Vinay Gupta: Blockchain Is 5% Of The Solution, Here’s What We Need Now
Famed technologist and Ethereum engineer and CEO of Mattereum, Vinay Gupta, just gave a riveting talk at the Distributed Economy, or Deconomy, conference in South Korea. In his talk, Gupta discussed a number of important concepts and issues that relate to blockchain. Not only as it stands today, but what it will need to accomplish before it can be adopted by global trade as a whole.
The Revolution Is Not Inevitable
A key point of Gupta’s talk is that during his lifetime, he has seen a number of revolutions that seemed inevitable but didn’t pan out. He noted that it’s common for young people to believe that many things are inevitable, but that with age and experience, people quickly realize that not everything is meant to be — no matter how much you wanted them to happen.
Part of the reason for his measured skepticism is that there is currently no historical precedent for what is happening now. He spoke on the unique dynamic between individuals, companies, and governments. The relationships between these three groups is one that is highly intricate and will take perhaps decades to fully shift or disrupt.
Gupta gave the example of the telephone and other important technological advances. While we may take many advances for granted today, it often takes about 30 years for these types of major changes to be adopted. He gave the example of the internet, which was created back in the 70s. It only became widely adopted in the late 90s and early 2000’s, about 30 years later.
Gupta is not a blockchain naysayer, however, and he noted later in his talk that the appearance of a blockchain-like technology is inevitable, and required, in order for true global trade to occur.
The Trouble with Addresses and Keys
In the second part of his talk, Gupta discussed an important point about the way in which we transact cryptocurrency today. That being, we typically send someone our public address through an unencrypted medium such as an email. Then, we cut and paste the address or scan a QR code and make the payment. All of these methods are highly prone to attack, as we saw with the recent virus, CryptoShuffler, that replaces the contents of one’s clipboard with a bogus address in an attempt to steal funds. This, he argues, is not sufficient for true global trade.
The key word here is context. When we receive an address to send payment, we often have the address but lack any information about the context of said address. There is no way to know who owns it, what the address is for, or what the terms of the contract are. This, according to Gupta, is due to a lack of important address infrastructure which exists in other established payment channels.
To elaborate on this, Gupta used the example of bank transfers made today in international trade.
Let’s say, for example, that a company wants to send payment to a supplier in another country. They make the payment to the bank, however, they later discovered that it was sent to the wrong account. The company can then call the bank, and likely have things corrected. As we all know, this is impossible with blockchain assets. This is because blockchain assets and cryptocurrencies have irreversible transactions.
Gupta described blockchain as being the first 5 percent of the solution towards true, democratized global trade. Meaning it is the critical first step, but there’s still a long way to go before widespread adoption can truly occur.
Democratizing True, Global Trade
Another section of his talk was related to issues regarding global trade.
Today, over 50 percent of all stock market transactions, according to Gupta, are made up of what’s known as high-frequency trades. These are trades that are done by automated systems that perform millions of micro-trades per second. Because trading occurs so rapidly, a delay in milliseconds could mean millions of dollars in revenue over the course of the year. Therefore, high-frequency trading organizations pay top dollar to set up their systems as close as physically possible to stock exchanges.
This inevitably causes a wealth disparity to occur. The countries that host the exchanges have a disproportionate benefit to countries that do not. Likewise, the country that the exchange exists in affects the laws that must be followed in reference to the exchanges, including taxes for example.
According to Gupta, this is something that must change in order for true global trade to flourish. These types of hyper-centralized systems that give disproportionate benefits to those geographically closest cannot be sustained. Instead, a system like a blockchain which can be potentially distributed across the world and controlled with synchronized timestamps (and thereby, less influenced by physical proximity to a central point) will be what truly opens up the world to mutually beneficial trade.
Putting It All to Together
Vinay Gupta has a number of important points and suggestions that we should all consider when looking at blockchain. Blockchain evangelists love to talk about the impending revolution, as if it is an absolute certainty and simply a matter of time until it occurs. However, Gupta notes that this is not inevitable, and instead will rely on us as a community to find and take advantage of the right windows of opportunity.
Further, based on the historical precedent of major societal changes taking several decades to truly take over, we may be in for a long wait, even if the crypto revolution does occur in our lifetimes.
Change in the global systems of trade is inevitable and happening quicker than ever (for instance, the failure of Trans-Pacific Partnership). One of the possible paths forward is a blockchain-trade revolution. But getting there will require hard work and dedication from all of us.
What’s your take? Is the revolution nigh, or still far off? Sound off in the comments below.
Images via YouTube, Britannica