Identification on a protocol level could help blockchain become mainstream for blue-chip companies like MasterCard, Volvo and Geely if international regulations are met.
“[Anonymity] is exactly what is hindering wider use of blockchain,” said Concordium CEO Lone Fonss Schroder. Concordium is developing a regulatory-compliant blockchain platform with identification and proof of stake operation as key aspects of its protocol.
Key Highlights
- “I can’t find any [protocols] which embrace the science into the code on a level where it becomes truly immutable, where you can’t do rollbacks, etc. I don’t see that in combination with the readiness [for regulation] we have set in. I actually think we are the first platform coming on board which have these elements.”
- “Some of the companies we are in talks with, for example, MasterCard’s global payment infrastructure could be built done on Concordium. It could be Volvo or Geely, I could easily see that this could be used for them if they want to do a car-sharing platform built on an open community. But it could also be used by us as consumers just to transfer value to each each other.”
- “[Anonymity] is exactly what is hindering wider use of blockchain. Existing anonymity based platforms, of course, will attract a lot which can’t go through normal bank systems. I think we are at this crossroad now where you might want to have privacy. This is what the business world needs, but privacy doesn’t equal anonymity.”
- “As good citizens, we want to embrace new technology. Often new technology does come from the more anarchistic parts of the world, which I think is very fine, I think you can have those as pilots. But once it has to become mainstream, it does need to follow the rules or that you, together with your society, decide to reformulate the rules. You can’t embrace large-scale anarchistic projects. If it’s cryptocurrency, it’s really threatening the fiat-based economy of the world.”
- “The technology behind both Ethereum and Bitcoin are proof of work, which is so energy intensive that you simply can’t do that, you can’t allow that for the world. I think the world has to be assisted now by cutting edge technology going towards sustainability, but also even further resiliency. We are a proof of stake and not proof of work based protocol.
- “Blockchain can be used to grow business models which might not even sit in the strategic framework of that specific company.”
The usage of anonymity-based cryptocurrencies facilitates illicit activity which circumvents conventional banking Know Your Customer and anti-money laundering regulations around the world.
According to blockchain analysis firm Chainalysis, transactions on illegal online markets reached $515 million by July, as reported by Bloomberg. Chainalysis predicted the use of bitcoin on such sites could reach $1 billion by the end of the year.
“Existing anonymity based platforms, of course, will attract a lot which can’t go through normal bank systems. I think we are at this crossroad now where you might want to have privacy. This is what the business world needs, but privacy doesn’t equal anonymity.”
Following MasterCard, PayPal, and eBay’s departure from Facebook’s Libra cryptocurrency project, Schroder said companies are now seeking “accountable privacy” when it comes to blockchain adoption instead of decentralized “anarchy”.
Congresswoman Maxine Waters, Chairwoman of the House Financial Services Committee called for Libra to cease implementation due to regulatory concerns in July.
“The scant information provided about the intent, roles, potential use, and security of the Libra and Calibra exposes the massive scale of the risks and the lack of clear regulatory protections. If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger U.S. and global financial stability,” said Waters and other democrats in a statement.
“As good citizens, we want to embrace new technology. Often new technology does come from the more anarchistic parts of the world, which I think is very fine, I think you can have those as pilots. But once it has to become mainstream, it does need to follow the rules or that you, together with your society, decide to reformulate the rules. You can’t embrace large scale anarchistic projects,” said Schroder.
See related article: ConsenSys, R3 and Digital Asset execs say enterprise blockchain is changing finance world
Forkast.News Editor-in-Chief Angie Lau talks to Concordium CEO Lone Fonss Schroder to find out more.
Listen to the Podcast
Full Transcript
Angie Lau: Welcome to Word on the Block, the series that takes a deeper dive into the topics we cover right here on Forkast.News. I’m Editor-in-Chief Angie Lau. In this episode, we dive a little deeper into one blockchain protocol, Concordium that’s positioning itself as an industry grade solution for business.
Now it’s something its CEO knows intimately, after all, Lone Fonss Schroder is no stranger to global multinationals. She’s a former SVP who spent 22 years at Maersk, the largest shipping company in the world. She also sits on the boards of Volvo as Vice Chairman and IKEA as Director. Now she’s helping build blockchain. So welcome Lone Fonss Schroder, CEO of Concordium, to Word on the Block, welcome.
