The idea of ​​rushing to develop blockchain standards is premature

Rage Comment : Before fully understanding the implementation of blockchain technology in the market, we don't have to rush to formulate blockchain-related standards. The formulation of blockchain standards is a very complicated process, which requires the formulation of blockchain standards from three dimensions: technical, corporate and legal. There are usually two ways to formulate blockchain standards, one is to formulate according to the use of blockchain in the market, and the other is to use the current relevant rules and regulations, or modify them into rules and regulations that can be well combined with blockchain technology. However, the formulation of blockchain standards is also risky, and the standards should be formulated cautiously and not too hastily, otherwise it will be counterproductive.

Translation: Nicole

William Mougayar is a Toronto-based entrepreneur, investor, advisor to Consensus 2016 (CoinDesk’s flagship conference), and author of the forthcoming book, “Enterprise Blockchain.”

Mougayar believes that the idea of ​​rushing to develop standards for the blockchain industry is premature, and now is the time for the industry to reach a consensus on some important points.

Measurement measures

First, let’s analyze some of the related suggestions that the idea of ​​developing blockchain standards is premature.

It is too early to say whether the lack of standards will affect the use of blockchain technology or whether standards-setting organizations such as the International Organization for Standardization (ISO) will set standards (although they are already doing so).

Blockchain standards are very complex, not just the interoperability challenge. This is because blockchain standards can be divided into three interrelated vectors: technical, enterprise, and legal.

If you understand blockchain as a technology, you will use it as a technology. If you see it as a driver of corporate change, you will consider corporate processes. If you understand its legal significance, you will have confidence in its new management features.

When enterprises use blockchain technology (or distributed ledger), they will be exposed to technology, business process-related areas and legal regulations at the same time. Therefore, these standards should be viewed equally from three different dimensions.

There is a common saying: The benefit of standards is that there are many standards to choose from. In the world of blockchain, which is still in the development stage, let us not indulge in its word games.

Historical Research Methods

There are usually two ways to develop standards

In fact, through the market adoption of blockchain technology, corresponding standards can be developed, or industry standards can be agreed upon through standards committees or consortiums. Industry standards can bring many benefits to them, including some of the impacts on the Internet, such as simpler interoperability, sharing of information, low cost and low risk.

However, before developing new standards, we should look at whether we can implement the current standards from the perspective of corporate processes and regulators.

For example, in the financial services sector, there are now some mandatory regulatory standards: the Bank Secrecy Act (BSA), the Dodd-Frank Act, and the Commodities Exchange Act.

For over-the-counter (OTC) contract standards for buy and sell transactions, we have the International Swaps and Derivatives Association (ISDA), International Bank Account Numbers (IBAN), Commodity Futures Trading Commission (CFTC) rules and the European Market Infrastructure Regulation, to name a few.

Second, we should consider updating existing standards, such as Section 1.31 of the International Swaps and Derivatives Association (ISDA) regulations regarding recordkeeping, or proposing a revised ISDA to better integrate with peer-to-peer trading (running on decentralized clearing networks).

If neither of the previous approaches work, we can create a new standard specifically for implementing blockchains and distributed ledgers.

Precautions

Furthermore, there are many many-to-many standards between technical, business, and legal relationships.

A particular technical standard can be implemented in different ways and in different directions, following corporate processes or regulatory standards through five different techniques.

But here are some things to note about setting these standards, they have to be open and not proprietary, so that everyone can participate. Generally speaking, you don't have to worry about standards competing with each other. Once they implement these standards, they all work in their own field and let companies compete in their own way.

The faster you implement, the more competitive advantage you have, and if you develop innovations outside of the standards, there are even more benefits. Blockchain technology has similar opportunities and risks as other standards: they are necessary, but not sufficient.

Technological innovation will outpace the pace of regulatory standards, but policymakers want to freeze technological innovation so they can develop more appropriate regulations. But if you take a picture too quickly, the image will be distorted, and you will quickly take another one to replace it. The same is true for rulemaking.

Blockchain standards will be discussed at a panel discussion at the upcoming Consensus 2016 conference, with Barclays chief blockchain strategist Simon Taylor and Ethereum chief scientist Vitalik Buterin among the panelists.