Steve Tendon is a senior executive management consultant, adviser, speaker and author. Steve’s research and consulting work focuses on the use of emerging technologies — in particular Blockchain technologies — to improve business performance. He holds a MSc in Software Project Management with the University of Aberdeen, a MIT Fintech Innovation: Future Commerce certificate with the Massachusetts Institute of Technology, and an Oxford Blockchain Strategy Programme certificate with the Saïd Business School at the University of Oxford.
In 2016 he was the strategic adviser for the Ministry of Economy, Investment and Small Business of the Maltese Government, and developed the vision of Malta, The Blockchain Island. He was the lead designer and author of Malta’s National Blockchain Strategy, which was approved by the Cabinet of Ministers in April, 2017. Subsequently he was appointed to Malta’s National Blockchain Task Force advising the Ministry for Financial Services, Digital Economy and Innovation within the Office of the Prime Minister on further developing and implementing the country’s blockchain strategy.
Based in: Malta
Company website: https://chainstrategies.com
When was your first encounter with Blockchain technology, Steve? What about it really caught your attention?
I first learned about the Bitcoin (the protocol) around 2010, reading Satoshi’s whitepaper. Having a software engineering background, I was intrigued by how he resolved the consensus problem not only through algorithms, but also through social engineering with the introduction of incentives (i.e. mining). At the time, it was primarily an intellectual curiosity, and I didn’t really give much weight to it.
The real “Aha!” moment came later. Around October 2015, when I happened to read Vitalik’s Ethereum whitepaper. The realisation that Vitalik was proposing not only decentralised storage but effectively decentralised computation was key. That’s when I became convinced that the technology had much more far reaching consequences than I first thought. The ideas of Smart Contracts and DAOs were just too compelling to ignore. That’s when I decided to go into it “full steam!”
The understanding we had then, and the understanding we have now… how do you reckon it has evolved?
Understanding is always evolving, so I wouldn’t make such a drastic distinction between then and now. It’s an ongoing process. At the beginning, certain fundamental aspects were not a problem at all. For instance, scalability, transaction speed, storage, energy consumption became apparent only as the systems became more widely adopted. The great thing is that these problems are spurring even further innovative thinking, both in the existing blockchains (Bitcoin, Ethereum) as well as in new ones that have emerged in recent years, and probably even newer ones yet to come.
Would you say the ‘crypto craze’ contributed to this much? Any other factors that helped bring blockchain technology to the limelight except that?
The “crypto craze” has had a role; but it is just like any new technology adoption life-cycle. Of course, we cannot ignore the financial aspects underlying crypto; but the greater thrust, I believe, is yet to come; and it will come from decentralized applications, and the convergence/synergies with other technologies, like IoT and AI.
Do most solutions being developed today really need Blockchain technology to support it? What main features of Blockchain technology make it so prevalent or relevant in your opinion?
This is where we need to be nitpicking, and reason around terms and definitions; and agree on their meaning.
Naturally the term “Blockchain” comes from the underlying data structure: a linked-list of hash-pointers to Merkel trees. In more common parlance, a “chain” of “blocks” of data. Even today, die-hard computer folks see it as a mere data structure, maybe ignoring the consequences that such a data structure is distributed and especially that the underlying algorithm provides the additional magic sauce, that transcends the data structure as such.
So a more extensive understanding of the term “Blockchain” would cover not only the underlying data structure, but also the algorithm used to manage it, and even the game theoretical social engineering of incentives for miners.
What does this magic sauce bring about? Data structure + Algorithm + Social Engineering effectively creates a new medium which is global and uncensorable.
Of course there are many who question whether it really is global; and really uncensorable. I will not enter into that debate. The greater idea is just the very concept of a global and uncensorable medium. We did not have that before the Bitcoin! This is the most important idea of all.
All current implementations of Blockchains are striving very hard to become such a medium. Maybe they have already succeeded (at least the Bitcoin proponents sustain this); maybe not. But sooner or later someone will create such a global and uncensorable medium. And it is those attributes – of being global and uncensorable – that make it relevant and revolutionary.
