Hadley Stern from Fidelity Labs in Boston explains how his team has been experimenting with blockchain and bitcoin.
For nearly four years, I have been deeply involved in the exploration of bitcoin and blockchain technology at Fidelity Investments. Our interest began in 2014, and has grown into a dedicated team that is researching and experimenting across different parts of our business.
Our journey is an exciting one. It has been difficult at times for me, but I have grown through the people I’ve met and the discoveries we have uncovered along the way. It can be daunting for me or any member of our team to take on a new challenge that is uniquely complex, specifically in an area that remains largely misunderstood.
We used a proven three-step method we’ve used at Fidelity Labs when exploring emerging technologies, which I will now explain in some detail for anyone who is looking for a way to get started exploring blockchains in their own organisation.
Blockchain and digital assets can take a while to fully understand and you really need to be willing to read, listen and experiment. When tackling any complex topic, I begin with reviewing and discussing the topic with credible sources I really trust.
We expanded several of our existing collaboration relationships with forward-thinkers, such as the Ideo CoLab and the Institute for the Future, and we joined working groups across industry and academia, with organisations including Harvard University, University College London, the MIT Media Lab and IC3. We paired this outside knowledge with our own analysis.
We also conduct user research with Fidelity clients and customers to gain an understanding of their interest and activity in this area, which has helped inform our pilots.
The experimentation I’m leading is part of a cross-Fidelity effort to explore and test ways to apply blockchain technologies to our business. When we started to explore the possibilities for capital markets, we started with the obvious pain points – specifically, money movement, transactions and payments. This really caught my interest as there was a lot of speculation about the day-to-day usefulness of digital assets.
We built a protocol to accept bitcoin in our employee cafeterias to test the transaction protocol. This early proof of concept was interesting work, but we ended up with just over 100 transactions.
‘Some of our testers told us they didn’t want to buy coffee in the morning with what they could use to pay for lunch in a few hours’
We had tried to create something new and solve a problem in an innovative way, but the price of bitcoin was rising during this experiment. Some of our testers told us they didn’t want to buy coffee in the morning with what they could use to pay for lunch in a few hours.
In this experiment, we observed the challenges of bitcoin as a utility, while so many in our user group saw it as an asset with value. What my team learned from the experience has helped us in our other projects. Be willing to build a prototype, put it in front of users, test it and learn from their feedback, then do it all over again.
I am often asked about our bitcoin mining rig. We stood up a mining operation as a learning experiment. What better way to learn about blockchain than to dive right into mining?
One of the pilots of which I am most proud is our work to make it possible for Fidelity Charitable donors to fund their philanthropy with charitable contributions of bitcoin and ether. Donors are now able to tap into a whole new asset class to support their favourite causes.
Through experimentation, we are learning about blockchain while diving deeper on bitcoin and other digital assets as an asset, protocol and investment. Be willing to challenge the conventional way of doing things. Provoke your team , and yourself , to continuously make changes and improvements.
My team has been hands-on with these technologies for several years now, and this work has involved people from across Fidelity. At every level, we’ve learned all about hashing, we’ve dissected the underlying concept of a blockchain, and we’ve met with outside academics and the people leading this revolution.
Build a team with the right people, from inside and outside your organisation, and then challenge them to stretch and learn.
Run experiments. Never stop learning. Don’t shy away from complex ideas.
The work continues
Our exploratory work has evolved from initial research to employee and customer pilots, to integration with Coinbase on Fidelity.com. We will continue our research into blockchain and digital assets and bring more pilots to investors.
What could all of this mean for financial services? Customer demand for information, guidance, and products and services in this area is high. We understand some interest may be price-driven, but we also recognise that many of the queries we receive are from passionate ‘HODLers’ who want to see us evolve our way of working to meet their changing needs.
By Hadley Stern
Hadley Stern is senior vice-president of and managing director at Fidelity Labs, where he is responsible for Fidelity Investments’ blockchain and digital asset incubator.
A longer version of this article originally appeared on Medium.