Lone Fonss Schroder: Thank you a lot.
Lau: First, tell us about Concordium. This is a Swiss-based foundation, right? Tell us a little bit about Concordium and a little bit about its billionaire founder, Lars Seier Christensen, and the vision.
Schroder: Lars was doing a lot of deep work in finding out how to build platforms. He was building Saxo Bank, which I think actually they were number one hundred on the Internet in the early days of the Internet. He built their Internet based trading platform. So he has very big knowledge about how to build these platforms. I came from the industrial sector, crossing over to financial institutions. I’ve been a director of one of the import banks for many years. And then I was asked to take the position as chairman for Saxo Bank. This is how I got to know Lars and his visions for that.
So with that combined effort, he was looking at Ethereum, he was looking at companies like Cardano, etc., and finally landed at: “No, I want to make a platform which meets the demands I see for layer-one blockchain.” Then he got in contact with – in Denmark, where we both come from – Aarhus University, which is one of the leading universities in the world in cryptography, and professor Jesper Buus Nielsen from Aarhus University. Buus made the architecture behind what was needed, a list of components you would need to code into a layer-one blockchain. First of all, [it had to be] safe, that you can’t do rollbacks, that it’s scalable, that it’s really truly immutable, and own so that it can keep up and doesn’t break.
If the internet is slow or breaking down. So all these elements are what we have coded into the layer-one platform. And then knowing both from Lars’ side and my side the regulative demands, I’ve been as part of banks, implementing 200,000+ pages of [such things] since just the financial crisis, the Basel protocols and the MiFID regulations. So to do a platform which is not borne out of a more anarchist assault, but rather a platform which finds its place in the society we support and meet the regulators’ demands, we have accountability.
One thing is we have to ID at a protocol level. So you have to identify yourself, which is one of the biggest problems for conducting business, actually knowing who is truly on the other end. So you know who you’re paying to and who you receive money from, one of the big things within the anti-bribery laws.
We have other mechanisms where you can make sure in your wallet that it doesn’t receive, or you can’t send funds to anybody on certain sanction lists, which you would have to apply to do if you are based in a certain jurisdiction. Things like this are really built into it, so we are embracing the laws and regulations, and we show the world that you can do a blockchain which finds its place in the world we have created together.
Lau: So that makes it slightly more unique than a lot of protocols out there. But at the same time, there are other blockchain protocols that currently exist that are designed to really serve businesses and serve industries and cater to KYC and cater to regulatory specifics from different jurisdictions.
How do you compete? You’re brand new and there are a lot of protocols out there that have been building for a while and have governance set in place, have this community in open source that have created and designed it to a measure of complexity. So how do you, as the new kid on the block compete with that?
Schroder: I can’t find any [protocols] which embrace the science into the code on a level where it becomes truly immutable, where you can’t do rollbacks, etc. I see a lot of good coded blockchains which are coded by coders, but who might not have the cryptographic understanding.
So that is one thing, and I don’t see that in combination with the readiness [for regulation] we have set in. I actually think we are the first platform coming on board which have these elements. Going from there and really getting people to understand why it’s needed, that you also can test the things you can’t really see and you can’t test in a normal way. Where you need to have, for example, formal verification testing.
Now from here where we have it in beta running now, closed beta where we have our own malicious nodes running and trying to attack our blockchain. Once we open that for the market, and that’s the next big milestone for us, is when we have that communication with the community.
For us, both the regular blockchain community, as so much the industry community, people who might have used elements of blockchain in their own private blockchain, ours will be a public blockchain and it will be open source, it will be fully decentralized. So this is actually I think when we open for this, it’s a new chapter in blockchain history where we will spearhead that part of it.
Lau: Who do you envision using it?
Schroder: It could be some of the companies we are in talks with, for example, MasterCard, I could mention as one example for dare I say a global payment infrastructure could be built done on Concordium. It could be companies I represent myself, take Volvo or Geely, I could easily see that this could be used for them if they want to do a car-sharing platform built on an open community. But it could also be used by us as consumers just to transfer value to each each other.
Lau: One of the interesting things that you’ve said about Concordium is the need for KYC, and yet we’ve seen the adoption and the enthusiasm for blockchain in the early days really centered around anonymity. Do you think that has helped or hindered the adoption of wider use of blockchain?
