by Zach Gentry – Concert CEO
Most people by now have some familiarity with FTX, the cryptocurrency exchange that filed for bankruptcy on November 11 after having earlier in the year been valued at $32 billion. The story remains to be written about how much of the issue was mismanagement and how much fraud, but it is certain that many who look at this mess may assume that this diminishes the entire blockchain promise.
We disagree and hope with this brief overview to explain both the importance of the core mission and the dangers that we hope to avoid with Concert.
First, some basic definitions.
Cryptocurrency is a digital currency in which transactions are recorded on a decentralized ledger. This ledger is duplicated across thousands of computers operated by arms-length entities known as validators. Each validator is paid in cryptocurrency to validate legitimate transaction. Cryptocurrency therefore creates the financial reward system that pays for its own maintenance and ensures its own integrity. When the consensus agrees, the entry is added to the ledger and cannot be altered without breaking the cryptographic lock that binds all the transaction records together.
The records are maintained in units of finite digital space referred to as “blocks” and when they are linked together to assure their immutability, the whole structure is referred to as a blockchain. Ethereum is one of the original blockchains, and it is possible to check every single transaction. The first transaction occurred on August 7, 2015 and there have been almost 1.8 billion transactions since. Although the data stored might not be decipherable without context, it is completely transparent and searchable.
While blockchain started out as a method for permanently recording cryptocurrency exchanges, it was quickly recognized to permanently record other kinds of transactions from simple record-keeping to automated computer programs. Once software developers and futurists got hold of this concept, they saw new opportunities to connect people and data. Could blockchain make it possible for people to broker access to their personal data rather than giving it up to Big Tech? Could it simplify title transfer in home buying? Could it ensure the integrity of the global supply chain?
When we formed Concert, we set out to create a mechanism where architects and engineers could ensure the integrity of their authorized design data. But we also wanted it to be something through which other design, construction and real estate stakeholders could share project data. We wanted this promise to outlive us, and we saw no other data management strategy that could accomplish permanence, immutability, and transparency like blockchain.
For example, if an architecture firm wishes to use a cloud-based data management and archiving system, they may do so, but their counterparties will not accept the assertions of authenticity for the content or timing of data sharing when there is a dispute. They therefore maintain their permanent record of the same data. Even if they agree to share data in a common data environment, they will each maintain separate copies of the same data as a form of self-preservation. Since dozens of stakeholders exist in the construction process, there are often dozens of duplicates of the data. However, our experience indicates that duplicate copies of the data will be subtly but significantly different. What we end up with as an industry is data confusion. Blockchain offers a path for clarity – a single digital thread that unifies the data for stakeholders.
Let us return to FTX.
It appears that among other issues, FTX was running two sets of books. The variance between the two was being filtered into trading accounts by investors at Alameda. This might not have resulted in losses had the cryptocurrency market not declined so much this year. But this sort of misappropriation happens throughout the financial sector on a routine basis. Blockchain wasn’t the issue – financial crooks were.
Nonetheless, Concert recognizes that there are many financial transactions that have been proposed for blockchain in construction. We will not engage in this activity. It would make us responsible for other people’s money, a responsibility that is beyond our vision. Our promise is simple. We broker blockchain transactions to assure data integrity, increase transparency, and enable digital project delivery. We have nothing in common with financial exchanges except to the extent that we pay fees to the validators of the blockchain for each record.
To that extent, we have a different goal from crypto traders. We like price stability and do not want massive run-ups in the exchange rate. That is after all the purpose of a store of value and the means of a fair trade. Crypto is going through a lot of growing pains, but as long as there are validators willing to charge a fair price to store our records, Concert soldiers on.