Soramitsu Co-CEO: Blockchain Is The Basis Of A New Digital Civilization
2018 was a controversial year for the entire decentralized community, and the cryptocurrency market continues to stagnate. However, we keep attending conferences to boost the crypto economy and push blockchain adoption for mass. At the Blockchain UA conference in Kiev, Blockspoint talked to Makoto Takemiya, the co-founder and co-CEO of the Japanese blockchain company Soramitsu, which is in the process of creating a new, global digital economy.
Before Soramitsu was founded, Mr. Takemiya worked in the neuroinformatics research lab at ATR (Advanced Telecommunications Research Institute International). In 2014, he was a member of the NEM team. Soramitsu developers created the Hyperledger Iroha blockchain platform, which is currently used in D3 and tested by the National Bank of Cambodia.
Makoto Takemiya is a naturalized Japanese and ethnically half-Ukrainian, who grew up in the US, which explains his global way of thinking as it unites Asian, European, and American worldviews. We discussed many topics, from the beginning of cryptocurrencies till the end of the universe and the infinity beyond, and got to know why Bitcoin is not so decentralized after all, what Hyperledger Iroha and YAC consensus (Yet Another Consensus) are, how to build decentralized systems inside centralized infrastructures, and revealed the secrets of new money allocation.
We first need to standardize digital identity
The problem now is that we have achieved a really high level of technological advancement, but most business models in the world are still trapped in an archaic state having artificial limitations. The truth is that most financial institutions, like banks and other regulated entities, have large gaps between what they can do and what they actually do. I live in Japan, and even here I see a great need for technology to be used to provide new services and increase the efficiency of social infrastructure. In particular, digital identity solutions are needed because it is hard to establish a digital economy without them.
There are many regulated institutions, and we have to share our personal information with all of them, such as our date of birth. In many cases, the personal information itself is not of interest to the institution, but rather they need to know if you are on some kind of sanctions list or if you have the right or privilege to do something (like if you are old enough to drink). And we have to do it repeatedly, to answer again and again all the questions and to copy our ID cards and other papers just to verify own identities. That is a problem. If we had a distributed registry, it would be easy to unify the authorization of sharing our personal information once and for all. We are developing an identity application called Sora Passport. It will allow people to share their personal information whenever it is needed for KYC. This will help to streamline many real use cases faced in modern societies everyday.
I founded Soramitsu with my partners, Ryu Okada and Ikkei Matsuda, 2.5 years ago in Tokyo, to solve these urgent problems. Before that, I was greatly interested in Bitcoin, blockchain and all kinds of decentralized things. I was looking for the next new technology. When we started the company, we researched many different existing blockchains, but no one was a suitable match for our requirements. So we designed our own blockchain, Iroha, and contributed it to the Linux Foundation’s Hyperledger Project, where it became Hyperledger Iroha. Our blockchain platform is based on YAC (Yet Another Consensus), which perfectly serves the business needs of financial institutions.
A cup of coffee with Hyperledger Iroha
Hyperledger Iroha is a general purpose permissioned blockchain platform that can be used to manage digital assets, identity, and serialized data, and can be useful for applications, such as inter-bank settlement, central bank digital currencies, payment systems, national IDs, and so on. YAC is a Byzantine fault tolerant consensus algorithm, which is also high-performance and allows the finality of transactions with a low latency. It means you can go into a store and buy coffee without waiting for transaction validation or new block creation. Just pay for coffee in a few seconds, and that is all. The best part is that the transaction is finalized and the store does not have to take any risk in order to finish your transaction quickly.
The pilot version of our system is tested by the Cambodian central bank. It is one of the most interesting projects for us. In the payment system for Cambodia, because the central bank runs all the servers for the Iroha ledger, you might be forgiven for thinking that the system was centralized because only the bank runs the servers. However, in this new type of blockchain system, every user has their own key, and no one can fake transactions or steal users' money. Through the segregation of information and permissions, the system as a whole becomes decentralized.
