Interview with Lawrence Lundy: Blockchains, Tokens and Convergence

September 2017

Q1. As Head of Research and Partnerships at one of the first Blockchain-based businesses in Europe, you are clearly heavily invested in Blockchain Technology, but where did you first encounter Blockchain and Distributed Ledger Technology? What about this technology interests you the most?


I was first introduced to Bitcoin back in early 2013 or so and saw the huge potential of a crypto-currency. At the time I had just started work as a mobile analyst and didn’t track developments as almost most of my clients were Fortune 100 companies and few were interested. In 2014, I began to write more and more about Bitcoin, the underlying blockchain and its applicability across markets to provide an alternative to trusted third-parties.

It was not the technical elegance of Bitcoin (although it is) but rather the social and political implications of math enforced decision-making and trust that fascinated me. I thought that if you could automate monetary policy, what else could be automated? This has led me to explore the ideas around distributed autonomous organisations (DAOs), automated governance, futarchy — the idea of using markets to make decisions, and most excitingly the idea of tokenized digital co-operatives.
I think that tokens offer the potential to change the hierarchical design of the firm; shareholders, management, and workers. With tokens, workers can be shareholders. Co-ops do this today, and startup employee equity pools do this on a small scale. With tokens, the co-op model could potentially outcompete the traditional firm offering greater rewards for talent.

I do not think there is a more exciting field to work in today; essentially asking the philosophical question: how do we build sustainable economies? Our most recent work called Community Token Economies is an attempt to do just that. Read more here. We are also actively exploring the ideas behind digital co-operatives and building a community around the idea of network cooperativism.


Q2. Your work around Blockchain seems to have a focus on new and innovative applications for the technology — how do you keep ahead of the curve in such an innovation focused industry? What does it take to be innovative with all of the surrounding noise?

It is an ongoing challenge, and increasingly so with the mania around token sales. There is much more noise than signal today, but we have always sought to take a macro view of the industry. The best way to find insight and identify investment and partnership opportunities is to look at the intersections of technologies, as well as studying history and politics.

Ultimately, we are in the midst of the digitisation of the information and communication, and distributed ledgers, the internet of things, 3D printing and artificial intelligence are all part of the larger theme. You need to look back at the invention of the telegram (not the app), the telegraph, radio, the telephone, television and the Internet to help inform your thinking for blockchains. Bitcoin and blockchains are not the first decentralisation technology promising to shake up power structures; it is just the latest. History doesn’t repeat itself, but it does rhyme. So I try to understand the patterns.


Q3. Smart contracts are one of the more widely touted applications for Blockchain, and one in which you have a significant amount of interest — where do you see their use heading in the future? Do they have the potential to reshape industry on a massive scale as the hype seems to suggest?

All technologies go through a hype cycle as people first spot the opportunities and then see the challenges of getting a working product to market. Smart contracts are no different. But as a technology and as a legal construct (if it can ever actually be one) it is extremely early. The underlying networks that these smart contracts run on — Ethereum, QTUM, EOS, Tezos, Bancor, Aeternity, and Waves — are all at different levels of stability and security.

At an abstract level, a program that automatically processes reasonably complex transactions can bring massive system-wide efficiencies and cost reductions. In the real-world, however, you encounter all sorts of legal challenges around legalese, disputes, resolution and enforcement. It is likely that when networks are mature enough to handle interacting and connected smart contracts, they will mainly be used as an extension of back-office automation rather than a replacement for lawyers. In the medium-term, though much legal work is relatively simple templated contracts and opportunities abound for automating and lowering the cost of legal services.


Q4. Blockchain thus far it seems fair to say has been focused on the Finance industry. With the technology spreading into other industries, and this being an area of interest for yourself, are there any other industries you think are particularly ready for Blockchain application, and why? What makes an industry compatible with Blockchain technology and will we see the emergence of new industries as a result of Blockchain?

Bitcoin was released around the time of the 2008 financial crisis and the early interest from the libertarian right was as a replacement for the banking system. Bitcoin was designed specifically as digital cash and therefore the focus of the media and public for many years was in the finance system.However, one of the key components of Bitcoin was the underlying transaction ledger and how this was maintained and updated using a proof-of-work blockchain.

A shared transaction ledger (note: not a blockchain specifically) has applicability for virtually any transaction of value across a vast array of human and machine activity.We are still at the stage of development where we are picking apart of the different elements of Bitcoin and testing new combinations of consensus algorithms and distributed ledgers to meet the needs of different use cases. For example, a solution for machine-to-machine transactions has very different throughput and latency requirements than Bitcoin.

Distributed ledgers and blockchains are horizontal technologies not limited by industry. As soon as you conceive of value as broader than money, you can begin to see the possibilities of personal data exchange, or bill of lading for shipping, or provenance of goods. You can argue that we already have the first blockchain industry: bitcoin. Or maybe even two: Ethereum and token issuance. The legal and compliance issues around tokens are certainly a new industry for securities lawyers. However, more broadly, I do not think blockchains will create new industries, other than blockchain SaaS and consulting, instead all industries will utilise the benefits in their technology stack.


Q5. You have a nuanced series of interests within and surrounding Blockchain — for example 3D printing and Robotics. Could you tell us how Blockchain could influence some of these more niche industries and when you think that will happen?

We spent almost all of 2016 developing our investment thesis called Convergence. The original paper can be read here. We take a systems approach and see Bitcoin, blockchains and DLTs as part of a broader macro shift from Web 2.0 to Web 3.0. Our thesis is that blockchain technology when taken broadly to include innovations in decentralised storage, compute, and automation such as smart contracts, oracles and tokens will form a decentralised infrastructure that enables other technologies like machine learning, robotics, IoT, and 3D printing to combine and converge.

We are investing in companies like: uVue, focusing on providing a decentralised software layer for autonomous economic agents primarily in the mobility sector. Botanic who are providing multi-modal trusted personality interfaces to artificial intelligence. And IOTA building a new transactional settlement and data integrity layer for the Internet of Things. All three have existing corporate clients with products today. We believe there are problems to be solved today using decentralised infrastructure and toolkits. This isn’t a 5 year time horizon. These products are being bought and sold today.