Which goes back to the first part of the question, about whether today’s solutions development really needs Blockchain technologies. This is where the waters get murky, because many – especially regulators – have introduced the term “Distributed Ledger Technologies.” This is also where we start getting all the fine distinctions between “private and public blockchains” and “permissioned vs permissionless blockchains.”
I like to simplify all these distinctions, and reflect on the fact that DLTs are simply (plain old, and some would say “glorified”) shared databases, that might use blockchain data structures but certainly do not use the blockchain algorithm’s and even less its social engineering. In other words, they are under centralized control.
DLTs may, however, cross organizational boundaries; so they may give rise to new forms of contractual agreements between the parties whose boundaries are crossed. Yet DLTs do not create a global and uncensorable medium (at least as I see it). DLTs do not create any regulatory challenge at all.
At the end of the day, there are two classes of problems one might consider:
- First, if your problem space spans multiple organizations, then a DLT solution could be something to consider.
- Second, if your problem space is of global nature and needs to be uncensorable, then you will have to use a “real” blockchain.
Many applications developed today fall in neither of those two categories. Probably many are trying to ride the wave the being “on the blockchain” is all hip and cool now; especially if you launch your business with an ICO.
In a way, this all reminds of the early days of the world-wide-web, which eventually led to the dot-com crash. Maybe a crash is what is needed to clear up the field, and let the really interesting projects finally take over and take off.
How has the experience been in guiding various stakeholders to learn more and develop their Block’Chain Strategies’? Which would you say are the most interesting domains to work with?
The experience has been very exciting. The field is full of misconceptions, misunderstandings and misrepresentations. So there is always a great need to inform, educate and put things in perspective. It is always a great satisfaction to help stakeholders of all sorts to arrive at their “Aha! moment,” and moving from skepticism, if not even hostility, to actually wanting to be part of this revolution.
There are many areas that can be deeply affected by Blockchain technologies and/or DLTs. Most of today’s global economy is a network of supply chains, or value chains: they cross organizational boundaries; they are global in nature; they transact and transfer values.
Trade finance, supply chain management, provenance tracking, notarization services, insurance, health care and many others can all benefit from the innovations of Blockchain technologies and DLTs.
One area that I see of extreme importance is that of identity. Both identity of people as well as identity of “things” (in the IoT sense).
Identity systems are the basis of today’s AML/KYC compliance processes. They are definitively draconian; and the risk here is that we are moving towards totalitarian, “Big Brother”-like surveillance societies. It is already bad enough with the “surveillance capitalism” created by the Facebooks and Googles; and it seems it will get worse.
The counterweight comes in the form of more balanced identity systems. In particular those that are made possible by Blockchain technologies, and that giver rise to self-sovereign identity systems; and even more so those that are still under development that will make use of Zero-Knowledge proofs (or even newer developments of those concepts).
With self-sovereignty combined with Zero-Knowledge, it would be possible to envisage identity systems that provide the assurance and trust that you’re dealing with legitimate counter parties; without them having to reveal every minutest detail of their entire life.
You are based in Malta, presently. The Maltese government has been quite welcoming for Cryptocurrency startups. Is it the same with Blockchain companies?
As you know, I advised the Maltese government and was the lead designer of the country’s National Blockchain Strategy. (For an overview of the strategy, see https://chainstrategies.com/2018/02/18/maltas-national-blockchain-strategy-the-big-picture/)
In early October 2016 I had already sketched out and named the vision of “The Blockchain Island.” Notice that the name says the “blockchain” island, not the “cryptocurrencies” island, or the “bitcoin” island.
Notice also that this was in 2016, a year before we had both the surge in bitcoin valuations and the explosion of the ICO phenomenon in 2017. Many jurisdiction had almost a knee-jerking reaction to those events of 2017, and were very quick to produce some kind of cryptocurrency and ICO-related regulations. And, apparently, Malta was late to the game, not presenting anything.
However, what is being missed is that Malta’s new laws were designed for decentralized computation. That means for second generation blockchains that allow for smart contracts, the foremost one of which is the Ethereum blockchain. That is a bit more complex, and requires more time as well as deeper thinking.
Others countries made a quick effort to “regulate” decentralized storage only: the first generation blockchains, like the Bitcoin.
From the very outset Malta was aiming at Blockchain technologies in the broadest sense. The whole legislative effort was designed from the very start to cater for Blockchain technologies; and it resulted in three distinct bills.