Schroder: I think this is exactly what is hindering wider use of blockchain. Because if you look at the analysis for the existing anonymity based platforms, of course, that will attract a lot which can’t go through normal bank systems. You also have seen all the discussions following Libra’s publication of their business idea. And you see companies like PayPal, companies like MasterCard, who was first in Libra have now left the project.
I think we are at this crossroad now where you might want to have privacy. This is what the business world needs, but privacy doesn’t equal anonymity. So you want to have accountable privacy. As a director in a company, I wouldn’t support that you open accounts based on bitcoin or ethereum, so you simply can’t have a rigorous compliance policy in a company and then embrace technologies and interact in things where it doesn’t follow the rules and where you can’t make sure that your entire compliance regime can come all the way out in that product.
I think this is exactly the problem you would see in the business world. But I think also as good citizens, we want to embrace new technology. Often new technology does come from the more anarchistic parts of the world, which I think is very fine, I think you can have those as pilots. But once it becomes mainstream, it does need to follow the rules or that you, together with your society, decide to reformulate the rules. You can’t embrace large scale anarchistic projects. If it’s cryptocurrency, it’s really threatening the fiat based economy of the world.
Lau: There is no doubt that the anarchist kind of seed was what inspired blockchain and really allowed people to see possibly a different system. But I wonder now that it’s evolved, 10 years later and with more and more professionals like yourself, that the protocols that exist today—couldn’t you use existing protocols and apply Basel, apply MiFID, apply the regulatory compliance that jurisdictions require in the sovereigns that you choose to do business in? Why build a brand new protocol?
Schroder: Because it’s already contaminated. You can’t implement these things. It’s already a running system, you can’t clean it up. And the protocol doesn’t support this thinking, so you simply can’t do it. The other thing is that the technology behind both Ethereum and Bitcoin are proof of work, which is so energy intensive that you simply can’t do that, you can’t allow that for the world.
I think the world has to be assisted now by cutting edge technology in order to to clean up the world, in all parts going towards sustainability, but also even further resiliency. So that’s not doable. We are a proof of stake and not proof of work based protocol. [It’s like] talking about the [type of] energy you ought to use to run an app on your cell phone, so it’s a totally, totally different technology.
But I think it’s a very natural development, and I really love to look into to the more anarchistic part of the world. A lot of good thoughts are coming from from that. I think it’s to convert these and take the elements of these pilots, hobby projects, and then take the best part and apply that and code that into something which then can become scalable. I think that’s really, really interesting to combine those worlds.
Lau: It’s fascinating to hear how the vision is to bake in current rules of engagement into blockchain so that contractually or any kind of trade or any kind of transaction or interaction would be compliant under the current system, the current set of rules and laws. But what if those rules and laws change? Does the source code change? How do you continuously update and evolve the blockchain to keep up to date with new rules and new ways of thinking?
Schroder: That’s a very good question, because this is exactly some of the problems you have with a fully decentralized [system]. It’s stakeholders in that ecosystem who have to make sure that it’s upgradeable to the extent you need. In the first years, we will follow this from the Concordium Foundation and we’ll have a governance model which would be acceptable to users and participants in the ecosystem.
The governance model will be directed to make sure that it’s constantly upgraded within the boundaries of a compliance system, but also on the technology itself to make sure that it’s on the technical side because that’s changing all the time. Take one example, nano computers. Nano computers and that computer power will destroy a lot of the governance models or security you have in certain protocols. These are some of the things we are already building now in the future versions of Concordium to make sure that it’s constantly following what is happening in terms of computers’ CPU power.
This all has to do with [making] sure that it’s still decentralized but also immutable. If you really read the protocols of for example, Bitcoin, it’s counting on honest nodes. If you really look into it, people are not only incentivized by money, there could be a lot of other things incentivizing people [which need to be considered] to understand what it takes to be sure that it’s really immutable.
This is also very interesting because we were having a discussion the other day about the old tombstones from the Viking age, which we see, for example, in Scandinavia, where you have the rooms carved into the stone and you can still see exactly to the original code, you can see what [one of the old kings] from the Viking age in in Denmark, was putting onto stone. But today, if you look, and I had a discussion with a podcasting radio station which was going to close down, and their concern was what happens to all our material?
If you don’t have anybody who can maintain it and pay for having that maintained… This is another thing I really like about blockchain, it has to be immutable that you can contain things which are needed to be contained, for probably thousands of years. In our totally digitized society we just take it for granted that things are available for us.
