Why are Australia's banks so interested in blockchain?

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Overhyped?

Why are Australia's banks so interested in blockchain?

But privacy expert Wilson and blockchain expert Toohey believe the likes of Staples are misguided in their expectations of blockchain applications outside of its original role creating the Bitcoin crypto currency.

Wilson says the argument that blockchain could be used to account for exchanges of other valuable items comes unstuck once it’s recognised that cryptographic certificates still need to be bound to those items by some form of trusted third party.

That, he argues, goes directly against the original intent of the pseudonymous Nakamoto’s original white paper, which led to the creation of Bitcoin.

Citing Staples’ example of Everledger, Wilson points out that the diamonds can’t physically be on the blockchain in the way Bitcoins can be; a third party still has to map them to it in some form of database.

He argues what’s being proposed is that massive amounts of compute power be thrown at problems better solved by simple spreadsheet software.

“I really laugh. It’s humongous over-engineering when you bring it down to earth in the real world,” Wilson says.

Wilson is not entirely derisive of all distributed ledger projects inspired by blockchain, but says the conversation around it needs to be grounded in reality.

“It’s a bit like the Wright Brothers’ flyer. It could fly 30 metres but couldn't hold its own weight in fuel. But you looked at it and you said ‘okay, powered flight is possible’ so why don’t we work on progressive generations of the idea and see how it goes," he said.

"Bitcoin was a proof-of-concept for something once thought impossible but you can’t put health records on the blockchain. It just can’t be done."

Toohey also believes the technology doesn’t currently warrant the attention it’s getting, agreeing many of its suggested applications would be better handled with conventional databases.

Replacing human workers

However, once its true disruptive strengths are realised, Toohey argues there will virtually be no stopping the flow of white-collar blood as the technology threatens workers in equities and commodity trading.

“Blockchain is going to disrupt anyone that’s an intermediary and that means anyone that’s got the word 'broker' after their job title such as 'stock broker' or 'insurance broker', and anyone that sits at their desk and has an in-tray and an out-tray," he said.

"Their jobs are all imperilled. Anyone who can be relaced by a bot will be."

Digital X's Tsvetnenko says early implementations of blockchain technology are more likely to involve removing the day-to-day grind of paper-based invoicing and fulfilment systems, given the technology's potential to eliminate disputes and legal action.

“With the blockchain there’s no arguing about the format of the invoice or whether it's there or not. It’s impossible to argue with mathematics,” he says.

He remains sceptical that groups like R3 will be able to reach a level of cooperation required for wholesale change across the thousand of banks in the global system system that currently rely on the SWIFT international payment network.

“The word on the street is that it’s not going to be successful because it’s hard enough working with one bank. Imagine 40 banks? How are you going to satisfy 40 banks that all have different ideas about what they want and how it should work,” he said.

CBA's Rajasingham is more upbeat.

“SWIFT didn’t start with a thousand banks but it grew to that. But you need a critical mass and that sort of critical mass can be provided by groups like R3,” he says

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