Mike Taylor - Blockchain technology and digital transformation

Welcome Mike, thanks for being with us today. I understand that you, just like myself actually, found your way into the tech space by joining an early blockchain startup. Can you tell us a little bit more about that, about how you entered the space, how you became interested in the blockchain?

Mike Taylor: Of course, yeah, thanks for having me, Tim. You know, how I began in this space is a really great question. I actually have a really unconventional background. I’m an architect by training. So, I went to both business school and design school and started working for urban design firms on a lot of smart city projects. These projects generally made use of emerging technologies in the urban realm, so I had some exposure early in my career designing alongside things like autonomous vehicles, machine learning, connected devices and decentralized networks.

And then in 2016, I joined a budding startup called Modem, here in Zurich. So, at the time, Modem had just won their vertical and kickstart accelerator, and was starting to work with pilot customers. I came in at employee number five and stayed with them for about two years until product launch. So now you can look them up, modem.io, they're offering supply chain solutions for sensitive goods in transit, and they monitor these by using a proprietary IOT device that's blockchain enabled. So, after this experience, I was really excited and eager to keep working on blockchain concepts, strategies, venture building and implementations. So, I joined Verum Capital which does all these things and in my unbiased opinion, is the best advisory there is for blockchain projects.

Tim Butara: Nice way to finish this section, yeah. Nice, it's very cool to hear from someone who's really experienced in the blockchain but who didn't actually start out his career in tech. You know, you said that you were an architect and a designer by trade, and you kind of entered this place because you were interested in it, you saw the potential in it, and that's very similar to my experience actually, so I think we're in for a really great chat.

So okay, let's talk about the main topic today, which is blockchain. Can you first give us, like, a brief overview of blockchain, its history, some early use cases etc. and maybe a special focus on like the initial idea or the first early hype around it?

Mike Taylor: Of course, maybe I can start by taking a step back. Distributed ledger technology (DLT), is the more accurate umbrella term for the technology we're talking about today. It refers to a decentralized database that stores a registry of assets and transactions across a peer-to-peer network. So, it's a public registry of who owns what and what transactions they make.

So, when we talk about the blockchain, this is more accurately a protocol that describes a specific way of packaging and structuring data in this ledger. So, in a blockchain, all the transactions written to the ledger are secured through cryptography. Over time, the transaction history gets locked into blocks of data that are cryptographically chained together, and secured to make an immutable record of these transactions that is impossible to forge. So, the blockchain is really great because it allows you to store records for digital assets, like cryptocurrency, but these could also be, digital assets that can also be things like a title or a certificate or a contract.

In one of the first Ted talks about blockchain technology, Bettina Warburg described it a little like this, she said,” you can think about the blockchain kind of like Wikipedia, it's a place where we can all write information, but that information is consistently verified by a community of users so that false information is eradicated as soon as possible.”

Tim Butara: Oh nice, it's really cool that actually one of the first talks about this technology was one of the most accurate ones and one that you can still draw these sources of inspiration from and maybe one of the most accurate definitions of what the blockchain is actually, you know, equating it to Wikipedia and seeing it not just kind of a type of software but a kind of different type of storing any kind of information basically, any kind of digital asset. And if I understand it correctly, bitcoin was one of the first uses or one of the first associations with blockchain, but how did things evolve with that and after that?

Mike Taylor: Yeah, it's a good point, I mean certainly some of the earliest discussions about blockchain can be the clearest and I think since then, we've had a lot of people have a really hard time unpacking or separating blockchain from bitcoin. So, the first blockchain of course, was the database on which every bitcoin transaction was stored. Since the bitcoin network began in 2009, its blockchain has come to hold about 300,000 gigabytes of data, and this data relates specifically to every bitcoin transaction ever made. But in the original documents, the original white paper describing bitcoin, this new database for this virtual currency wasn't called a blockchain, it got this name over time because as I said, the transactions coming into the network were grouped into blocks of data and then chained together using cryptographic functions. So over time, what this original network, what the bitcoin blockchain showed us, was a really important underlying principle about DLT generally.

When we have a decentralized ledger put into place, there's no central authority controlling it. Rather, everyone who is part of the system shares and controls the information that is stored. So, what this means in practical terms, is that if you're participating in this network, you don't need to trust a middleman to handle your transactions, you can transact directly with other participants in the network, without needing to raise questions of trust.

