‘Like the printing press’: Why these academics say crypto needs institutional reform

Could the emerging technologies of blockchain and cryptocurrency fundamentally change how the world functions and bring about widespread change like the steam engine or the printing press?

According to a group of academics from RMIT University’s Blockchain Hub, they could. In a report released last week with major crypto exchange Coinbase, they call for broad, institutional reform of Australia’s Web3 industry akin to the Campbell and Hilmer reports into finance and competition of the 1990s.

Professor Sinclair Davidson believes such reform could drastically change perceptions of Web3 technology.Credit: The Age

Professor Sinclair Davidson, one of the report’s authors, believes such reform could drastically change perceptions of Web3 technology, with the paper outlining a range of areas the academics believe could be improved by blockchain tech, including government operation, tax, and the country’s welfare system.

The Age and The Sydney Morning Herald spoke to Sinclair for our weekly series You, Me and Web3, which aims to examine, challenge and demystify the ideas behind the emerging industry by speaking to the people who live and breathe it.

Why are you interested in Web3?

I was introduced to the idea of blockchain by my colleague Jason Potts, one of the other co-founders of the Blockchain Hub, when he came up to me in 2016 and said, “Sinclair, have you heard of ethereum?” And I said, “Look unless they play those guys on Smooth FM, I’ve never heard of them”.

He quickly told me it was actually a new cryptocurrency like bitcoin, which I had heard of as I’d been introduced to bitcoin by the other co-founder of the Hub, Chris Berg, many years before. Unfortunately, I didn’t buy any of it at the time. Otherwise, I’d be on my cruise ship right now.

But Jason and I (also with Primavera De Filippi) decided to have a look at it and wrote a paper where we made the argument that blockchain itself is not a new sort of industrial technology, where you do things faster or cheaper, but instead it is a new institutional technology that’s going to allow us to do completely different things than what we were doing before.

And once we had that particular insight, we approached the university and said we were onto something here, and the senior management bought into it and gave us funding for a few years. So we set up the Blockchain Innovation Hub to look at all this from a social science perspective, not a computer science perspective.

You authored a report last week that’s pushing for institutional reform in the Web3 space. Why do you think Web3 needs that?

Our argument is that we’re actually looking at a structural break: the world that we’re looking at is fundamentally going to be transformed by blockchain technology. The world after the printing press was profoundly different from the world before, the world was profoundly different after the invention of the steam engine. Our view is that blockchain technology is the printing press and the steam engine on steroids.

This is because blockchain technology actually industrialises trust. If you look at the world around us, you don’t quite realise how much trust there is embedded in everything that we do as human beings. We’ve got auditors, government regulations, rules and norms, and all these things that we take for granted as human beings that are designed to create trust so that we can exchange and deal with each other. Well, we’ve now got a new technology that creates trust.

We’re incredibly optimistic that this technology is going to completely revolutionise how we organise our businesses, how we organise the economy, and how we organise society. We’re on the cusp of it, and we want to understand how that’s working. Australia is uniquely positioned to do well in the space, and we really wanted to emphasise that point.

In the report, you say it should be given institutional reform like financial services and competition policy was in the 1990s; isn’t it a bit of a stretch putting Web3 in the same bucket as them? Blockchain has been around for only 10 years or so years.

Shining a spotlight on Web3 could actually create greater levels of awareness and understanding as to the potential of this technology.

RMIT Professor Sinclair Davidson

That is true. At the same time, we’re thinking let’s get ahead of the curve. Changes in blockchain technology are occurring exceptionally rapidly, unlike so many other things that develop fairly slowly. Competition policy and financial services have had decades to evolve – this new technology is evolving over a period of years.

Web3 can go two ways: it can more or less be fully incorporated into the institutions of society, or it can all go dark, at which point it becomes a haven for criminals. So, that’s why getting ahead of the curve is important.

Is there not a risk that shining a spotlight on Web3 would just further undermine or highlight inadequacies in the space?

I don’t think so. Currently, there is an astonishing amount of misunderstanding around crypto. If you were to randomly select a general member of the public and said, “What do you know about crypto?” they’re probably going to say things like criminals, money laundering, scamming, and all sorts of stuff. And I don’t want to say there is none because obviously, there is.

But shining a spotlight on Web3 could actually create greater levels of awareness and understanding as to the potential of this technology as to what it can do, and also probably what it can’t do.

One of the things you highlight in the paper is about putting welfare onto the blockchain. How do you think using blockchain would improve the welfare system?

The government had a big go at trying to digitise the welfare system a while back and we ended up with robo-debt. It was a total disaster from beginning to end, an absolute disgrace. What blockchain can do is do that properly, do that differently.

With blockchain, you can create what are called zero-knowledge proofs, and you can combine those identity protocols, with real-life tracking of people’s assets and income. So when people’s current income falls below a particular threshold, the government tops them up, and when it goes above that threshold, the government phases it out.

With a combination of identity protocols, real-time asset tracking, and monitoring, you can maintain people’s privacy, you can top up people as the case may be, and you can withdraw funding as necessary. All without us having to go back into these clawback situations.

This would take a lot of work and effort. And quite frankly, I would not put government departments in charge of this, I would get the private sector to go out and design a product for the government who then buys back into it.

Given what happened with robo-debt, do you think people would trust blockchain technology any more considering its reputation? I can’t imagine there would be much public support for an idea like that.

That would be one of the reasons why you would have the spotlight. You would have a full-on review where people run the ruler over the industry to see that we can do this, we can build a safe, secure, privacy-enhancing, automated welfare system.

What would be the first step in getting this sort of reform on the table?

I would like to see (Liberal Senator) Andrew Bragg’s private member’s bill get a fair hearing, and then I would like to see the establishment of an actual inquiry and the appointment of a serious senior person to oversee it who is trusted by the blockchain community and by the government.

I would hope in a year that we would at least have in place the idea of this inquiry or even start to have reports being put out and getting Bragg’s private member’s bill up and running.

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