Centralized institutions to organize chaos around
This model is perfect and can serve as a basis for the creation of the new digital civilization. Society still needs some order, so there is nothing bad with centralized infrastructure that can help organize this chaos around us. But this centralized infrastructure must be built on top of decentralized systems, where many actors come together and perform different roles. We can create a new type of personal identity using decentralized verifiers. You do not have to track someone’s personal information, you just have to know by whom it was verified. Every user has his or her own key, so even a central bank cannot change the history of transactions or interfere with someone's financial life. No one can transfer your money without your knowing about that. So that is the key — a decentralized system inside of a centralized infrastructure. This is really hard from a regulatory point of view, but it is part of our long term strategy.
This model is interesting because it can actually promote the privacy of users, while increasing the efficiency for sharing personal information at the same time. Imagine a world where crime prevention really works because of blacklist sharing, but general people in a society have to share less information and there are fewer cases of identity theft.
Please, vote! The creation of a new global digital economy
It is quite amusing that there are a few people in the blockchain space who are quite vocal about creating a crypto economy, while they have no idea how the traditional economy works. Unfortunately, one of the big faults with existing cryptocurrencies is the centralization. And it sounds really weird as everyone around just talks about how decentralization is one of the main advantages of Bitcoin. But in one key area, Bitcoin is actually quite centralized.
Bitcoin is not really very decentralized from the economic point of view (Ethereum and many other currencies and tokens are also the same). Bitcoin is very decentralized as a payment system, but not as a unit of account. It is not backed by rational economics, but instead all new purchasing power goes only to miners. In a more rational model, other stakeholders would be involved as well. We now see the traditional economic system (where most money is owned by just a small percentage of society) which is wrapped in digital clothes. That definitely makes no sense. Technologies are fun but they change every few months. We have to focus first on the social environment and economic system and not only on the successful launching of another project.
At Soramitsu, we are creating a new kind of virtual country. Our goal is to create an advanced digital economic system that will be so well-developed that governments will desire to adopt it. People who are engaged in our community can vote for what amounts and to where new money will be allocated. That is really powerful as the allocation of new money determines what kind of new society you have. If just a small group of people can determine what amount of money should be issued and controlled, there is always some moral hazard or ethical risk. We want to create a system where every participant can choose the allocation of money that is best for the economy.
A new trend in the decentralized community is that people are making less via ICOs and the cost and burden of an ICO is often higher than actually issuing publicly traded equity. Crowdfunding models are also costly and inefficient in an economy, as they simply allocate existing purchasing power and do not create new money that expands the economy. In our model, if someone wants to raise money for their project they can just allow people to vote for the proposal and then new money for this will be allocated. We do not have to attract investments, which divert existing purchasing power from other potential uses, but we can create new purchasing power instead. Just think about that.
Yet Another Consensus
Consensus is one of the main themes today. But are we really able today to settle the consensus with each other? We have to understand that it is really hard to coordinate if everyone has their own token, or their own currency. There are over 20 000 tokens built on top of the Ethereum ERC-20 standard. We (Soramitsu) hope to make it easier for people by creating our Sora (XOR) which will be under the ERC-20 standard and aims to negate the needs for many new currencies to be created to do fundraising.
People can keep in mind only a few things and they are in constant change. Not knowing what currency to choose, whether there are more profitable ones or if one might be a scam, causes a lot of stress to users. That makes no sense as people will go back to something more traditional, well-known, easy-to-understand, and ready-to-use, like the US dollar. So here we are again. Back out of the decentralized future. I think in the future we will see a lot of discussions on this point.
Look at the sky. There is a pretty huge universe out there, and we are just trapped here, focusing on inconsequential problems. It is ridiculous. We have to use all the opportunities available. Decentralization is a real thing for people now because we can use digital frameworks that work on common rules, rather than relying on trust-based complex agreements that add a lot of friction. If rules and laws are codified and made automatic, you cannot just go against the globally agreed system, so you cannot cheat people.
I like different cultures and national identities, but nowadays, it doesn't really matter much where you are from. The Internet makes the world global and collaborative. I think, this is what we need. We need to have collaboration. There are a lot of problems in the world, and we can solve them only by working together. And we all have a lot of work to do.
Photo: Sofya Danilova, Blockspoint