So, for this reason, blockchain has become a bit of a social movement, especially for early bitcoin or early cryptocurrency investors, and I think the reason for this is that the people using the system, have in large part been also the ones who are making it run. So, the more we as kind of regular individuals learn about blockchain and the less futuristic it seems, generally the more empowered we can feel by it. I know that sounds a little insane but I do think people, when they start to understand and interact with blockchain, they do feel more empowered than they would by working with conventional software or a centralized IT system.

Tim Butara: Well, I think that just like with any new software basically, the biggest hurdle to its mass adoption is people not being familiar with it, or people only being familiar with what it does but not how it benefits you. I think that was one of the early problems of blockchain. You know you had all these sources of information about you know, ‘Oh yeah, blockchain, this is like this decentralized technology’ and you know for somebody who isn't in tech, who doesn't work in the digital, what does it mean to have decentralized technology, you know? It's just like, yeah, like what can I do with it, how will it benefit me? Oh, yeah, you know it will have blocks, and it will have a distributed ledger, yeah, but what's the result, what's the outcome for me? So, I think that like the more we use it, the more companies use it, the more actual beneficial use cases we have for it which we'll talk about a bit later, the easier it will be for people to adopt it and for people to see the benefits that they personally or professionally they can have if they choose to adopt blockchain.

Mike Taylor: Yeah, I would agree, and I think the space is moving quickly into this kind of realm, into a realm where we are seeing practical applications and people can start to see these benefits. So, at Verum we like to say that blockchain is entering its second decade. So, as I mentioned, bitcoin came to be in about 2009, but activity didn't really pick up until 2010 or 2011 after the first exchanges started moving, and in the first decade of the 2010s, there's a lot of crazy things that happened. We had other new pioneering protocols show up like ethereum in 2013. We had some big hacks that made the news like the DAO hack in 2016. In 2017 is when, I think, bitcoin and blockchain started becoming a household term. The price of bitcoin rose from 2000 to 20,000 US dollars that year and then by 2018, after all of these you know kind of crazy ICOs and token sales, we had a crypto market cap of about 220 billion USD.

So, from the outside I think the space looked really volatile and very kind of crypto focused, but within the space, there was a lot of really important evolution and important foundational steps being made. So, there were regulatory changes that supported the development of the technology, but there was a lot of promising infrastructure as well that's now the basis for serious applications.

So, we think of 2020 onward as the second decade of blockchain, and we think that it'll mark a really dramatic shift from these hype cycles of the last decade and move very swiftly into widespread explorations and experiments within major organizations. So, at Verum, we're already helping companies, institutions, and governments find meaningful ways to use the blockchain. But we really think this is just the tip of the iceberg.

Tim Butara: Yeah, that's a good way of putting it, it's just the tip of the iceberg, and it seems that the initial hype around blockchain was primarily associated with cryptocurrency. And I think that a lot of people still associate it primarily with cryptocurrency or with bitcoin. You know, when you hear blockchain, you kind of immediately, your second thought is immediately bitcoin. But there are actually many more use cases for distributed ledger technology and I wanted to talk more about this. What are some industries that you've seen leveraging the blockchain in really good ways and which ones, to you, have the most potential?

Mike Taylor: That's a great question. So, actually I’d probably spend the bulk of my time here explaining potential overlaps of blockchain technology to professionals and people in the industry, and I think even though it's been around for 10 years, I think a lot of people still have trouble reconciling what blockchain can do and maybe more importantly what it can do for them.

So, I think to understand where blockchain can add value, I mean it's very easy to rattle off use cases. But to understand where it can add value, it's really important to understand where it's good for at a fundamental level. So, if we understand that blockchain is a decentralized and distributed ledger that stores a record of transactions immutably and indefinitely, and that the network structure allows its participants to exchange directly, then it's really easy to see that the highest and best use of the blockchain is when it's deployed in applications that enable and empower new marketplaces or places for direct exchange. When I say marketplaces, I don't just mean places where things are bought and sold, like a bitcoin exchange, I also mean any context where parties need to exchange or share data.

So, for this reason, I would say the most popular kind of second example of where to use blockchain after finance has been the supply chain. If we think of the contemporary supply chain, it requires that movements of goods and capital be coordinated. But more and more we're also needing to move extensive amounts of data and this data pertains to a way a product is receiving value throughout the supply chain from a number of cooperating stakeholders as it's brought to market. Typically, these stakeholders are completely separate entities but they're incentivized to coordinate because they all stand to profit off of the good that they're adding value to. The blockchain is really useful here because we can create serialization or allow each stakeholder to know in various-- where a very specific item has been at any moment as it's moving through the supply chain.

