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The price fluctuations of Bitcoin have turned off much of Wall Street. But the blockchain technology behind it has attracted the attention of the major financial companies, which have invested millions in understanding how it could simplify their operations.
Supporters of Blockchain argue that it will revolutionize financial services, making transaction settlement easier, including stock trading. Cross-border trade could become faster and less dependent on intermediaries and paperwork.
Now, an expert who was early on the blockchain became a great skeptic.
Angus Champion de Crespigny, who had been managing the blockchain finance division at Ernst & Young for years, was enthusiastic about the technology at first. But when he left the company, he was extremely skeptical of the use of blockchain for businesses. Ernst & Young, for his part, said in a statement: "We continue to see areas in financial services institutions where authorized or private blockchains can really provide value".
Barron he spoke with Champion de Crespigny, 36, recently about what he changed his mind.
Barron: How did you get into the blockchain?
Champion de Crespigny: I started at EY in August 2008 and started in August 2018, 10 years after the day. I joined leaving the engineering school. I have an engineering background and I worked on cybersecurity, data analysis, regulatory compliance, technology. In about 2013, I read about Bitcoin in one of those columns in a magazine about the airline. With my background, I could see how exciting it could be, but also in what kind of a regulatory minefield was approaching.
So I became very involved in the community, which was quite small. It was a bit of time before mid-2014, when I knew every single company in the New York area that was working on this and all people. Obviously it has expanded a bit since then. I started recommending regulatory considerations, which are now a bit common. Over time at EY, as more and more customers were asking us, I was more and more the type to visit. Finally we formed a group. So, while I was actively working on it since 2014, the group was really formalized in 2015.
At the beginning was all Bitcoin, or were there companies that experimented with other uses for blockchain?
At that time, in 2014, it was almost all cryptocurrency. The private blockchain material started in late 2014 and 2015. We have assembled a group. Our customers wanted to understand where or even if there were opportunities for them. We as a group would bring together our business experts and regulatory experts and we would have our technology experts who would help us determine if there was anything there and what was the best way to gain value.
And were you starting mostly in financial services?
Yes, I have looked after financial services and [another executive] took care of everything else.
Read more: Blockchain is starting to show the true promise in the middle of the advertising campaign
How were the early days of blockchain? Were you optimistic at the moment?
Yes, I was optimistic. It would be foolish of me to say otherwise. My opinions were aligned with many of the common views at the time.
What changed that initial vision?
What I found while helping some of our customers analyze this is that each of them started to encounter the same problems. There is a story I remember as a child about a group of mice gathering around, wondering how they will protect themselves from the cat. Someone has a great idea to put a bell around the cat's neck. Until one of the wisest mice says "OK, it sounds great, how will we get it there?"
This is a little like this industry. If we could create a big blockchain on which everyone is active, which is not owned by anyone, it works perfectly, if everyone is in agreement on the standards, then it would be a great setup. Actually the process to get there is incredibly, incredibly complicated. Generally, as it evolves, we end up having to coordinate everyone. And if you can coordinate everyone, then there's often a better technology to use than a blockchain.
Why?
Blockchain works by everyone agreeing the rules and rules that are applied in the software. With Bitcoin the rules are very, very simple. You can not send something you did not receive. With a lot of corporate or private blockchain that people are trying to do, it becomes much more complicated. You have to decide which are the rules that we will insert in our system.
Anyone who has done any kind of consortium work knows that getting them to agree on a path forward is incredibly difficult. Once you are able to bring all these stakeholders together, you generally still form a sort of trustworthy central entity. If you managed to do that coordination, which is the hard thing, there's a technology you can use that is much easier to manage when that central organization can be the one managing it.
Which technology is easier to use?
Only a distributed database, which is faster. The reason why it is faster and why it is more efficient is because it is all built around a central control entity. You want a blockchain when you do not know who you can trust, because you do not want any party to be able to arbitrarily change these things. The fact is that in the business world, we have legal contracts to do it. If you have already formed a consortium, if you have formed a central group, you can also give them the keys, because any kind of maintenance, errors, updates are much easier to manage when there is a central controller than it would to get everyone to make all changes at once.
