Understanding blockchain well with Dr. Paolo Tasca

The Cryptonomist had the opportunity to interview Dr Paolo Tasca, University Professor at UCL (University College of London) and founder and chairman of the DLT Science Foundation and the UCL Centre for Blockchain Technologies.

After attending the P2P Financial System 2023 event at the Bank of Italy headquarters in Rome, organised by Dr. Paolo Tasca himself, we had the opportunity to speak with him to better understand the functionalities, developments and future of the booming blockchain technology.

In the interview, we tried to extrapolate Dr Tasca’s opinion and vision on blockchain.

We tried to cover several topics, as this is such an important technology for the future of finance.

As a first question, I wanted to start with a personal one: you are probably one of the most important exponents of research in blockchain technologies. What made you choose this path?

“I left in 2011, after doing my PhD at the ETH Zurich, because I had approached the crypto world. At that time, bitcoin represented 90% of the entire crypto ecosystem, and there were only about a dozen digital currencies. This nascent economy fascinated me for two reasons.

The first was that the data was free, and if you are an economist and you work with data and different models, an economy like the decentralised one was a ‘Pandora’, a huge opportunity. It was very interesting because it gave me a way to analyse both the emerging economy and the differences with traditional finance through this data.

The second reason was that in this emerging economy, there was a monopoly when it came to crypto exchanges. There were very few platforms offering this particular service, with a good 70 percent of the volume being handled by just one platform. So my motivation was to build a crypto exchange in the Swiss market where I was working.

So I can say that I was looking for a first approach, both from a scientific point of view and from an entrepreneurial point of view. I wanted to create an infrastructure that would create an on/off ramp between the traditional and the digital economy.”

The foundation of your work is obviously the research and development of blockchain-technologies. With this in mind, how important is government cooperation in development and research? How important is trust in institutions?

“This is very important. It was no coincidence that the first application of blockchain (DLT) was a decentralised form of currency. There are several applications of blockchain that can be developed, but the first one was Bitcoin.

Therefore, being a financial application, I always thought that it would have a disruptive impact on the financial market, which is one of the most regulated markets in the world. That is why I have always been an advocate of dialogue betw mi een regulators and innovators when it comes to the crypto world.

Because, on the one hand, you have an actor pushing for innovation (new forms of finance, payments, currencies) and, on the other hand, you have a regulator with a government mandate, with the duty to maintain financial stability and confidence in the currency issued by the central bank (taking into account all the other government bodies that exist).

I have always tried to propose a dialogue between these two actors, so much so that the first edition of the P2P conference was organised in 2015 at the German Central Bank, and at that time it was a surreal landscape compared to today.

I managed to bring together a completely different audience, there were people from anarchist and anti-capitalist backgrounds and at the same time the institutions in double-breasted suits and jackets.

These two worlds have come very close in the last 10 years, despite the great dichotomy between them.”

So do you think we are going in the right direction?

“It depends, it is interesting to observe, because if these two realities meet in the middle, then it can be called the right direction. But if there is an imbalance at the point where they meet, then I don’t think it’s the right direction.

I think we are moving towards an institutionalisation of what was the ‘anarchist’ model of the early movements to undermine traditional finance.

I see a conformation away from the traditional model, for example, look at institutions like BlackRock entering the bitcoin world through spot ETFs.

So the question is whether the approach that is happening is actually going in the right direction, I have some doubts.

Not that I am an anti-capitalist anarchist, but we all have to remember that the institutions that exist today were designed by us in a socio-economic context that was very different from the one we have now.

This means that we should have the mental elasticity to adapt the institutions to the new world, how should these institutions be redesigned?”

In the last year, one of the trendiest developing technologies is undoubtedly artificial intelligence. Is there a possibility of integration with blockchain? Can This technology and AI be combined in the near future?

“We don’t just look at blockchain, but as far as digital technologies are concerned, as a foundation we have funded a new research centre that is being set up.

The goal is to develop and promote a decentralised form of AI, we are still at the beginning, but there is a lot of interest in it. Indeed, it is a goal of several blockchains, among the most important ones, to bring artificial intelligence into their architecture designed a few years ago.

The convergence of the two may give rise to transformations in protocols or governance architectures. It could even give rise to new blockchains, different from those we have known so far.”

The use of blockchain has often been questioned in terms of environmental sustainability. In particular, ‘proof of work’ technologies have been criticised for their excessive energy consumption. Is there a way to use this technology without such a high environmental impact?

“At UCL, my team and I have conducted several studies on the environmental impact of blockchain.

We compared the energy consumed by Bitcoin with the energy consumed by all other major proof of stake (PoS) systems.

We invented new models to measure the energy impact of these blockchains, parameterised by the number of transactions per second. The study shows that several blockchains are carbon neutral and negative.

The argument that blockchains are not sustainable needs to be debunked. So much so that even Bitcoin has moved towards renewable forms of energy in recent years. Several studies prove this.

In the beginning, there were several reports about the consumption of bitcoin, which was certainly true at the time, but this is no longer the case.

The development of these technologies should be carefully considered.

Blockchain companies are also paying a lot of attention to ESG (environmental, social, and governance) standards.

Ethereum itself, by moving to proof of stake, was the symbol of this change that the industry is having. So from that point of view, I no longer see it as a problem, but as a successful attempt to improve.

I can add that we, as DLT Science Foundation, will soon launch a dashboard of products created by our intelligence unit, and among these products there is one that will do a track&rank to create healthy competition between the different blockchains. A kind of rating in terms of consumption metrics.”

Finally, do you think blockchain technology will change the world? What do you expect to see in the coming years?

“I am very puzzled by society’s general disinterest and lack of education about these new technologies.

Italy, by the way, is one of the least educated countries in terms of financial literacy, and the effects will be seen later.

We are moving towards global progress and most citizens are not being given the right tools to adapt. Even the media, not the sectoral media, but the more mainstream media, do not bother to talk about it enough, even in a general way.

It occurs to me that the FTX scandal has been linked to Bitcoin in the more general media, calling it another ‘Bitcoin scam’. In reality, we know that it was an ‘accounting fraud’ that had nothing to do with Bitcoin and the crypto world in general”. There is ignorance that creates misinformation.

If this gap continues to grow, there will be no small problems in the future, there will be no room for real innovation.

I, as the head of this foundation and as a university professor, and you, as the media, have a moral obligation to try to reduce this gap. Through information programmes, education, etc.

Trying to educate not only market players but also ordinary people. I would like to see more festivals, and more conferences talking about these new technologies.

What I expect is an exponential growth in technology adoption, but only if this education gap is closed.”