It's also really good for traceability or attention, attaching data to a digital representation of the physical good, so the end user can understand where it was sourced, who touched it and how it moved through the supply chain. For the same reason, we also really love talking about blockchain in the context of things like payment systems, alternative finance, government registries, digital identity, participatory budgeting or credentials, and these topics like the supply chain example to be well done all require that a group of people come together and work toward a collective goal. So, the ability to transact directly eliminates questions of trust and maintaining an immutable record supports that is objective and that's why blockchain can really help in these areas.

Tim Butara: Oh, that does sound like restricting cryptocurrency as kind of the only use of blockchain, yeah, is very limiting. I think you've done a really good job showing all other potential use cases and one thing that stood out to me was, you said that it can be used for supply chains to know who has touched a particular object or a particular good. And I think that could be potentially extremely relevant in a post-Covid future. So, I think that's actually a very physical use case that's facilitated by a digital asset such as the blockchain which is really cool.

But you know on the flip side, we also have to play the devil’s advocate here a little, and as you mentioned, blockchain has become this kind of social movement but it's definitely, I mean, it can't always be the correct answer, right? And how does somebody know when blockchain isn't the best solution and also in the same vein how do you as a blockchain focused consultant avoid falling into the trap of, you know, everything becoming a nail just because you're a hammer?

Mike Taylor: That's a really important question and thank you for calling me a hammer. But, I mean, we spent a lot of time at Verum Capital working with clients to determine the best solutions for them. And a lot of times, that means moving people away from the blockchain. I mean, more often than not, we are moving people toward the blockchain but once in a while, we have to say this isn't right for you. And I think it's important to remember that when you engage in new technology in the worst-case scenario, it can be dangerous or harmful to end users. So, in the case of blockchain, this might look like data privacy violations.

But more likely if you are engaging in technology in a naive or superficial way, it's very easy to create something or create a condition that we like to call technology theater. So, technology theater is when a technology has been deployed for mere performance, like a theater and it's usually in situations where the context could allow for something much simpler or effective or straightforward to be deployed to achieve the same results. This happens a lot in the blockchain context. Sorry, I should say, I think blockchain is particularly prone to technology theater because it can be deployed in a centralized context or within one company.

So, when we see these kinds of internal blockchain concepts show up, it really feels like an oxymoron and in these cases a conventional centralized service structure or something more conventional might do the trick. In these cases, the blockchain doesn't really make a ton of sense. But if you're just getting started with the technology, a really great sanity check for you to make sure you're on the right path is to ask yourself two key questions.

So first, I would ask yourself, does the system you're designing require tracking? Does an immutable record benefit the application? If not, you might be better served elsewhere. Secondly, I would ask; does decentralization make a meaningful difference? So, are you able to prevent censorship or the creation of monopolies, does it facilitate system adoption? Again, if not, you might be better served with a conventional approach.

But I would also ask yourself as a third point of reference, does the implementation of blockchain support innovation broadly? So, if your potential blockchain project doesn't go beyond its current application, if it's kind of limited in scope, there’s a clear boundary to it, there’s no opportunity to develop a new marketplace, empower users, create new business models, there might be a simpler way forward. So, I guess to sum up, it's not a panacea; it's not a solution for every problem that calls for technology, deploying it in like really sensible and legitimate ways I think is important especially for the integrity of the space because there is a lot of scrutiny on blockchain, probably because of its cryptocurrency history.

Tim Butara: Yeah, that's a good point and I think that the next few years, the biggest challenge for the blockchain will be, alongside the, increasing the adoption, will also be finding this balance between over using it and under using it, to kind of find the perfect balance between these two, yeah. And I was really fascinated by this idea of technology theater and it reminded me of… Mike, do you know the online comic Dilbert maybe?

Mike Taylor: Of course.

Tim Butara: Have you seen the episode where the boss reads something about the blockchain and he asks him like “oh yeah, hey do we have the blockchain already? I think we should have a blockchain. It really boosts sales.” or something like that, and then Dilbert is like, oh, he thinks to himself, I don't think that he knows what he's talking about, and he says “sure, what color would you like your blockchain?” and the boss goes like “oh yeah, I think mauve would be the best.”

Mike Taylor: Yes.

Tim Butara: And I think that this is a very good example of technology theater potentially being avoided, because of the person who is in charge of adopting IT solutions being well versed in their profession. So, that's another crucial point here probably, you probably want people who are well-versed in technology, who know its limitations, who know its potentials, who can basically help you decide when to use it and when not to use it.