First is the institution of a new regulator, the Malta Digital Innovation Authority (MDIA). The idea behind this regulator is actually even broader than Blockchains and DLTs: It is intended that the regulator will take care of any kind of so called innovative technology arrangements. Thus it could extend its scope of action to Artificial Intelligence, Internet of Things and other innovations. It’s purpose is to foster innovation.
The guiding observation in proposing a dedicated regulator was that Blockchain technologies can affect basically any industry sector. It was a key concern that existing regulators could overstep their mandate and over-regulate and possible create counterproductive regulations. In fact, before the creation of this new regulatory framework, Malta already experienced conflicting positions taken by the Malta Financial Services Authority (MFSA) and the Malta Gaming Authority (MGA) with respect to cryptocurrencies and ICOs. With the MDIA, such regulatory actions would all be harmonized in a consistent manner.
Second is the Innovative Technology Arrangements and Services act. This is possibly the most innovative act; and it is possible that it will be amended and evolve even further in the future. Here the idea is that it is not possible to regulate technology as such, but that the interactions between humans and advanced technologies should offer certain guarantees.
The ground breaking idea, which is not included immediately in the first instance of the act but will possibly be at a later stage, is that of recognizing legal personality to technology arrangements. In particular, those technology arrangements that have the traits of autonomy and self-sufficiency, like Decentralized Autonomous Organizations. I described this in more detail in a recent blog post (https://chainstrategies.com/2018/03/11/malta-blockchain-regulation-proposal-legal-personality-for-daos-and-smart-contracts/).
Third is the Virtual Financial Assets act. This one caters for the regulation of cryptocurrencies and ICOs, as the other aforementioned jurisdictions have done. It is what everybody was expecting. Now even Malta has it; but the first two acts will be a surprise for many.
So, all in all, Malta’s regulatory framework is shaping up as one of the most advanced in the world, if not the leading one. And, of course, blockchain technology companies will find many reasons to move to and be welcomed by Malta.
One final consideration is that those jurisdictions mentioned earlier, who reacted on the “crypto craze,” are typically not EU members; but Malta is a full EU member. While this added additional constraints to the scope of the legislative action, and required more time to elaborate the regulatory framework, it will give the advantage that any company coming to Malta will be able to operate in the whole of Europe too.
Any important developments that you’ve recently noticed in terms of government support extended to understanding, adopting and regulating the technologies?
It has been an ongoing evolution, since the summer of 2016. Reflecting again on the earlier question about the “crypto craze,” the “crypto craze” of 2017 made many realize that this whole sector was real. It was a catalyst to the processes that I and a few others had started one year earlier, when we were probably considered the “crazy” ones!
The ground work of 2016 all of a sudden became much more relevant. To the extent, in fact, that in 2017 the whole sector was considered so critical that a new dedicated ministry was created: the ministry of Financial Services, Digital Economy and Innovation headed by Parliamentary Secretary Hon. Silvio Schembri. It is under Silvio’s energetic leadership that things really took off: in only 8-9 months the three bills were drafted.
That is probably the most significant evidence of how the Government of Malta has evolved it’s understanding of this sector. From a crazy vision in 2016, to the setting up of a dedicated ministry in 2017, which resulted in the regulatory framework in 2018. That is an incredibly fast evolution, considering that governments and regulators are usually lethargic in reacting to technology innovations.
What are the main areas of interest for you and ChainStrategies in the next 1 year?
Since I focus on strategy and emerging technologies, attention is 360 degrees. However, if I had to choose one topic that will be extremely important going forward, I would say it is about identity. Both identity of individuals and entities, as well as identity of “things.”
The socio-/political implications of identity are enormous. Blockchain technologies can afford the notion of self-sovereign identity, and that is something that has never been possible before. There are two extreme conflicting views. On the one side the crypto-anarchists and libertarian extremists; on the other side the collusion of surveillance capitalism (Facebook, Google, Apple…) and government totalitarianism. Neither are desirable. It is only by applying the most ground breaking ideas coming from the crypto community, like self-sovereign identity and zero-knowledge proofs, that we can have a technology infrastructure supporting trust without totalitarianism or anarchy.