Who produces that kind of software that is blockchain without the hassles of blockchain?
The traditional ones are[
Microsoft
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]SQL Server e
Oracle
.
Any traditional corporate database can be set up to be distributed this way. This is technology that has existed for a long time. People are now being sold a dream that a blockchain will be easier to do all of this, and I do not think it's accurate.
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Are there any other advantages for databases with centralized control?
Blockchains by design is set to work independently and not essentially to take orders from anyone else. If there's a bug, all these pieces of software will keep running and the only way you can stop that bug is basically to disable them all. You need to update the software and then send it to everyone. Now you can say, "Why do not we have a central way to coordinate these updates?" But if you have a central way to coordinate those updates, then we're back to the previous problem, you're trusting some central party to propagate those updates. In this case, again, why not use only one database?
When you were at Ernst & Young, your clients abandoned projects when they were not working as planned?
There were some different. In some cases where I have not seen the value, I would suggest providing another technology perhaps more efficient or more practical for what they were trying to do. In some cases they would say: "Yes, but we want to do it anyway because we want to know this technology, we think it will be important for our business." So we would like to help. I would be totally sincere and honest with anyone trying to pursue this goal – highlight concerns or concerns, if relevant, and show them the best technology.
Why did you end up leaving EY?
My passion is to look at public blockchains, particularly value transfers. I think Bitcoin is the winner so far, but I'm open to other technologies. This is an exceptionally exciting technology for the developing world, and I wanted to concentrate full time on this. There is a much wider mandate in the company, and I think they will be very successful with this. But this is my passion. Since I was a teenager, I thought about managing my business. I come from a family of entrepreneurs.
Explain what you are doing now.
There are a number of projects I'm working on, including joint workshops for wealth managers to help them manage cryptocurrencies. I am advising companies on regulatory issues and helping to create Bitcoin and cryptocurrency infrastructures here and abroad.
What do you think of people who say "I like blockchain but not Bitcoins, keep me away from that Wild West stuff"?
I think they misunderstand the way the blockchains actually work and what is their advantage over other technologies. Staying away from Bitcoin now makes sense for many people. If you look in the United States, there is little need for people to use it here. But there is an opportunity when considering this as something useful for many other parts of the world.
I think in the West we have the habit of being rather Western-centric and not realizing that there is a significant number of people in developing countries who do not trust their local government, at least not enough to store all their money in that local currency. Having a sort of digital alternative is very beneficial for them. So there's a lot of misunderstanding about what this technology is and what it can do. You really need to understand how this technology works on a transactional level and make assessments yourself rather than using words of order and hype.
Let's say that I agree with you that much of this is hype. Nevertheless, very healthy companies and organizations are accumulating billions of dollars in blockchain projects. The Australian Stock Exchange is using it to redo its settlement system.
Walmart
is changing the way it traces its supply chain. Are they somehow completely blinded or are they selling snake oil? Are they doing it just for titles, or is it real?
I will not comment on specific companies, but there is a certain amount of head heading. I think once you have spent a certain amount of money with this, it is better to have something to show for this. Also, if someone is going live with one of these systems and they completely control the network, then what you really have is just a database. But you can call it blockchain because it's the kind of database it's on. If you have 100% control over that database, it works effectively the same way.
Gartner
said blockchain would be worth $ 3.1 trillion-plus for businesses in 2030. Do you think it's possible?
I did not see where private blockchains could create any business value. So I'm not sure how they rate those numbers. The thing is at the level of 20,000 feet, it seems to make sense, because you are told that this could automatically reconcile and get rid of mistakes. When it comes to technical bolts, how does it actually do? But most of the errors are at the inputs and outputs of the systems. I did not see anyone who was able to tell me how to actually do it. I think there is a lot of strategic thinking and order words and not enough technical practical knowledge.
Thanks, Angus.
Write to Avi Salzman at [email protected]
