Rob Knight — on the Internet of Agreements project

Full video and transcript below.

On April 10th, Mattereum hosted the third Internet of Agreements® (IoA) conference at the Google Campus in London. IoA® is a vision for global supply chains and logistics, integrating national laws and regulation with international commerce through the application of technology such as blockchains and smart contracts.

To kick off the third IoA 3 conference on the theme of digital identity, Rob set out the background to the conference series and elucidated where the Internet of Agreements fits within the evolution of the Internet in society. He divided its history into three eras — the Internet of Ideas, the Internet of Commerce, and the Internet of Agreements — and briefly described how the underlying technology manifested these changes.

In his explanation of the Internet of Ideas, he emphasized that since the early Internet was only used by specialized organizations to communicate with one another, there was little to no encryption. He then explained how the invention of the World Wide Web caused an exponential increase in users by providing a more intuitive interface to the Internet. Naturally, the “browsing” capabilities combined with the exporting of the credit card system onto the Internet via cryptographically secure channels precipitated a boom in the commercialization of the space which has given birth to the some of the world’s largest companies — the Internet of Commerce.

Regarding the Internet of Agreements, Rob explained that the majority of global trade and finance do not operate on the credit card system but on purchase orders, invoices, and other contractual frameworks involving multiple parties over time. Blockchain is potentially an ideal infrastructure to facilitate this with its long-term storage, recording-keeping of signatures, and capability to program conditions of a deal using smart contracts.

He then concluded by describing the role of identity throughout the evolution of the Internet — notably how the space has been quite “Wild West” since its inception — and suggests a potential solution to the damages of identity fraud and the caveat emptor practice by way of identity insurance. The Identity Insurance Consortium helmed by Mattereum and other projects that were present at IoA 3 is exploring this path.



Thank you, and thank you very much, Lloyd, for that introduction. I just want to start by saying thank you to everyone who’s turned up. I remember saying at the end of the last conference that everyone should go away, tell their friends what a wonderful time they had at this conference, everyone was amazing and interesting and smart and beautiful and it was the best time they’ve ever had, and that people should definitely come to the next one. I’m glad to see that that worked, and that we now have another bunch of interesting and beautiful and smart and intelligent people to have another day with.

I just want to begin by explaining what we mean by the Internet of Agreements. Because we’ve had two conferences and this is the third conference now on this subject, and I don’t think we’ve ever really spelt it out at the start of any of the conferences, which is probably an oversight on our part, but the concept is really fairly simple. As Lloyd mentioned, we kind of began in 1973 or so with the origins of the Internet: a bunch of universities begin to hook their computer networks up to each other, we get scientists and we get researchers and we get academics all talking to each other, all communicating, and building new services, building new products, building new tools to facilitate that communication. We get things like email, we get things like FTP to be able to send files around, we get newsgroups, and what these things have in common is that they’re unencrypted, for the most part, they’re there for the transfer of information, and they’re there to facilitate the life of the mind.

Towards the end of this period we have a particular researcher at CERN called Tim Berners-Lee who invents the World Wide Web, The World Wide Web is an advance over the previous technologies, because it’s much easier to use, it’s more visual, and it’s something that regular people can kind of understand, and so you get a major new adoption of the Internet by a whole bunch of new people, regular people. If you’re a business, a service like that that has a whole bunch of regular people using it looks an awful lot like a market, it looks like people that you can sell to. So we kind of go through a few years of intense development around things like cryptography, to be able to get just enough encryption in place that you can send your credit card number across the Internet without anybody stealing it. We go from a situation where people were mostly exchanging ideas around, completely in the clear and with no encryption, to a situation where people are conducting commercial activity, this requires cryptography, and this gives rise to the Internet of shopping. You get the World Wide web plus some cryptography, and you can now, as a consumer, go to a website, browse a bunch of products, select the product that you like, add it to a shopping basket, go to the checkout, enter your credit card number, enter your name and address, complete the purchase, and those goods will then be shipped to you.

There’s a kind of technological determinism at work here, because the technology that we had at that time was a very good fit for that kind of experience. If you think about the experience of going to a shop or going into a supermarket or a clothes store, you browse around, you see what’s on the shelves, you see what’s available, you have a look at a few things, you decide the things that you like, you put them in a basket, you take them to the checkout and you pay for them. That kind of browsing around, having a look at things, selecting the thing that you want and going through a checkout process is very well supported by the Web; the Web browser is a browser, it’s for browsing, it’s the same activity that you’d do in a shop. The thing is that this turns out to be a giant chunk of the economy, like huge amounts of what we actually do in city centres and shopping malls and things like that is exactly that experience. So we’ve had the second great age of the Internet, after ideas came shopping, and we’ve done the last 20 years of basically taking anything that you could do with a credit card by going into a store somewhere, we’ve taken that and put it onto the Internet.