Mike Taylor: Yeah, but I think, I mean there is a bit of a fallacy in this because I think if we look to history and if we look to earlier industrial revolutions where new technologies were being introduced, the people who were debating the use of, let's say, the printing press or the assembly line, weren't necessarily the engineers who built it, but the socialists or the capitalists who were fighting for its integration in their companies, like Ford Motor company. They had something to say about it and I think this is something people today get too caught up in. When we think about the technologies that are coming into existence within the fourth industrial revolution, we think that we need to be a developer or an engineer to be able to talk about them and we don't. I think it is very important that business leaders or organizational leaders across the board and even regular people, be able to kind of critically assess these technologies, and you don't need to really know how they're built or how they work technically, to be able to do that. And another good example is thinking about the internet, we're all very adept now at discussing, like, security issues or problems with working online, but very few of us know how to explain TCP protocol or TCP IP or all these things, I don't even really know. So, we don't need to know the nuts and bolts to be able to have a critical perspective. And yeah, that's my point there, that's a little off script but I think it's an important point.

Tim Butara: No, it's definitely a very important point to make here because I think it plays perfectly into that balance. I think blockchain is all about finding the balance. You have to have some understanding of the technical details but obviously I think that this was actually behind, I mentioned earlier that one of the biggest initial hurdles for the adoption of blockchain was its over focus on technological capabilities, and, yeah, as I said there has to be balance between the two.

Mike Taylor: Definitely.

Tim Butara: Okay so now that we've successfully played the devil's advocate with also the example of technology theater and the Dilbert example, let's talk more about some actual examples of blockchain being used to solve real world actual tangible problems. And I know you've had some very interesting projects at Verum and I would really like for you to tell us more about a few of these projects that you feel have been or will become very impactful.

Mike Taylor: Yeah great, I mean I would say the project at the moment that I’m probably most proud of the most excited about, is the ongoing work that we’re doing with the Ministry of Justice in Georgia. So, Georgia has been a really exciting client because they're such an innovative country. They rank really high in the Global Innovation Index and they perform really well in the World Bank's rankings, you know, for example, ease of doing business.

And they actually already have a lot of blockchain experience. Through the Ministry of Justice, Georgia was one of the first countries to put a blockchain based land registry in place. So, over the past year we've been working with the ministry to develop a catalog of use cases for moving public services onto the blockchain, so we analyzed, we kind of developed concepts based on existing and prospective services, and then we analyzed technical and legal implications for each opportunity. Then in the end, we developed a phased implementation plan that would allow the ministry to take a very step-wise approach to building on their experience with registries and working toward full-fledged blockchain based public services like digital identity for citizens.

So, maybe to outline some really tangible use cases, I’ll do the most simple one that we talked about with them and then the most complex. So, at the beginning, there's the land registry. I think it's a really simple example and at the end digital identity is a very kind of complex and integrated example. So, a blockchain based land registry, I would say is a really good use of the blockchain, and it's already been put into place in places like Georgia and Sweden. And here, the blockchain can ensure that the data stored in the registry is not changed or manipulated over time. So, what we're essentially doing is putting an already public record onto a public blockchain and allowing citizens to reference that information digitally in different ways depending on the services that the ministry wants to offer.

One of the key benefits here is that we can reduce vulnerabilities for the ministry that come with storing data in a centralized way. So, with a distributed ledger in place, the point of attack for a malicious party is much less clear. This is a simple example because, we're just using the blockchain kind of for what it was meant for, fundamentally to store data in a decentralized way.

A more complex example would be, what we suggested was end of the line for the Ministry of Justice, which was a blockchain based digital identity or a self-sovereign identity. And these exist in forms all around the world. There is an example that has been deployed in Switzerland as a means for citizens to access government services or provide legal signatures, but the opportunities or ways to use a digital identity really vary depending on the context. In practical terms, I would say a blockchain-based digital identity would mean that citizens hold their identity attributes in a wallet that they could access through a government-created app on their smartphone. And the ability to hold and manage one's own identity could empower citizens in a number of ways.

So, it could mean seamless access to essential services and even less bureaucracy in determining eligibility for these services. But it could also allow people to manage their own credentials, like a university degree, and decide who can access them and see them. It could also create access to new marketplaces, like secure payment networks, and it could even allow people to monetize their own personal data, selling it to companies or organizations when it suits them.

So, it’s more complex because it enables a lot more applications to be built on top of it rather than a land registry where it's a very simple data access situation. But I think what's cool about these two examples is that you can see how despite being very different, the role that the blockchain plays is very similar and aligns with these fundamental capabilities we were talking about earlier. So, the blockchain allows us to secure a public record in the case of the registries by distributing data across the network, but that same distribution allows us to protect individual data and empower citizens to decide how they use the data that relates to them in the case of digital identity. So, it seems oppositional but the decentralization is actually serving people in kind of the same way.

