Double Standards: The Coming Push for Blockchain Interoperability

Not everyone wants to copy the world's most successful blockchain.

While bitcoin's public-facing, immutable ledger has proven resilient to attacks (and a mostly reliable way to transact peer-to-peer), businesses are still looking for something else to meet their volume and privacy requirements.

Yet, this search for alternatives has prompted problems of its own. In an effort to build products that meet diverse demands, using varied and often incompatible technologies, consortia have formed to help standardize the way financial institutions and enterprises build with blockchain.

At the core of the effort is a conflict over whether numerous blockchains with different technological features might replicate the complexity and inefficiencies of the current system, or otherwise slow down innovation.

Working behind the scenes in this delicate balancing act are multiple standards-making bodies around the world, as well as startups and corporations. However, it remains to be seen if these efforts will yield the desired results.

Ajit Tripathi, a director of financial services at PwC in London, explained that there's potentially more at stake in the act of making a standard than just streamlining workflows.

Tripathi told CoinDesk:

"In any consortium, participants will always push for the standards that benefit them the most. If you push for a standard where your integration costs are lower than others, you benefit. Even if you're in a consortium where you're supposed to cooperate, there is an element of competition."

In the act

Indeed, Tripathi noted that there's even some competition between the standards bodies themselves.

Among the efforts PwC has participated in include the European standards body ESMA's consultation on the applications of DLT; the World Wide Web Consortium's workshops on blockchain and distributed ledgers; and the US-based Object Management Group's (OMG) Finance Domain Task Force, which is exploring blockchain in the financial sector.

That's not counting both the International Organization of Standardization (ISO) and the International Securities Association for Institutional Trade Communication (ISITC), which have formed blockchain standards committees.

Most recently, the ISITC’s co-chair of the its Blockchain DLT Working Group, Gary Wright, noted that standards bodies are even seeking to sync up their various projects as a reaction to the kinds of projects so far created by financial institutions.

"Most of the standards initiatives we have seen to date tend to be focused on particular target areas and be limited to the needs of local jurisdictions," Wright told CoinDesk, adding:

"It will take some time before all the standards initiatives become aligned."

He noted, for instance, that the group has reached out to the British Standards Institute to discuss how blockchain standardization might come to maturity.

Organic vs ordained

But in spite of such cooperative efforts, Tripathi points to the competition itself — both within consortia and on the outside — as a crucial part of the process.

He lists the privately developed HTML as an example of a standard formed more organically though the shear force of survival.

"But to assume that standards will only come from bodies or consortia is a mistake," Tripathi said. "Standards will come from competition. Google is a standard for search, but it's also a company."

It is this balance between standards bodies, 'coopetition' within consortia and outright competition that Tripathi says is key to interoperable blockchains and distributed ledgers.

Yet, others don't see any immediate risk. OMG co-chair Elisa Kendall explained that her organization is currently working to standardize the language with which various financial concepts are discussed, including how to describe currencies, indicators and market value.

She added that while she doesn't believe there is any urgency to standardize in the coming two years or so, there may be incentive for some parties to do so sooner rather than later.

"Sometimes it's in a manufacturer's best interest to delay standardizing as long as possible until they own a market," she told CoinDesk. "Other times, there's so much thrashing around that it's better to standardize soon."

Mess ahead

The secret to this balancing act is going to be how successfully the stakeholders weigh their ability to benefit from an effort with the overall industry’s need to advance, William Mougayar, author of The Business Blockchain, said.

Mougayar argues that there are many other reasons a company or organization might join a consortium or otherwise want to influence standards, including achieving insight into the how the technology works, educating the public and removing other barriers to development.

As more and more of these conversations take place and real change occurs — regardless of the motives — "the trick" is going to be striking that healthy balance.

"This whole thing is about decentralization, so the whole ecosystem is going to resist anything that is centralizing. That is the nature of blockchain," said Mougayar. "Yes, it's going to be a little messy."

And Mougayar isn't alone in this estimation. One of the most outspoken critics of early blockchain consortia is Preston Byrne, founder and COO of Monax, which rebranded from Eris Industries earlier this month.

Byrne is well known on Twitter for making his own tongue-in-cheek announcements that mirror headlines found on CoinDesk and elsewhere, he argues standards efforts are today mostly about publicity.

Most recently, he unveiled in a tweet, the "Hypermarmot Project", described as "a consortium of rotund, non-climbing, flightless squirrels preparing to dig up the gardens of the future."

Byrne argues that standardizing the way companies use blockchain now would have a comparable impact on innovation as if someone had tried to control the bitcoin blockchain in its early days.

Instead, Byrne said consortia should restrict their efforts to minimizing duplicate efforts while focusing on creating individual innovation.

Byrne concluded:

"I think when you see a consortium forming it’s because they want visibility and they don’t want to be the odd man out. That said, I think most the exciting work isn't being done by committee."

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