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Blockchain, or distributed ledgers, could deliver much-needed productivity benefits and drive innovation across Australia, but the nation’s leading research agency has warned that it is no silver bullet and the road ahead will be bumpy.
Adrian Turner, CEO of the Commonwealth Scientific and Industrial Research Organisation’s Data61 digital research network, said blockchain had the potential to reframe financial services and address industry issues, such as food provenance and quality of agricultural exports.
Blockchain could also boost Australia’s productivity, which has declined more sharply than in other Organisation for Economic Co-operation and Development (OECD) nations.
Several significant blockchain projects are already under way, led largely by the financial industry, where 80% of the world’s banks are to engage in blockchain trials, according to World Economic Forum data.
The Australian Stock Exchange has invested A$22m in New York startup Digital Asset Holdings to test the viability of a blockchain-based share registry.
The major banks in the R3 distributed ledger consortium are also developing a platform for financial transfers, while Australia Post and energy supplier AGL are both involved in blockchain pilots.
Even wine makers are jumping on the blockchain bandwagon. In May 2017, a pallet of Australia’s Coonawarra wine completed a 8,100km journey to Qingdao, China, with its provenance backed by a blockchain-based platform designed by Sydney startup TBSx3. Data61 is also involved in several supply chain trials of blockchain technologies, although none is yet public.
In the public sector, the city of Melbourne is testing the use of blockchain with Australian startup Civic Ledger to allow citizens to trade parking entitlements. New South Wales is also considering how blockchain could be used to manage land title transfers, or to boost consumer protection.
Data61’s Turner said blockchain’s potential for contract clearing and record keeping could also offer local, state and federal governments a common reference point for new and open registries of data.
Major fork in the road
But on a recent visit to Australia, Gartner research director Fabio Chesini sounded a note of caution.
Although Gartner believes blockchain is important and that the business value created by the technology will reach $176bn by 2025 and more than $3.1tn by 2030, the application with most value over the next five years remains digital cash.
“Too many grand promises have been made about blockchain,” said Chesini, adding that most blockchain use cases were either aspirational or flawed.
“The only proven blockchain is bitcoin and, up to a point, Ethereum,” he said, noting that beyond digital payments, the market was currently “almost at the peak of hype”. However, Chesini predicted that supply chain deployments of blockchain would take place beyond 2030.
Data61 has warned that blockchain is not a silver bullet, and has certain limitations that should be considered before and during the design of new systems.
It also points to the emergence of new classes of computing, particularly quantum computing, which could have highly disruptive impact on the progress of blockchain and distributed ledger systems.
Craig Laundy, assistant minister for industry, innovation and science, said although blockchain’s waters had been “muddied with bitcoin and the dark web”, Australia was now facing a tipping point where blockchain could be a major fork in the road for the commercial sector.
Stressing blockchain’s potential to reduce friction in supply chains, reduce business costs and streamline international payments, Laundy said companies could embrace and invest in the technology – or ignore it and perish.
Not if, but how
Meanwhile, Australia is contributing to blockchain developments. It been tasked with managing the secretariat for an international blockchain standards push after Standards Australia’s proposal was accepted by the International Organisation for Standardisation (ISO). The first meeting was held in April 2017 and work is currently under way to standardise blockchain terminology.
“Ultimately, we will work towards supporting interoperability across different sectors,” said Mark Staples, a group leader at Data61 and lead author of a report that helps organisations assess the impact of blockchain on their operations.
In the report, Data61 highlighted four potential scenarios for blockchain’s progress in Australia to encourage “what if” discussions among potential users of the technology.
The first scenario, dubbed “regulation on rails”, imagines what may be possible if the public sector embraces distributed ledgers to manage identity, control fraud, deliver services using programmable money, and automate regulation.
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The second scenario imagines industry leading a push for internet of things (IoT) and blockchain to create an “internet of trust” that could be used to underpin new business models and networks.
The third scenario imagines more of a blockchain free-for-all, with little leadership, guidelines or standards.
Data61’s final scenario posits Australia failing to engage with blockchain and being left behind other nations and industries.
Data61’s Staples said he hoped Australia would end up embracing blockchain, which he believed would deliver huge economic value, not only in supply chains and asset management, but also in areas where safety or security is critical.
Australia’s treasurer, Scott Morrison, said the Data61 report demonstrated the profound impact that adoption of blockchain technology could have on delivering significant productivity, security and efficiency gains.
“We should all be answering the question, whether in government or the private sector, about how we can use blockchain developments,” he said.