Blockchain is coming for your jobs.
The chainsmoking twin sisters of Marge from The Simpsons are about to be out of a job. The reason? Blockchain.
In a closed-door session in Sydney this morning, NY Stern Professor David Yermack spoke at length about potential applications of blockchain technology, which are extraordinarily wide ranging. But one where we might see the most efficiency gains is in Government – and this will displace potentially millions of clerks like Patty & Selma, who work as administrators in the Springfield Department of Motor Vehicles.
“Government applications are some of the most promising,” he said. “Almost every government is in the record keeping business – pension records, retirement eligibility, social security administration, veterans administration, drivers licenses – these are all databases that often run on 1970s computer. They’re vulnerable to hacking and corruption. Often real estate titles are talked about – these run on very 18th century procedures that are still followed.”
Savings for public administration are potentially immense. “Governments always trying to save money – it’s hard to benchmark but governments are among the biggest IT customers in the world. And they have countless clerks keeping track of administration and that’s who blockchain will replace.”
There’s plenty of potential for redundancy in finance too. Here, Prof. Yermack says, there is very real potential for a ‘wild west’ to develop where companies wanting to raise cash completely bypass the established financial system and use blockchain to raise money and trade shares directly with their end investors.
“If a major company goes public on a decentralised blockchain, would you have the confidence to invest without the government protections?” he asked. “A lot of people assume no, but confidence in government is probably even lower than confidence in the financial system. You don’t need everyone to go along with this, just a segment who finds it attractive. If you look 10-20 years into the future you’ll see a parallel evolution. You’ll see incumbents using blockchain for efficiency and cost saving, and some companies opting out and raising liquidity in new markets. In the long run there may be room for both. Younger, tech savvy people may be attracted to the new markets, but to cater to the legacy markets the current institutions will survive even if they shrink.”
But can companies just opt out of the rule of law like this? Prof. Yermack says yes.
“The point is that blockchain markets are in the cloud, they don’t belong to any country by design. A regulator could take an aggressive position that there are domestic investors, but how do you serve a warrant and get an injunction for someone who’s in the cloud?”
Of course blockchain technology is specifically designed to bypass regulators. Institutions may be working hand in hand with regulators but even with co-operation with government, there will be a raft of new issues that will require a lot of rule making and legislation and rewriting of securities rules originally written in the 1930s. Regulators will be very busy playing catch-up in the next few years, he says – “The market will be the arbiter. Governments can’t chase this around the world and into the cloud.”
So if blockchain is coming for Patty and Selma’s lunch, who is coming for blockchain’s? Possibly, quantum computers… but that’s a story for another day.
Professor Yermack is in Sydney courtesy of the Centre for International Finance and Regulation (CIFR). He is giving an address to 180 guests of CIFR and KPMG at Kapers’ very lovely new Barangaroo offices this afternoon.