Blockchain: disruptive innovation or uncontrollable risk?

France Stratégie, the General Commission for Strategy and Foresight reporting to the Prime Minister, has just published a timely report on the issue of the blockade. This technology promises programmable transactions without the intervention of a trusted third party. The disruptive potential of such an innovation calls, according to the report's authors, for a public strategy combining regulation and support for innovation... without delay.

 

Come see it as disruptive innovation that heralds "the entry into an era of efficiency and shared trust", others see it as a geek-only technology that could feed the next speculative bubble. One thing is certain, the blockchain is now on the agenda of all decision-makers. For this digital technology, which allows data to be transmitted in a decentralised, secure, transparent and unmediated manner, can virtually turn whole sections of the "old economy" upside down, starting with logistics. Some even think it could "uber Uber"! This report from the working group chaired by Joëlle Toledano, Professor Emeritus of Economics at the University of Paris-Dauphine, has the merit of taking stock: what are the real issues at stake in the blockade at this stage and how can public action accompany its passage from experimentation to maturity, combining regulation and support for innovation?

 

Esoteric. This is the word that comes up most often in reaction to reading an article on the blockchain! This report also has an educational vocation. So let's start at the beginning: the definition. "It is a new way of storing information, preserving it without modification, accessing it and integrating new information that becomes unforgeable. This new data can result from the execution of an operation, a transaction or the "automatic" execution of a computer program. They are recorded on the equivalent of a vast "distributed" register, i.e. shared by all members of the network, a system that allows for transparency and auditability. »

 

It is therefore understandable that wherever there is an intermediary - even a platform - or in other words a trusted third party who controls or certifies a transaction between people, the blockchain can change the deal. A virtual revolution for the banking, insurance, notary's office... and above all the logistics sector, considered as "first candidate". "As a register that memorises all the operations carried out without the possibility of falsification, the blockchain could prove to be a revolutionary tool for logistics. The entire life cycle of a product can be certified in this way," the report points out. More broadly, the report sees in the promises of the blockchain two families of operational uses in the medium term: "notarial-type applications linked to the keeping of a shared register" - from digital land registry to drug traceability - and "smart contracts", computer programs designed to execute the terms of a contract (insurance for example) automatically.

We are therefore far from a phenomenon confined to cryptomoney, with Bitcoin in the lead! "The blockchain should not be considered as limited to the world of finance," insists the report. If further proof were needed, the diversification of fundraising in digital assets (known as ICO for Initial Coin Offering) observable since 2017, particularly in the media, health, games and Internet of Things sectors, is proof of this.

Limit: "Real operational use cases are rare," the report points out. Why is this? First of all, there are "technical" obstacles. An example to prove it: the Bitcoin network processes a handful of transactions per second, compared to several thousand for a credit card operator. "The historical validation mechanism of the blockchain, with its cryptographic processes, is a source of slowness. "A change of scale therefore seems to be problematic. Other technical limits: the electricity consumption of cryptographic operations (enormous), the question of the electronic identity of the goods or persons whose transactions are recorded in the blockchain, or simply the question of the "choice of consensus protocol", i.e. the methods of access to the blockchain.

 

The second type of limits listed in the report are those related to monetary and financial issues. Today there are 1,500 cryptosystems built on blockchains for a total capitalisation of more than 300 billion euros, but still no regulation to curb their speculative dimension (as typically exists for financial markets). However, blockchains and cryptomoney are difficult to separate since the validation operations that secure the network are "remunerated" by issuing digital assets. Hence the idea in the debate of a digital central bank currency that would give cryptomoney the necessary institutional, legal and budgetary support. The report also points out that "cryptomoney is also notable for its ability to enable fraudulent payments (drugs, weapons, money laundering) or tax evasion," the report says. Hence the obvious security issues beyond the usual cybersecurity issues (protection against hacking).

 

The legal and fiscal question remains. Since the blockchain claims total reliability without the intervention of a trusted third party, the certifications it registers must have a proven probative value. In the absence of a "blockchain type law of evidence", legal uncertainty risks slowing down the development of the technology. The same lack of regulation on the tax side: "the legal nature of digital assets remains unclear" - which explains, in particular, why banks refuse to manage the accounts of companies that have cyber-currencies in their assets - and there is a lack of "a clear tax policy adapted to cryptomoney".

This is the expression used by the starter to say that it is time to move from experimentation to large-scale development. A revolution that requires the removal of all the obstacles identified by the report, without waiting for the blockchain to reach maturity: "most players are now ready to enter a new phase, that of government intervention to set a legal and regulatory framework that will allow the full development of this new technology," notes the report.

 

Hence, seven recommendations from the working group "to be considered as first orientations at the national level".

*To promote interdisciplinary research and development work, particularly in the areas of formalisation, security (integrity, confidentiality, evidence, enforceability), quality of service (bandwidth, latency, robustness, reliability) and governance (evolution, neutrality).

*Ensuite: develop training, not just for specialists, i.e. go beyond the need to train (good) developers, by also investing in the appropriation of complex systems, a necessary condition for the development of uses.

*Tax and accounting rules, the legal status of tokens, the value of proof of registration on a block chain, the fight against illicit use... it is also necessary to institute "basic regulations that are reasonably attractive". A necessity to support legal applications.

*Finally, the report recommends contributing to the financing of software infrastructure projects to build "the public blockchain infrastructures of tomorrow", to support sectors of excellence or strategic interest in France - logistics, anti-counterfeiting, traceability, banking and insurance, health - and to test, appraise, train and equip public authorities, in particular by developing a unit of public officials with expertise in the field of blockchains, capable of intervening in support of State services.

*Finally, the report stresses the urgency of meeting the challenges facing the internet of value, which requires a digital currency that is stable enough to serve as a counterpart to transactions.

 

Ten years after the introduction of Bitcoin, it is clear that blockchain technology has not reached maturity and that there are many pitfalls along the way. But waiting for an innovation to be proven before taking the plunge means taking the risk of going too late. This report reminds us of that.

 

 

Source: Newspress