Lawmakers are debating how to deal with virtual currencies and, in particular, with the promising technology behind them: blockchain. Patrick Murck, co-founder of Bitcoin Foundation, believes that the current ‘hands-off’ approach is the right one.
Patrick Murck is fellow at the Berckman Center for Internet and Society at Harvard University. He came to Brussels on Wednesday (20 April) to participate in a conference in the European Parliament organised by The Cobden Centre and European Digital Currency and Blockchain Forum.
Murck spoke to euractiv.com’s Jorge Valero.
When do you expect that blockchain technology will start having a significant impact?
In some ways, it already has. When you think about Bitcoin, which is the first implementation of this technology, it has not taken over the world or anything like that. From a payment system perspective it is something very small, but still has an impact on peoples’ life on a daily basis. It is valued at around six billion dollars. That is a meaningful market share for a very nascent technology and a radical new idea. So it is already having an impact in a limited way, mainly for payments. Now we are starting to explore the idea of taking blockchain and moving it into other areas, in the realm of finance or other sectors. This is a bit academic at the moment, so it is hard to say when these solutions will be commercialised in a mainstream way, but it is certainly coming. It could be six months, but more likely this is a story that will play out over the next five to ten years.
Banks and credit card companies are starting to invest in this technology. But what is the potential for other financial businesses, such as insurers?
Blockchain has two components. It is an asset registry and an identity framework based on cryptographic signatures. So anywhere where this is helpful, the technology could take off. In the insurance sector, someone could say: “Here is what I am insuring and the terms, we can write this in the code.” This will automate a lot of the process and it will prove who we are through the cryptographic signatures at any point in time. So you could see why in the insurance sector could be very interesting. In addition, there are other markets you could think of, like the music industry. You could record your rights in a performance in a global registry. And potentially, with time, the payment of royalties could be more transparent. Anywhere where you can benefit from creating a global asset registry that could benefit participants from a greater transparency you are going to see innovation and people exploring the potential of blockchain.
As you have said, the disruptive impact of blockchain goes beyond the financial world. What other potential applications do you foresee?
Land registry is a good example of where the blockchain could be both useful and not useful. In most of the Western world, we don’t have issues with land registry. We trust that the central government will record titles and enforce them against others. In other areas of the world, where institutions are less developed, you could see the advantage of blockchain as a global asset registry. It could be very useful both in terms of attesting that this property is mine, and recording it somewhere, and potentially for transferring the property to someone else.
In your view, what are the main risks of blockchain?
When you have an asset registry, you always have the issue that anybody who stipulates that they own something, they may be lying. So you still need to have some intermediary who is in the middle of the process who can attest the fact that this title is good. There is the question whether you are gaining a lot by using a distributive ledger technology (like blockchain), compared to more centralised systems where governance is better understood. So there is the risk that consumer solutions for managing and storing these cryptographic signatures are not robust enough yet. It is something that it is being worked out right now and developed, but we are not quite there yet.
What about the risk of hacking?
For me, this falls under the category of whether consumers can manage this system by themselves. There is a third risk which is fraud, when people are creating blockchain ledgers fraudulently to pretend they are doing something they can do or raising money on false hopes. This is the risk that comes from all the hype around the technology with a little understanding. Whenever you have a lot of hype you have to be wary of scammers.
What should be the legislative approach from the EU side?
We are figuring out that today here in the conference in the European Parliament.
But in your view, is it the right time for new regulation?
Everybody is in ‘wait and see’ mode. From the entrepreneurial side, people are waiting to see what the regulatory approach will be. So far it has been good. It has been ‘hands-off’ approach, allowing the technology to develop. From the regulators’ point of view, they want to see how the market shapes up, and what regulatory frameworks are appropriate to capture the risk in the right way without killing innovation. I think that is the right approach: let the technology grow, use the regulations we have, see if there are any gaps and whether there are any regulations stifling innovation and adjust those regulations.
Do you believe that blockchain technology is the next big thing?
I think this concept of sharing ledgers between parties holds an incredible promise for increasing the transparency of all markets, (and) making these markets more accessible to a broad range of people. That is the real promise here.