Catalogue shopping, the retail experience, has now been kind of replaced with the ecommerce experience. Instead of going to a supermarket or a bookstore, you can go to Amazon; instead of going to Blockbuster, you can go to Netflix; if you want to book a hotel, you can do that through any number of booking sites, or you can even book someone else’s apartment through something like Airbnb. Uber, Netflix, eBay, all of these businesses are enabled by this one fundamental innovation of the World Wide Web, the browsing experience to find the thing that you want, and a little bit of cryptography so that you can send your credit card number to somebody.

It sounds pretty simple, but off the back of this we get several of the world’s largest companies by market cap, they come directly out of that innovation. We also get Google and Facebook coming out of that, because they exist to advertise to that market of people. All of those people sitting at home with a Web browser and a credit card, the Google and Facebook business model is to figure out who those people are, figure out what those people want and advertise to them. This has created multi-multi-billion-dollar companies, and there’s now a race on between the world’s largest technology companies to see which will be the first to get to a trillion-dollar market cap, the current speculation is maybe Amazon will get there first. And it’s worth remembering that Amazon’s entire thing is that they know what your credit card details are, and they have a giant selection of products that you can buy.

What can’t you do inside that paradigm? What things are not a good fit for the Web and a little bit of cryptography that lets you send your credit card details? Well, most businesses don’t actually make their purchases using credit cards; they use purchase orders and invoices. Most finance isn’t done using a credit card. If you want to take out some insurance, if you want to take out a loan, the Web and credit card paradigm isn’t a very good way of doing it. Because the Web is very good at this kind of ephemeral, you look, you see that the product is available and you buy it kind of experience, which mirrors the shopping experience — you see something that you like in the shop, but you come back next week and it might not be there anymore — but for things like invoices, for things like insurance contracts, they live over a much longer time period. An invoice might take 90 days to pay, and it might fall under a contractual framework, a master services agreement or a longer-term contract, that may run for years. If you take out insurance on your home or on your car, it may be years before you make a claim. How many websites can guarantee that a webpage that you see today is still going to be there years from now? There is no real assumption that webpages last for a very long time, or that they make any guarantees that the information you can see today is going to be there tomorrow. We have things like the Wayback Machine and which kind of do their best to keep copies of all webpages, but pretty much anything over a certain age is now gone, very few things that were there 20 years ago are still there. But there are definitely people who took mortgages out 20 years ago who still got those mortgages.

So what we need to be able to address other areas of the economy outside of retail is something that is a better fit for those kinds of systems. We need something that can store information for the long term, we need something that has a notion of who are signatories, who are the parties to a contract, or who are the recipient and the sender of an invoice, or who are the parties to an insurance contract or a master services agreement. Many of those things are conditional: with an insurance contract, you don’t know if you’re ever going to make a claim, the best case scenario is you never have to, which is very unlike a credit card payment where you have a very distinct expectation about exactly what’s going to happen and you expect it to happen pretty quickly. So our key criteria are long-term storage, some notion of who the parties are, with some kind of signature system, and some ability to model conditional events that are going to happen based on logic. This sounds an awful lot like a blockchain. If you look at the Ethereum blockchain, it has long-term storage, digital signatures so that every record that appears on the blockchain has originated and had been signed by a private key, and you can model the conditionality in smart contracts; you can write logic in a smart contract, the same way you would write logic into a legal contract.

Our prediction and our view is that this gives rise to what we call the Internet of Agreements. Just as the Web was the perfect technology to bring shopping onto the Internet, the blockchain enables us to bring invoices, it enables us to bring insurance contracts, it enables us to bring supply chains, personal finance, business-to-business, all of those areas of the economy that are quite difficult to model just using the Web become much easier to model when you have things that look a bit like blockchains. This turns out to be a much larger share of the world economy than retail is, so the stakes here are extremely high. We’re just coming to the end I think of a sort of 20-year cycle of moving all of the shopping stuff from the offline world into the online world. There isn’t going to be another Amazon, there isn’t going to be another Uber, there isn’t going to be another eBay, there isn’t going to be another Airbnb; we’ve kind of got our major big brands, our major big institutions of online retail. But we don’t yet have our major online institutions of banking, of insurance, we don’t have the new competitors in a whole series of spaces — in business-to-business, in supply chain — we don’t know who is kind of the Amazon of this new era yet, we don’t know who’s the Google or who’s the Facebook. But if the past is any guide, we are at the beginning of a process that is going to end 10–20 years from now with massive, multibillion-dollar companies being born, huge reworking of how our economies work, how our techno-social systems operate, and it’s going to be in these areas. We’re going to go into finance, we’re going to go into supply chains, we’re going to go into insurance, we’re going to go into all forms of interpersonal and intercompany contracts, because we now have the technological tools that enable us to do it, which we just simply didn’t have 20 years ago.

