Trust, Law Enforcement and Killer Apps: Consensus 2015 Morning Sessions
CoinDesk's inaugural conference took place at the TimesCenter in the heart of New York today, with over 500 guests in attendance.
Garrick Hileman, a CoinDesk analyst and economic historian at London School of Economics, kicked off the day's sessions with an overview of the current state of bitcoin and blockchain technology.
Next was the day's first panel, Trust, Permissions, Openness: The Future of Innovation on the Blockchain, moderated by Emin Gun Sirer of Cornell University and featuring Adam Ludwin, of Chain.com; Greg Maxwell of Blockstream; Bitcoin XT developer Mike Hearn, joining via video link; researcher Tim Swanson and Vitalik Buterin of Ethereum.
The panellists explored the obstacles facing greater adoption and possible applications of blockchain technologies.
Buterin said he thought the blockchain space had diverged in the last couple of years and commented he had been "generally impressed" by institutional adoption in the last year.
Maxwell agreed, commenting:
"The amount of interest and excitement around cryptocurrencies and blockchain is tremendous but we are still using our training wheels, we are still learning."
With regards to the possibility of being able to use one single multi-purpose blockchain, Hearn explained that the question being posed was based on a somewhat incorrect premise.
"You don't need blockchains to do smart contracts, banks could provide them too if they wanted to with an API," he added.
Ludwin, on the other hand, spoke about a future similar to that of a financial cloud with many interoperable blockchains.
Unprecedented Transparency? Law Enforcement on the Blockchain
The next session, titled Unprecedented Transparency? Law Enforcement on the Blockchain, featured Kathryn Haun, of the US Dept. of Justice; Tigran Gambaryan of IRS Criminal Investigations; Catherine Pelker of the FBI; and Jason Weinstein, of Steptoe and Johnson and was led by Jerry Brito of CoinCenter.
Haun said the US Dept. of Justice had used blockchain analysis in its Ripple investigation and during the investigation of Silk Road's Baltimore Task Force, which led to the identification of illicit activity carried out by former agents Carl Mark Force and Sean Bridges.
Despite not divulging specifics about the investigation, Haun was able to determine that this had been the first time blockchain analysis had been used in a public charging document.
Speaking from her experience at the FBI, Pelker pointed out "blockchain analysis is a powerful tool, but it is not a magic solution to any of our issues", and highlighted her need for bitcoin exchanges to both collect data from customers and subsequently analyse the blockchain.
However, Weinstein highlighted the need for law enforcement and regulators to be able to police both the on and off ramps.
"The policing of the on-ramps is important because when you do blockchain analysis you reach the point where you need to connect that to a person," he said.
For Haun, the emergence of technologies has two-fold implications. On the one hand, she said, new technological developments may enable crimes. Alternatively, these technologies also provide another avenue for law enforcement to explore and use in their investigations.
"It gives law enforcement another area to mine for information about those committing criminal activity."
In terms of what's currently missing, Haun highlighted the need to train more agents and people in the government about bitcoin's distributed ledger and how to analyse it.
According to Weinstein, the benefits of being able to use the blockchain in law enforcement investigations lie in the fact the distributed ledger eliminates issues around data retention and the barriers imposed by geographical borders.
Pelker, however, noted the blockchain's borderless nature "cuts both ways", explaining it can be very difficult to actually progress with an investigation if the agency does not know the country it needs to issue the appropriate request to.
Further challenges, Gambaryan said, revolve around the issue of presenting blockchain analysis as evidence in court, noting:
"The information available is very limited and, in more complex cases, following the money is still a challenge."
The critical path to bitcoin mass adoption
Up next, Michael J Casey from MIT Media Lab moderated a discussion about bitcoin mass adoption, featuring panelists Connie Chung of Expedia; Jon Downing of Visa Europe Collab; and Vinny Lingham of Gyft.
Casey, who recently closed the door on an 18-year journalism career, opened by noting how the perception around bitcoin had changed in the last couple of years.
"At the end of 2013, we all thought of it as a currency, as means of exchange that would challenge the dollar ... we used to get very excited about merchant adoption announcements".
Nowadays, the consumer story is still very much alive, he said, but it looks very different.
Chung noted that bitcoin payments at the online travel giant typically decreased in line with the digital currency's drop in price. Despite this, she said Expedia – which integrated bitcoin payments in June last year – had seen "steady usage".
For Lingham, offering bitcoin paying customers a discount is important and worked very well for Gyft, he said:
"If you don't simplify the use [of bitcoin], why would people want to use it as a currency? Realistically, as a merchant, we are saving interchange fees, so, why not give it back to the customer?"
With regards to potential use cases, Lingham also explained how the digital currency may help people living in emerging countries, such as Africa, who want to purchase items online from US retailers:
"Most US retailers will not ship anything [to countries in Africa such Nigeria] because of credit card fraud. There are a million people living in Africa, this is a very strong use case for bitcoin."
Speaking on behalf of Visa Europe Collab, Downing – who noted bitcoin volatility was currently a key issue – said the organisation sought collaboration with all the key players in the ecosystem and it is exploring several opportunities, including micropayments, international payments and smart contracts.
Moving on to the notorious chicken-and-egg debate, which seeks to determine whether mainstream adoption is down to consumers or merchants, Downing drew on the comparison with contactless debit cards and how these first needed to be issued by banks for consumers to subsequently use them.
"It's finding those cases where people feel like using that technology on a day-to-day basis, that it is going to be used reliably and that it is beneficial to both parties."
A $1.6 Quadrillion Opportunity
Morris began by addressing the need to eliminate opacity in reconciliation. The decision to replace a working system is not one to be taken lightly, he said, as it could take a major firm approximately three-to-five years to do so and there's a high failure rate.
Shadab said blockchain technology was being discussed as a direct result of the financial crisis. What blockchains are trying to do, Shadab said, is to "take away back offices".
Peterson joined the conversation by giving an overview of Nasdaq and its involvement with the sector:
"We really have to master this [blockchain] technology ... we looked at where we could find alignment with this technology and fit it into something that we are already doing as part of our business."
Masters, who spent 20 years working at financial services in JP Morgan, touched upon her first impressions of blockchain technology:
"When I first came across blockchain technology I was frankly quite surprised and taken by the potential for a technology to check a lot of boxes that represent very real and very current points of pain the existing financial and market infrastructure and ecosystems."
For her, these points of pain include a generally depressed revenue environment, rising costs associated with compliance and regulation, inefficient infrastructure. "Firms are being asked to capitalise for more risk," she added.
Some regulators whose focus lies on systemic risk, Masters added, also see the benefits of this type of technology and the potential it has both to eliminate friction and reduce risk.
"The journey has commenced and is well under way, it will succeed and the upside is enormous. It's in the interest of everyone that we make progress here."
Images via Yessi Bello Perez and Flickr
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