Data61 has its sights on a blockchain-based future

While it's no silver bullet, Australia's research body believes blockchain has the ability to drive both operational efficiency and structural change for the country.

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Data61 group leader and principal researcher Mark Staples demonstrates the Ethereum blockchain.

Image: Asha McLean/ZDNet

Although blockchain technology originally emerged to support new forms of digital currency, Data61 believes the underlying system that facilitates transactions such as bitcoin trading holds promise as a new foundation for transactions in society, in particular for voting, notarisation, supply chain, registration, and process coordination, in addition to payment-related services.

In a report compiled by Data61, with facilitated access by Treasury to get input from varying parts of government, the research organisation explains that as the services listed above are conventionally provided by specific trusted third-parties such as banks, legal firms, accountancy firms, government agencies, and service providers in specific industries, the application of blockchain has the potential to flip the trust structure on its head.

"With a blockchain-based system, rather than relying on third-party organisations we could instead choose to rely on the blockchain software and on a majority of the collective that jointly operates the blockchain system," the report, Risks and Opportunities for Systems using Blockchain and Smart contracts, explains.

The report looks at some of the technical risks and opportunities in the application of blockchain technologies within government and industry, and how to assess whether blockchain-based systems will meet critical requirements.

It's a warning for government, enterprise, and consumers that the technology is coming, and what to expect when it lands.

"It sort of feels to me now what the internet felt like in the late 90s," Mark Staples, group leader and principal researcher at Data61, said.

At the same time, Data61 highlights that blockchain is still a rapidly evolving technology, with ongoing developments required to improve scalability and confidentiality.

"There is still much that is unknown about the development of trustworthy blockchain-based systems. Further research is required to improve our knowledge about how to create blockchain-based systems that work, and how to create evidence that blockchain-based systems will work as required," the report says.

Speaking at the launch of Data61's two blockchain-focused research papers on Tuesday, the organisation's CEO, Adrian Turner, said Australia has the opportunity to be a world leader in and around the development of such technologies, pointing to the country's involvement in managing the secretariat of an international technical committee for the development of blockchain standards by the International Organization for Standardization.

"Despite the enormous potential here, there's still some issues and hurdles to overcome and it's our job to look at all sides of this, not only the opportunities but also the limitations," Turner said.

"It's not fully mature technology, there are limitations, but we believe the technology is here to stay."

According to the Risks and Opportunities report, in economies where trusted third-parties are not always trustworthy, a significant benefit of blockchain is seen as a way of thwarting immutability and non-repudiation. One such example was the shipment of 88 bales of cotton from Texas, United States to Qingdao, China, that the Commonwealth Bank of Australia, in partnership with Wells Fargo and Brighann Cotton, performed via blockchain in October.

In developed societies, however, trusted third-party organisations are usually trustworthy, so Data61 said the benefits of using blockchain technologies in an economy like Australia would likely arise from enabling faster business model innovation, reducing the cost of establishing business relationships, and perhaps reducing the cost or risk of transactions.

"For government, blockchain can be used as a common reference point to bring the other different levels of government in new registries of open data," Turner added.

The other report from Data61, Distributed Ledgers: Scenarios for the Australian economy over the coming decades, explores plausible applications of blockchain technology in Australia in 2030.

"Scenarios allow decision makers to consider if similar possibilities were to occur, what should they do to prepare for the future ahead of time," said Rob Hanson, senior research consultant at Data61 and the lead author on the organisation's scenarios report.

Such preparation might be to consider which blockchain to build on before delving into the realm of an immutable record.

Speaking at the research launch at Data61's head office in Sydney, Hanson explained that when looking into all of the possible scenarios of blockchain-based technology, the common element is one of trust.

"In order for people to deal with government through online transactions, there needs to be trust -- that government is going to do the right thing, that the system is going to do the right thing, and that the government is speaking to the actual person on the other side," he said. "We really think identity is going to be the next big thing."

He said such transparency will bring more credibility, as well as result in more people trusting government.

"Blockchain is not unlike many other emerging technologies; blockchain will work with many other emerging technologies in the emerging future, which is coming toward us," he said, noting that it needs involvement from many stakeholders.

"All technology is neither good nor bad -- it's how you use it at the end of the day -- so you need to think about how the bad guys are going to use it," he said.

It all centres on integrity, Hanson explained. He said it's trust that produces productivity from blockchain technology and the challenge for the community is to create data provenance in a world swimming in data.

"We get integrity, and we get that trust from blockchain because we lock information into this chain and we can't get rid of it at the end of the day," he said.

"When it comes to privacy, the challenge we have -- and we refer to this as toxic data -- if you get things into the blockchain and you can't get rid of it, or you can't change it, you could be facing risks that previously you couldn't.

"Blockchain is a larger part of the ecosystem; it's not a silver bullet."

Both reports took CSIRO's research arm nine months to prepare, after engagement with industry and government to inform regulatory, financial, and technical implications of adopting blockchain based-systems across various industries.

Contributing to the Risks and Opportunities report were representatives from the Reserve Bank of Australia, the University of Sydney, ANZ Bank, the Australian Tax Office, as well as the Sydney Stock Exchange, which announced a project recently that would see it instantly settle trades using blockchain technology with the help of Sydney-based Bit Trade Labs.

The Australian Trade and Investment Commission, with the backing of Data61 and the state governments of New South Wales and Victoria, recently facilitated a trip of 26 delegates to Consensus 2017 in New York to showcase what Australia has to offer in blockchain technology.

At the event, three companies from NSW -- Block8, AgriDigital, and Veredictum -- won a hackathon that saw the team challenged to use blockchain technology to create an application for improved safety in a future filled with autonomous cars.

Data61's Research into blockchain technology is funded under the federal government's AU$1.1 billion National Innovation and Science Agenda, announced in December 2015.

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