“Don’t talk about blockchain”
Last week I had the pleasure of attending one of the more in-depth meetups in Berlin, which revolves around the decentralization paradigm and it’s potential ramifications propagated by blockchain technology. The event is called Blockchain Nights and is hosted by the Humboldt University roughly every three months.
In this post we will take a look at all the different aspects that were touched upon in this meetup, which was titled “Stocks, Bonds and Real Estate — Security Tokens as Application Case“ and provide you with all the links to deep dive into the fascinating world behind each of them.
Now let’s get started!
Empowerment with Smart Contracts
First up as a speaker was Robert Muth, a research associate at the Institute of Software Engineering and Theoretical Computer Science at the Technical University of Berlin, who got started by describing the lack of trust we have nowadays when it comes to the intersection of political and technological spheres.
More precisely, he talked about two problems that he sees as emblematic — electronic voting and political promises.
Voting via electronic means is regarded as extremely dangerous and not realizable by many experts, especially due to the fact that most electronic components can never be 100% fully secured.
The example Muth gave, was the known issue with Russian election meddling and the larger angle of attack this would provide them with.
As for the political promises, he described how frequently the promises made by leading politicians aren’t being kept, for example when it comes to the infamous upload filter that the German government coalition didn’t want to introduce when writing their coalition agreement — nevertheless 2 years later, they were indeed voting in proposition for them in the European Union.
Muth sees a problem of trust at the core in both of his examples and how blockchains can potentially act as a filler in this void of trust. He then proceeded to present a Berlin based blockchain initiative called BBBlocksberg (a fun word game for the Germans).
With this project (for which there currently is unfortunately no online presence), he tries to bolster residential participation, empowerment through voting and innovative incentive systems with tokens.
Adoption — Blockchain and Real Estate
Next on the speakers list was Gonzalo Sanchez Slik, the Head of Business Development at Brickblock.
Brickblock started out with the ambition to tokenize real-estate assets, but eventually pivoted and are now all-in on real-estate funds.
Slik kicked of his presentation by describing several obstacles that he sees especially in the real-estate sector when it comes to blockchain technologies:
First of all, this industry is overall very conservative, with a long term focus and very risk averse attitude. This attitude leads to a very negative reaction when people from this industry first come into contact with blockchains through the “Bitcoin funnel” aka the appearance that everything blockchain IS Bitcoin and therefore volatile, scammy and not very trustworthy.
He went on to elaborate how the managers of these large real-estate funds also have a different understanding of time, as in that fast in their world might be a couple of months, while fast for the rest of us in the blockchain space has a completely different proportion. Last but not least, he explained the risk-averse attitude through the question he is often asked by the managers: “Why do we need you?”
After Slik talked about all these obstacles to blockchain adoption in the real-estate sector, he went on to present the solutions Brickblock has found and applied.
The first solution focused on the point that “you only need one yes”. This refers to the fact that quite often you only need one little stone to get a Domino-effect started, in Brickblocks case this happened to be Peakside Capital, which will start a €200 million heavy fund using their technology. The positive aspects of this will be a fast, automatic and secure execution of processes, in a transparent and reliable way.
In order to get the managers in this industry to fathom the potential efficiency gains and the way blockchains work, he said that it was essential to hold their hands and guide them slowly into this new technological realm.
His next point might be the most important one of all — don’t talk about blockchain. He elaborated this point and made it clear that quite often we, who we are in this fast moving and complex space, often tend to underestimate the huge lack of proper understanding what this technology is and where it’s great potential lies. In order to get ordinary people (without a computer science or advanced cryptographics degree) to embrace the technology and use it, it might just be best to have it work its magic under hood, without screaming “this is blockchain” into the world.
Last but not least Slik stressed the importance to present this new technological paradigm rather as a “just another tool”.
Finance 4.0 — Sustainability Actions as Tokenized Asset
The next speaker was Mark Ballandies, a research associate at the Institute of Computational Social Science at the ETH Zürich. His talk revolved around the concept of Finance 4.0, a new holistic concept that tries to nudge people towards sustainable and healthy choices and actions using token-based incentive systems running on Distributed Ledger Technology (DLT) systems.
Ballandies calls this approach distributed sustainability and started his presentation showing us this video:
Afterwards Ballandies elaborated on his reasoning to use DLT systems for the purpose of nudging people towards sustainable choices. By understanding the inherent workings of different tokenized systems, he created a taxonomy of tokens.
Looking at the conceptual architecture of prominent blockchains, such as Bitcoin or Ethereum, he pinpointed how it is the people that help finding consensus in these networks through employing their hardware (or staking their tokens), who benefit from the actions that are taken in these systems.
His vision is to extend the rewards given out to not only the people who enable consensus in these networks, but also to reward positive behaviour in the real off-chain world. As described in the video, one could earn tokens for performing certain actions and then proceed to use those tokens for other goods or services.
He went on to describe a couple of potential use cases for this new approach, such as supporting a time bank scheme for helping neighbors, elderly people, etc.
If you feel like reading more about this interesting new approach, be my guest.
Translating the legal world into a smart contract: Applying Swiss law to the blockchain
Up last was Samuel Brack, the co-founder and COO of a company called BlockState.
Their project is building a platform for offering security tokens. These kind of tokens represent complete or fractional ownership of a physical asset (for example a barrel of oil, a diamond, or a stock in a company).
Using the Ethereum blockchain, Brack presented how they use the token standard ERC1400 to create these security tokens.
Since Blockstate is located in Switzerland, there are a couple of very important legal aspects that they have to keep in mind, one of them being a very big risk from my personal point of view — Swiss law requires a company to be able to seize assets from their clients if needed.
Especially in blockchain context, this seems rather difficult to fit into the whole immutable ledger discourse. Brack calls this possible intervention “God mode” and defended it, saying that it leaves traces and therefore is somewhat transparent. I’m not too convinced though.
A very interesting aspect of his talk was the way they design their security token though. He pointed out that since the legal context is always prone to changes, this presents a potential problem when it comes to the smart contract that governs the security tokens. They therefore opted to design their security token in a way that only the transfer logic is an inherent part of the smart contract , and the complex business logic is constructed as an additional layer that can be changed.
If you want to deep dive into the world of security tokens, just click right here.
This interesting meetup ended with a panel discussion revolving around the possible implications of the automation of law, which was hotly debated.
I hope you’ve enjoyed this brief recap of this interesting meetup, if you have any questions, remarks or feedback, feel free to let me know.
All the best
Till
