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The dott. Hermann Hauser is one of Cambridge's most distinguished intellectuals, the guiding light of some of the city's key developments and a world-renowned investor, but as a speaker he is often underestimated.
His opening remarks at the Cambridge Blockchain Forum at the Bradfield Center have illuminated a fact that has just become apparent: the 2007-8 financial crisis has permanently ruined the banking industry's reputation.
He outlined how the new blockchain-based financial architecture – a growing list of records or blocks connected using cryptography – can guarantee that the excesses that led to that crisis are never repeated. The restructuring may have been carried out by "very well-known organizations called banks, then in 2008 we discovered that they are not so reliable, in reality they are not recommended and have escaped – none of them has been locked up".
He added: "My friend Bill Gates said that" banking is necessary, but bankers do not "and he was absolutely right."
Noting that the arrival of double-entry accounting in the fifteenth century "led to the Renaissance," he told the forum that a similar "rebirth" is taking place in the financial sector with the application of cryptography and other components to the sector. Now we are living what he calls "a digital Renaissance".
"It is nothing less than the total restructuring of the financial system," he said. His conclusion was "do not trust the bankers, trust the blockchain" and indicated four applications that change the life of the distributed ledger that blockchain has created: AI (eg driverless cars), smart contracts in finance, synthetic biology for pharmaceutical and quantum computing "that will reshape society". And if the incoming model challenges existing players – be they bankers, or internal combustion or other car manufacturers – Dr. Hauser has told his audience not to be surprised because the break is natural in such circumstances.
"When personal computer users have switched to smartphones, the smarter and better computing companies have lost the next wave, and it happens every time: the incumbents lose the next wave."
So the fanfare is enough – what was discussed? Tom Trowbridge, president of Hedera Hashgraph, has addressed the crucial area of security of the new network.
"You can not tolerate this network going down," he said. "It will not be tolerated, no network can be built if it presents vulnerability, so this is by far the safest, and this is a great element of differentiation."
It is not only security, however, it must be "fast, fair and secure – it is what is needed by the new financial logic". In reality, the blockchain needs four strengths, Tom said.
■ Technology. The technology must have the capacity – not just the bandwidth, but the storage facilities, and it must be delivered in a way that does not cause a permanent interruption of the electrical system because it is absorbing so much energy to make it work.
■ Security. "We expect to see attacks on every level".
■ Governance. The governance of a base-ledger consent algorithm concerns the decision-making process. With the current and bankruptcy of capitalism, governance is accumulated by a handful of trusted individuals. But all humans are prone to mistakes. The Hadera Hashgraph platform offers a new form of consensus for distributed ledger technology (DLP) through 39 blue chip companies.
■ Stability. "Open source software and cryptocurrency have created both innovation and chaos." (See Bitcoin, for which the blockchain was originally built).
The discussion was opened on the floor by the co-host and host presenter, Hazem Al Nakib, who co-founded the Cambridge Blockchain Club with Jon Bradford. One of the questions was about governance. These 39 companies … how does it work?
"Equity is designed in such a way that it has no value", is the answer. "It is owned by a company of 39. There are no dividends: any excess goes to [charitable] foundation. So there are no IPOs and this [shares] it can not be bought. "
This is rather revealing: the advice of 39 decentralized trusted companies – which rotate in such a way that each of them is there for only three years – can not take dividends so that they have nothing to sell. They are not driven by profit. They are guardians. Hadera is "the bottom layer [of the internet] on which the applications are built. "The company has raised $ 124 million and 1,000 investors, and its platform is" incredibly resilient and very difficult to eliminate – this is the first level of security and what people are rightly worried about. "Right. needs a new cryptography of a Ponzi scheme like the one invented by Bernie Madoff, or a Russian cyber-attack …
So, just to give you an idea of the speed of progress in this area, the well-known but very encrypted Bitcoin in cryptocurrency works on a platform that can handle 20 transactions per second (TPS). Etherium (Bitcoin V2) operates at 25 TPS. The next generation of digital currency platforms should work at 10,000 TPS. Hedera Hashgraph operates at 100,000 TPS.
Later – on the turn of the cemetery shortly before the closing of this amazing conference – Mattereum CEO Vinay Gupta considered the key problem of the blockchain: it is an application addressed to the consumer or a data portal for sectors such as health, finance and pharmaceutical?
Vinay suggested that the blockchain is not yet mature enough to act in place of cash. "If you try to buy a house, for example in France, using the blockchain, there is a crisis of execution." How do you solve it? "His answer? "Deliver us all your resources." There are many promises and smart contracts to ensure that you can resume your assets once Vinay has acquired it, but most people's response will be: "Okayyyy".
The idea that everyone is happy to withdraw their resources from Santander or Barclays and deposit them in Mattereum or any other similar company is not a reality at this time. Remember what Dr. Hauser said about double-entry accounting in the sixteenth century? It takes ages to build that level of trust and, even if trust is broken – "reputation comes on foot but goes on horseback", as the Chinese proverb says – which still does not mean that everyone is ready to deliver their finances to a new entity that is largely unverified.
Clearly, however, the blockchain is making progress. Those who develop it take their responsibilities seriously and the issues can be resolved in time.
In fact, they have already been passed in Estonia, explained Ott Matter, Deputy Director of Estonia's e-residency program. The key factor in the history of e-success in Estonia, explained the extremely articulate and artificially ironic Oct, is that when the Soviet Union was dissolved, in 1991 Estonia had to start over from head. The skills of the nation were based on "forests and IT". They decided that IT could have more scope and the result is:
■ "Everyone in Estonia has an electronic ID"
■ "99% of services in Estonia are online"
■ "The only two things you can not do online in Estonia are getting married and selling a property".
They also introduced the "one-off principle" – once the data is delivered to the government you should not need to do it again "because" the data belongs to you ". It makes you want to have hired an Estonian when the universal credit system was designed.
Estonia has been dealing with data since 2001, when the X-road was introduced – "the underlying platform on which our digital society was built". It now manages 500 million transactions per year and is a sort of gold standard for intelligent blockchain application.
This Blockchain forum in Cambridge was a brilliantly designed and brilliantly executed conference. Contributions including those of Toby Simpson of Fetch.AI, Michel Rauchs of the Cambridge Center
for alternative finance, Junde Yu of Pundi X and Dr. Edward George of Ecobank UK, as well as two extraordinary regulatory groups and investments in blockchain and DLT, have made it a prominent event.
Check in for the next one. I hope that at that point – if the Polo Blockchain of Cambridge and its members have a say – the sector will be more renaissance digital and less wild West.