So when we talk about the Internet of Agreements, this is the process that we are talking about. We are talking about the process of rewiring the world essentially onto a new technological platform, and the reason we’re doing it now rather than doing it 20 years ago is that we didn’t have the technology to do it 20 years ago.

In each of these conferences, we’ve looked at areas where this new technology intersects with other systems. In our first conference we looked at the intersection between this technology and the legal world, in our second conference we looked at world trade, and in this one we want to look at identity. Because if you want to make an agreement with somebody on the Internet using a technical system, you need to know who that person is; specifically, you need to know that if they don’t do what it is that they promised you, that you can get some kind of recourse against them. If we’re completely honest, the Internet has always been pretty bad at this kind of thing. Economists like to talk about high-trust societies and low-trust societies, and in a high-trust society there are good institutions, you can rely on people, if you make an agreement with someone you can expect that they’re going to keep it, because everybody kind of knows that there are rules and those rules tend to be enforced, either by social systems or by the law. The Internet has always had that kind of air of Wild West about it. Generally speaking, if you receive an email with a business proposition and a contract that somebody would like you to sign, you’d be pretty well-advised not to sign it. It’s probably from a Nigerian prince and they’re probably offering you great rewards for conducting this activity, and we don’t have a very good way of allowing that person to prove that they really are a Nigerian prince and that they really do have millions in a vault somewhere, and they just need you, as a specific individual, to help them to recover their money — it’s very hard for them to prove these things.

We have one set of approaches of doing this, which is the kind of Facebook approach, which is to collect a huge amount of self-declared information about people, to look at their social networks. We’re seeing I think right now in the news the downsides of that approach, the fact that it doesn’t work very well for a whole bunch of things. A lot of the people on there are not who they claim to be, they may in fact be paid agents of a state or of an organisation that exists to try and influence you. And if you are a real person, you really don’t want to be disclosing all of your information completely accurately to Facebook simply for the benefit of being allowed to poke people or post on walls or whatever it is that you do.

So we are at a situation where in order to do real business, we need some kind of breakthrough in identity, we need a way of making this work. The traditional tech person’s approach to this kind of thing is to think of one amazingly elegant system that works for all possible use cases, with perfect privacy and perfect security, but also perfect disclosure of information to everybody else where you want to have it, and I think what we’ve learnt from the past is that that perfection is very, very hard to achieve. We could achieve perfect knowledge of who everybody is and what they do and their claims, if we’re willing to accept total surveillance of absolutely everything, everybody’s relationships with everybody else and everybody’s activities, but in reality we don’t want that. So we have to accept that this is a situation where people want to defraud other people, there are bad actors, it’s an adversarial system, it’s the Wild West out there, and the blockchain space is a very good example of this. We see regular scams and frauds, misrepresentations, people posing as other people, people inventing entire other identities, people inventing whole teams — plenty of ICOs have gone out with pictures of Hollywood actors as the team members — fake identities, fake LinkedIn profiles, this stuff happens all the time. I’ve even seen people impersonating me, which is not a thing that I ever expected but it has happened. The first time it happened, I thought it was really flattering, I thought “Wow, I’ve arrived! I’m at the point where now someone thinks it’s worth impersonating me!” but by about the fifth time it happened, it was less amusing.

So, we have this very difficult path that we have to find. If we go down one approach, we have the Wild West, caveat emptor, buyer beware; if we go down another path, we have perfect surveillance, absolutely everybody is being snooped on at all times, in order to make sure that you are who you say you are. We need to find that middle path, which is to allow people to trust each other, or to at least trust the information that they’re being presented, without necessarily requiring scanned copies of everybody’s passports before they’ll even talk to them. We’ve been doing some work, Vinay has been pioneering this idea on an intellectual level, and we’ve begun to put together a consortium, to discuss whether it’s possible to use insurance as a mechanism to bridge this gap, such that rather than having to verify every single aspect of another person’s information before you’ll deal with them, it’s possible for that person to insure that information so they can present a set of insured facts to you, and you at that point are relying on the due diligence of the insurer, rather than having to perform all of that due diligence yourself.

This is one approach, I’m sure we’re going to hear from other people who’ve got other ideas about how these things could be done, but what this event exists for is a forum to bring together people from the tech world, from the world of finance, from the world of law, from the world of government and further afield, to try and get those perspectives out, to try and work out how do we move forward. Throughout the course of today, I think we’re going to hear from people who are building identity products, from people who understand the legal & compliance requirements, from people who are in the insurance world, and they’re going to present their understanding and their perspective, and hopefully in the discussions that happen around the conference, we can try and form that into a cohesive view that everybody understand.

I think I’ve probably run slightly over time so I’m going to conclude here, but I’m greatly looking forward to the conversations today, I’m hoping that I get a chance to speak to pretty much everybody here. Please come and talk to me about what Mattereum is doing or about the identity insurance consortium, and I hope you all have a wonderful and stimulating day — thank you! [applause]

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