Tim Butara: And also, you know my first association with managing your identity is, “Oh gosh, I have to wait in line at the physical registry, I have to wait for my number to be called and I have to take a day off work to do that.” But if it were on the blockchain, if it were in an app, you could do it really conveniently, you could do it in like five minutes from the comfort of your home, which as it appears to be the case, we’ll likely be much more used to being at home and handling these types of things from home, from now on. So those are really cool use cases actually and it's interesting that you're doing this for the government. So actually, government seems to be one of the really promising candidates for mass adoption of blockchain.

And I think my next question can relate to that a little bit and yeah, as kind of moving into the final part of our call, I wanted to ask you, because of what we've underwent in 2020 and what we're still going through, I typically try to relate the topic, because we're talking about digital transformation and Covid has really marked digital transformation as we know it in the past year. So, I wanted to ask you, how do you say that Covid, so the global disruption caused by Covid and actually everything that went down in 2020, has impacted or will contribute to the adoption of blockchain?

Mike Taylor: Yeah, it's a great question, and it's hard for me not to get too political here because I think there's so many ways that blockchain can improve conditions across the compounding crisis that we're experiencing. I mean, I’ve already talked about supply chain monitoring and digital identity so I think most listeners could piece together the fact that tracking the Covid vaccine or creating digital inoculation records could work with the use of blockchain technology.

But I think there's actually some more practical examples that are already in place that kind of help to address some of the insanity that we saw last year. So, these are less obvious and don't kind of tackle Covid directly, but I think they're still important. So, I mean I would say that the pandemic has made it very apparent to us that access to data and accurate information is really important in times of a crisis and what the blockchain can actually do is help track the evolution of public information. So, a really good example of a blockchain based project for permanently storing and displaying websites is called arweave and last year, they created an archive of sites and documents from the protests in Hong Kong. And these types of records could be really valuable to help us keep track of important sources of information and hold sources of misinformation accountable.

In the same vein, blockchain structures could help us to ensure that freedom of speech and representation during a crisis is upheld. So, Twitter's actually been exploring or they announced in 2019 this blue, what they're calling the bluesky project. I don't know a lot about it, but from what I understand, it intends to make use of the blockchain to give Twitter less censorship power. And again, this doesn't directly relate to Covid, but I think when we think about access to information in the crisis, and especially blockchain's role or forthcoming role in shaping the internet, its ability to create records of truth and create new forms of access is I think really important.

Tim Butara: Yeah, it certainly seems like blockchain just like many other industries in digital, have also been massively affected by the pandemic. And as you said, it's not just directly related to Covid but everything around it, everything-- basically 2020 you know was kind of a landmark for this technology and I think that from now on, things will only look brighter for the blockchain. So, maybe in a similar vein and as a kind of final question, do you have any words of advice for owners and decision makers that are looking to adopt blockchain?

Mike Taylor: Definitely, I would say first and foremost don't forget, blockchain works best when we do it together. I mean your application will be stronger if you find new ways to collaborate, and collaboration both in terms of bringing it to life and operating it on an ongoing basis. We see a lot of organizations who want to use the blockchain but aren't willing to cooperate with stakeholders in the supply chain or relinquish some control to their customers. And working with the blockchain isn't just about putting a protocol into place, it often means shifting to a decentralized way of operating and this shift can be a really big hurdle. At Verum Capital we really believe that as the pace of technology adoption increases, decentralized operational paradigms will create huge competitive advantages. So, embracing these and working together, I think will serve you well in the future.

Tim Butara: Yeah, that's a really great note to finish on Mike, thanks. I think any listener who is experiencing and facing this problem will definitely find some valuable info from this. Just before we finish, if people want to reach out to you or to learn more about you, what's the best way to reach you?

Mike Taylor: Yeah, thanks again for having me, thanks again for helping me to talk about blockchain and Verum Capital. So, if you want to find us you can go on TikTok ... I’m kidding obviously, please email me [email protected] or find me on LinkedIn, my name again is Mike Taylor, you can find me by searching Mike Taylor @Verum Capital.

Tim Butara: Hey, thanks so much for joining me today Mike, for discussing this with me, I’ve really enjoyed it. It's been a fascinating conversation and I think it will make for a great episode and I bet our listeners will agree. So, to our listeners that's it for this episode, have a great day everyone and stay safe.

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