BUILDING VALUE

2019 MARKS THIRTY YEARS SINCE VISIONARY SCOTT STORNETTA SAT DOWN WITH HIS PARTNER STUART HABER AND FLESHED OUT AN IDEA THAT WAS TO BECOME THE FOUNDATION OF BLOCK TECH. HE IS ENDEARINGLY REFERRED TO AS THE FATHER OF BLOCKCHAIN, AND IT IS A TITLE HE CARRIES WELL –HIS OPINIONS ARE ALWAYS ‘GLASS HALF FULL’. SCOTT STORNETTA IS CHIEF SCIENTIST AT YUGEN PARTNERS, A VENTURE CAPITAL FIRM BASED IN NEW YORK CITY THAT WILL BE INVESTING TENS OF MILLIONS OF DOLLARS INTO BLOCKCHAIN COMPANIES. HE SPEAKS TO KATY MICALLEF.

Stornetta’s revolutionary building blocks have since given rise to an advanced, digital world that has already infiltrated a variety of industry, shaping even the most ordinary facets of our lives. As he celebrates the anniversary of one of his most important pieces of work, I ask him how he sees the next chapter of history unfolding for blockchain applications.

“The first thing that really emerged was Satoshi’s efforts, in a sense he attempted the highest degree of difficulty in the project. I think there are many easier things to accomplish than just trying to create - almost out of nowhere - a viable alternative to traditional fiat currency.”

Stornetta goes on to explain that we need to forge realistic expectations, taking into consideration that different types of applications and use cases are going to emerge in different time frames.

“There is plenty that is going to emerge in the near-tomid-term, so the ongoing modifications to some of the earlier entrants, including Bitcoin, are attempts to re-tool for more difficult things, such as cryptocurrencies. There are plenty of things happening now that are somewhat less challenging. The so-called lower hanging fruit is where we’ve seen plenty of progress.”

One of those fruits concerns one of the most fundamental uses of the blockchain, which is simply to provide a more credible audit record and corporate governance control within existing corporations – this says Stornetta, is an often overlooked initiative.

Other much larger gumptions are efforts to reduce settlement and reconciliation costs in the financial services space and moving real-world assets onto the blockchain, something which it hasn’t always been economically possible to create liquidity for.

They might not be the most exciting applications in terms of people trying to think outside the box, but Stornetta has absolute confidence in their ability to unlock value, saying: “It takes very little leap of faith to see those cases are full of social benefits.”

Another nuanced problem is creating the right sorts of incentive systems for peer-to-peer social media applications, which Scott thinks offer tremendous opportunity but which are very difficult to get right. The idea, he says, is to challenge the current revenue streams, often advertising-based, to become more beneficial to the population participating in the social media network.

“By having incentives and reward systems that embody a token, there’s the ability for participants to feel that they are helping to create and sustain the social media network - to be the recipients of much of the value creation.”

Speaking of social media, I can’t help but bring up the intriguing plans rumoured to be in the works for social media giant, Facebook. The company is thought to be contemplating a stablecoin-driven scheme that will allow users to send money through WhatsApp.

While Stornetta is cautious about opining on something before it has been fully revealed, he believes a stable currency might be something the company may try to bring forward, especially in light of their vast database of users – users who would most likely want to engage in some kind of inter-party commerce.

A long-term ideal will be the possibility that a decentralised operation will in turn reflect a more peerto-peer or middle-class situation, where the owners of the system really reflect the users.

The concern is the assumption that if an entity that has a strong dominant position, such as Facebook, were to introduce a stablecoin it would be governed not by users, but by a strong concentration of powered capital, which may fail to live up to some of the ideals we have of cryptocurrencies.

“Is that good or not? I guess I would have to come down on the glass is half full side. Getting a stablecoin right is a very tricky thing, progress in getting the algorithms’ right is still progress. Seeing viable, successful stablecoins, I think that helps prove the research agenda alone, just to see something emerge - in that sense, I feel: the more the merrier.”

Stornetta is at pains to point out the unfairness of assuming it will be a fully centralised component, especially before the project has been officially revealed, and has little sympathy for anyone that condemns a company for creating something that people like a lot and use a lot, but that doesn’t go far enough towards the ideals they’d like to realise.

“I think what’s more likely to be the case is there will be some nod to decentralisation but it will not be taken as far as some of us would like.”

As he surmises though, there is nothing to stop someone from bringing those ideas forward into a more realised project, something which he believes is at the heart of value creation and adoption.

“If we haven’t found the right value creation, it only means there’s more room for those that can think of a better mousetrap. Rather than complain about something Facebook may or may not do, let people try all the ways they can to make this work - to find a way to entice users in their self-interest to go one way or another.

“There’s something about ideals that just feel right, and they create aspiration in us - as humans, we want a better world. But the way to get to a better world is to demonstrate that the ideals themselves have genuine power in creating value.

It’s so early in the game that it would be nice to see some success scenarios of whatever flavour - because I think they would advance the agenda for all of us in trying to understand what can be done. What I’m striving for is an economic community where we can pursue our self-interests but are also looking out for the interests of our neighbours, and I feel that that’s a fundamentally more value creating and viable future for how we relate to each other economically.”

His quiet positivity and generosity of spirit belie what is, in fact, a deep commitment to the innovation and creative development of this sphere. True to form he ends on a reflective note, saying: “As a friend of mine once counselled me – don’t tell me what you’re against; tell me what you’re for.”