Dublin is at the forefront of global disruption being wrought by the evolution of blockchain.
The building blocks of blockchain that will impact a variety of industries, not only finance, are being formed in a new Deloitte blockchain lab in Dublin’s Silicon Docks.
For too long, blockchain has been associated with bitcoin, the cryptocurrency that has become its poster child for good and bad reasons.
‘For us, blockchain is about creating that single source of truth that multiple parties can have access to and have confidence in’
– LORY KEHOE
But the reality is that the technology holds the key to unlocking efficiencies in a whole range of industries, from food traceability to diamonds and art trading, to cybersecurity – you name it.
Blockchain technology, which underpins emerging digital, virtual or cryptocurrencies, consists of blocks that hold timestamped batches of recent valid transactions, which form a chain, with each block reinforcing those preceding it.
This creates an indelible, accountable narrative that could empower businesses and consumers in the decades to come.
Powering an exponential revolution
At the Deloitte blockchain lab in Dublin, a team of 25 developers and experts are hard at work on proof of concepts and prototypes for future services.
Leading the team is Deloitte’s head of financial services, David Dalton, and director Lory Kehoe.
“The plan is to grow the team to 50 people in line with how demand for blockchain goes forward,” explained Dalton.
The lab is a kind of mission centre for Deloitte’s plans for blockchain and how it advises clients, with Dalton and Kehoe playing a kind of ambassadorial or evangelical role in the subject. Leaders from a variety of industries worldwide stop by to stock up on knowhow and proofs of concept, while partners such as Bank of Ireland have set up a desk in the office, reversing the traditional client relationship.
Across the world, the range of opportunities for which blockchain can be applied are multiplying. Last year, for example, Barclays and Israel-based start-up Wave used blockchain to guarantee the export of almost $100,000 worth of cheese and butter from Ornua, formerly the Irish Dairy Board, to the Seychelles Trading Company.
The Deloitte Dublin blockchain lab has been at the forefront of some key breakthrough developments in blockchain in the last year.
Ireland aims to be at the centre of this blockchain revolution and, with that, the Irish Funds trade group is working with Deloitte to develop a blockchain proof of concept on regulatory reporting.
The project, which will focus on the Resident Investment Funds Return regulation, will develop technology to leverage blockchain and smart contracts to create a regulatory platform for both the reporting entity and the regulator. Irish Funds said this latest proof of concept will test the application of blockchain for enhanced compliance, increasing transparency and determining the cost of actually using this technology.
Also last year, it emerged that Deloitte and Bank of Ireland proved the use of blockchain technology as a way of tracing transactions in keeping with MiFID II regulations. The purpose of the trial was to understand the technology and assess how it can fit with Bank of Ireland’s legacy systems as a layer on top.
Dalton said that blockchain needs to be seen less as a cryptocurrency and more as a mechanism for enabling different things such as accountability and traceability.
“The best way to think of blockchain is as a distributed database technology that allows data to be shared in a way that is trustworthy, immutable and in a way that is as close to real time as possible.
“It is also a way to rethink how parties interact with each other on a level of shared trust and this could have a dramatic effect on a whole range of business ecosystems.”
These sectors could include food and pharmaceutical distribution.
“Blockchain could be essential for traceability and creating a secure supply chain,” Kehoe explained.
“For example, in manufacturing, it could be used for the secure tracking of parts or in defence contracts, tracing the origin of components. In other cases, it could be used in art registry, for example, timestamping onto the blockchain the time a piece of art was acquired.
“In the US, there is a lot of talk of using blockchain in gun control by linking health records to make sure weapons don’t fall into the wrong hands.
“In Ireland, there is a lot of support for the use of blockchain in the forthcoming Electronic Health Record to create a secure record but also give citizens a sense of control of their own data.”
The black box effect
According to Dalton, in technology terms, blockchain is still an immature technology but it is evolving rapidly.
Companies such as IBM are investing hundreds of millions of dollars into blockchain, and players such as Ethereum and the Hyperledger project are emerging as the new operating systems of choice for the technology.
In gearing up the team to be able to deploy proof-of-concept projects, the Deloitte blockchain lab, which sits alongside Deloitte Digital’s creative team, consists of a curious mix of front-end and back-end developers as well as a number of domain experts on various industries.
“One of the areas we spend a lot of time on is regulatory reporting. It sounds dull but it actually plays into the whole regtech field. Every time a new regulation or new way of reporting is required, a lot of banks approach it on a tactical basis and build a solution and end up with a load of old tactical solutions that pass their sell-by date. We see the opportunity with blockchain to extract the data from legacy systems and then, over time as new regulations come in, have the full dataset that you can then build the reporting around.
“The advantages of using blockchain over other technologies in this situation is that it creates a level of resilience that is really powerful. Think of it as the black box effect.”
I venture that such a blockchain-based black box technology would have been very handy in cases such as the collapse of Lehman Brothers in the US or Anglo Irish Bank in Ireland.
“We’ve built a number of working prototypes around MiFID II transaction reporting requirements and we’ve also built a proof of concept around liquidity coverage ratio, which would have been a key indicator during the time of the financial crisis.
“Another area we have spent time around is KYC – know your customer – which is still a paper-based process in a lot of banks when signing up customers to new services that require proof of identity.
“Using blockchain, we have come up with a way to make a utility out of that process by creating a hash of the data, providing just enough information to validate documents and speed up the process of signing up with another insurer or bank.
“Fundamentally, this changes the customer experience so they don’t have to provide paper every time. Eventually, this could sit as an app on your phone or watch and it can give you a level of control over your data in terms of who can use it as well.”
Ultimately, Dalton sees blockchain becoming more widely accepted as a mechanism in the wider IT world.
“We see blockchain as an exponential technology. In the beginning, it starts off flat but as it becomes used in areas like financial services, adoption will happen more quickly.”
Kehoe said that Deloitte’s global blockchain team is working with financial regulators around the world on creating the standards of the future for the technology. For example, Deloitte is part of the technical committee creating ISO/TC 307, the ISO standard for blockchain, which will no doubt kick it further down the road.
“Blockchain orchestrates who is in control of their data but it also creates a clear, immutable picture of a set of circumstances, and this could be transformative for a huge number of industries.
“For us, blockchain is about creating that single source of truth that multiple parties can have access to and have confidence in.”