Putting Blockchain to Work at HKUST
Vitalik Buterin is the 23-year-old co-creator and inventor of Ethereum, the blockchain-based platform for running smart contracts. Earlier this year, the Business School welcomed Buterin for an interactive dialogue and a workshop that took students through the process of developing a simple contract on Ethereum.
Where is Ethereum in its evolution?
“We are at an early- to mid-stage now. The technology is well established for some things, but for applications that really try to reach the mainstream with many millions of people, it’s not at that stage. You still need another, maybe, two to five years for the tech to get there.”
Do you see new forms of business being made possible by Ethereum?
“One of the ways I think about blockchain is as a very low-cost and low-infrastructure-intensive way to create economic institutions. What this means is, groups of people who might not have had the resources to cooperate with each other, before, or might not have had the ability to coordinate, communicate, and secure trust between each other, may now be able to much easier. So I could see blockchains being useful for people looking to start businesses in the developing world, or internationally, when you have five developers scattered across five different countries. In general, anything that’s underserved by existing markets.”
How closely is blockchain technology tied to cryptocurrencies?
“I think cryptocurrency is definitely the first large application but it’s only one of many. There’s also stuff around the Internet of Things, there’s smart contracts, peer-to-peer insurance, financial agreements, identity management, and other things that are not part of the financial space at all. Cryptocurrency is going to end up having some role in a lot of these applications even though they are not necessarily going to be ‘about’ cryptocurrency. It’s like shopping in stores; stores can’t function without money but you don’t really think of stores being about money.”
What are the obstacles to the widespread adoption of blockchain technology?
“I’d say there are three major challenges. One is security, and I’d say there are several major categories of security. One of them is security of the protocol, just making sure the blockchain doesn’t break in half. The second is the security of smart contracts on the blockchain. The third is the security of the interaction of users with the blockchain. Outside of safety, privacy is one. Can we come up with ways to use the blockchain, while minimizing data leaks but still getting all the benefits we want out of things like smart contracts?
And the third is scalability. Basically, right now the way blockchains work is every computer in the blockchain network processes every transaction. This also means that the entire network cannot process more transactions than one single computer - which starts to make it look a bit limited.
I think all three of these issues can be resolved, say over the next three to five years, and that will really enable the next major wave of applications.”
How did your interest in blockchain develop and lead to your role in the creation of Ethereum?
“I first heard about bitcoin back in 2011. I was already interested in some of these topics; I was interested in cryptography, economics, all this stuff. At first, I was actually skeptical because I thought this was a currency backed by nothing, so why would this possibly be valuable? But then I was attracted to the idea that a community of people could basically create this fundamental financial institution, a currency, completely from scratch without relying on any existing established systems. And that this was something you could build an entire economy on top of. I remember that felt very empowering.
At some point at the end 2013, I realized there is so much other stuff you need to rethink how you’re going to build a blockchain in order to support all of this. So I came up with this idea of a blockchain that contains a general purpose programming language. So for any application that you have you can encode the rules of that application into a piece of code, upload the code to the blockchain and run it. And Ethereum started from there.”
Which Applications Are Real?
May’s BizInsight@HKUST Lunch Seminar on ‘Blockchain in Business’ was addressed by Richard Vibert, Investment Associate in Arbor Ventures’ Hong Kong office, specializing in blockchain and big data technologies, and Jehan Chu, Managing Partner at Jen Advisors, an early-stage blockchain-focused venture capital fund.
Vibert presented an overview of the real-world use cases of blockchain technology in a number of areas including digital currency, payment and supply chain. Broadly assessing its potential, he said: “What we’re talking about is Internet No. 2.”
Chu spoke on the theme of ‘Liquid Equity: Tokenization and the future of Blockchain-based Capital’. He described how this new technology democratizes access to capital and to the capacity to store capital.
“Bitcoin and cryptocurrencies do this by divorcing identity from the process,” he said.