Depending on whom you ask, blockchain will be as transformative as email or even the TCP/IP protocol on which the internet is based. Stephen McNamara, head of the newly minted Rakuten Blockchain Lab (RBL), prefers to view it from a historical perspective. To him, blockchain is the evolution of computing and data management, but also the result of decades-long decentralization in these domains.
“In the 80s and 90s, for the first time we really started to connect computers, and that created distributed systems – machines that spoke to other machines – and the principal one was the internet itself,” McNamara said during an interview on the sidelines of the Rakuten FinTech Conference 2016 in Tokyo.
“In the 90s we had distributed information. Everyone could publish information on this new thing called the world wide web. We very quickly went from being information consumers to content producers with our Instagram, Facebook, Snapchat and Twitter.
“But what was never a part of those two technological waves was a way to ensure the authenticity of any of that information. Bitcoin, as a technology and the blockchain within that, is principally a system for establishing that trust – without the need for a third-party arbiter.”
McNamara’s own history dovetails with that of blockchain, and he has played major roles at both startups and established players. He was chief software engineer at CyberSource when it was acquired by Visa, where he later worked as CTO. Along the way, he read the original white paper about bitcoin by Satoshi Nakamoto and became convinced of the digital currency’s enormous potential.
“I would recommend people read the paper. It’s only six pages and very accessible and it bears rereading multiple times,” says McNamara. “It’s a remarkable publication for capturing so succinctly and so well the mixture of technology, economics and political ideology.”
He believes that bitcoin has lived up to the possibilities presented in the paper because it allows for the free and instantaneous transfer of value to anyone without the need for authentication from a third party. In place of that third-party arbiter is a digital ledger (a “blockchain”) that exists across a network of computers and is protected from hacking or tampering by a highly complex algorithm.
And, in the same way that ownership of every bitcoin in existence is recorded in a blockchain, so too could ownership of just about any type of asset.
“Blockchain can be used wherever people want to converge on a version of the truth about the state of an asset, for example who owns that car or is that diamond authentic,” McNamara said.
When the car, diamond or other asset is bought or sold in the real world, its entry in the blockchain is simply updated – again in a manner that is secured by an algorithm to prevent theft or fraud.
Speculation – and experimentation – is already underway on blockchain applications in securities trading, interbank settlements, identity authentication, land registries and much more.
In 2014, McNamara left Visa to co-found Bitnet Technologies, a bitcoin payments and e-commerce platform in Belfast. Since Rakuten had invested in Bitnet in 2014, its acquisition of the startup’s IP two years later was a natural development. Now that expertise has been transformed into RBL.
The lab has just begun with a small team based in Belfast. It will first focus on educating people within Rakuten and its various arms about the potential of the technology.
“We’re looking for opportunities within Rakuten to apply the technology. Rakuten is so global and so diverse, from banking and securities and insurance and marketplaces to travel and digital goods and e-readers. There’s a huge opportunity here. I think it’s a bold step for Rakuten to explore technologies that ultimately might disrupt themselves. That’s the classic innovator’s dilemma – if you don’t start to challenge and disrupt your own business, someone else will.”
Read more posts from the Rakuten FinTech Conference 2016 here.