the conference was a good veiw point from both sides of the permissionless system debate of which all parties agreed there was no debate since there are no winners or losers in this realm. Those wanting to use permissioned systems systems internally like they use intranets don't harm or help anyone but themselves so it makes little difference. Peppered through out the day were good and bad points of various regulatory approaches and technologies use cases.
At the end of the day some regulation is needed to prevent bad things from happening and protect consumers. However, too much of "not a bad thing" simply becomes a bad thing. Just look at what has happened to banks and why this technology has come into existence in the first place.
Lastly, the depth of Patrick Byrne's involvement in blockchain technology and even bitcoin itself is certainly thoroughly seeded. One of the key things left ringing in my head is what Byrne stated (and has stated in the past) in regards to what blockchain technology can accomplish.
That is the potential for regulatory frameworks to govern free from capture and with the "consent of the governed". That is the way the United States is supposed to work after all.
Report by dinbits staff