Just think on the private level of your pictures, your history documented in terms of pictures of your family and friends, etc. If that is suddenly disrupted because you were relying on your private computer or on a cloud which disappears… We just take things for granted in a moment of time and these are some of the things we can work with on blockchain technology as well.
Lau: Finally, one of the most fascinating things about you is that you don’t necessarily come from the blockchain space. You’ve spent an entire career really helping build multinationals, sitting on boards of IKEA, Volvo, these are all names we know. What is the enthusiasm amongst your peers and colleagues at the board level for blockchain?
Schroder: I think most people, and when I started in Concordium as my son correctly pointed out, “you can’t even spell blockchain, mom, what are you doing in that space?” I think that’s actually a very good starting point. That is, don’t be so scared about the technology. For example, testing work from a need I saw with customers and sub-contractors to do fintech which has been scrutinized. I couldn’t think of a more demanding bank to build it into than at the headquarters of Credit Suisse in Zurich. So it’s sitting there with their bank platform.
I think to show that you don’t need to be scared, that you can embrace technology, I was kind of blown in from my very early days in aviation, in Maersk, working closely with both Boeing and CFM for their engine and all these maintenance programs for aviation. Really, technology is just a part of all products. As a director, you really need to go further down so you know about things. It’s like a puzzle, you have to know all the breaks in a jigsaw puzzle in order to put it in place.
I don’t say that all board members necessarily need to make their own fintech to prove the point, but really to understand more, understand the opportunities, because this is not only now, I’ve seen that in all of my career: you have the destroyers and you have incumbents. The incumbents, we took for granted, they do disappear. Very few companies in the world reach their 50th anniversaries, and even fewer reach their 100th or 200 year anniversary.
The big names we think of today, and I think it’s Bill Gates who years back said that Microsoft’s biggest competitor, just five years from the time he was saying this didn’t exist and he was ever so right. I think to understand that you really, really need to see how can you can disrupt yourself in a true manner. So it’s not really just to change the way we do things inside the companies.
Blockchain can be used to grow business models which might not even sit in the strategic framework of that specific company. I’m also a part of the remuneration and election committee of Volvo, for example, and there we have one of the original founders behind Skype on our board, early investors in eBay. You just have to make sure that your board does have people who understand this on a more specific level.
I like people who are good implementers and that’s saying the whole game. For example, Volvo is one big company of implementers and we have been able in the past, under their ownership for the past 10 years to convert Volvo from a fund which have set in Sweden, it’s kind of for the older man with the soft hat on, and his stock in the bag.
Now Volvo is really such a cool brand and we just see the whole way we have been able to convert it into a smart and premium car, but still, which speaks to also very young people and speaks to the original customers. We have been able to convert safety into something which is really smart.
Lau: Well, I dare say, Lone, you’re doing the reverse here for blockchain, where it started out with the young people, the visionaries, the anarchists, if you will, and you’re making it digestible and you’re making it really acceptable, possibly and practical for a lot of mainstream companies to use it. So it’s going to be very interesting to see what happens next. If there are industry leaders out there and they’re interested in Concordium, when can we expect something?
Schroder: We will run some use cases in connection with our open beta. By the end of our first quarter next year, we would be able to come up with a tool box. Now we have to dial open and start the use cases. We’re not a use case house, but we are developing the technology and in particular our tool box together with the users to make it, as you say, easy and implementable because that’s another mission I have, is to make blockchain easy, understandable and not something which is complex for specific segments.
Lau: You and I are we’re on the same page there for sure.
Schroder: To take that up to make things mainstream and make them easy, by the end of the day, and people don’t like it when you say it, but at least my experience is that 90 percent of everything is just the same. It’s just sitting with another nomenclature or another vocabulary. Just to convert it into something people understand, it’s not that difficult. We are just providing a software which you can download and use with a good understandable tool box.
Lau: And we’re just having a conversation, and I really thank you so much for it. It was fascinating. And I look forward to hearing more. I’m sure this is the first of many conversations we’re going to be having. Lone Fonss Schroder CEO of Concordium.
Lone, thank you so much for joining us right here on Forkast.News. And thank you, everyone, for joining us on this latest episode of Word on the Block. I’m Forkast.News, Editor-in-Chief Angie Lau. Until the next time.