OPINION-1

A Conversation with Guy Berg

–  Josephine Rossi

As leader of the Accredited Standards Committee X9 Inc. (X9) blockchain study group, Guy Berg will be involved in developing a standardized glossary addressing distributed ledger technology. The initiative kicks off in October, and the project’s deliverables will become an ANSI X9 technical report. Here, Berg, who is vice president of the Minneapolis Federal Reserve’s payments, standards, and outreach group, discusses the initiative and the need for a common set of terms and definitions for financial services and beyond.

The following has been edited for length and clarity.

What terminology confusion have you witnessed in the financial sector?

This idea came from a work group I’ve been chairing over the last year, where we were looking at [the] value for standards to support blockchain technology adoption. One of the first things we ran into is that each of us had a different definition for each of the terms. So we spent a number of months trying to work through … vocabulary.

We also went out and interviewed a number of the vendors and consultants that have helped implement pilot blockchain systems. And in each case, again, we ended up spending a lot of time defining what we meant by each of the terms. It’s really difficult to have a conversation—whether you’re a customer talking to a vendor about what they have to offer, or you’re a vendor talking to the customer trying to sell them on what you have to offer. If both parties don’t understand the terms, you spend a tremendous amount of time just talking about those terms, and you don’t get to the meat of the conversation you want to get to.

Think about it: There are a number of different blockchain platforms that are out there. IBM has one. Microsoft has one. Ripple has theirs. They all use slightly different architectures, and they start coming up with their own definitions of terms. Somehow, all of these different platforms need to start using a common vocabulary. If they don’t, I think that they’re ultimately just hurting themselves in the marketplace, because they’re going to end up spending more and more time—or just as much time—in every meeting trying to define each of these terms. I think one of the greatest challenges to blockchain technology overall is the marketplace’s understanding of it.

 

What specific terms or concepts are problematic?

There are many. The ones that people get the most excited about, often times, are the ones that are most confusing. For instance, people talk about smart contracts. What really is a “smart contract”? If you’re talking to people in the legal profession, they may be interpreting it completely different than somebody from the technology side of things. And then the platform providers will have slightly different definitions of how they view and implement a smart contract. …If I get a group of eight or 10 people in the standards community talking about it, we could be in the conversation for three hours debating [the meaning].

Then you get into the consensus algorithms. Some people think that there might only be one or two, but there are many different consensus algorithms out there. And they have their different merits depending upon what the business requirements are. If we had a list, we could take those terms to providers, and they would define them just enough differently so that it starts to confuse people.

 

Why is a common lexicon important?

I think it’s important for everybody to understand the value of having that common set of terms and just how many different stakeholders can benefit from it. Obviously the customer base themselves will benefit. [The same goes for] investors, regulators—it could help inform future legislation. I think that anytime there’s a new technology being introduced to the marketplace, one of the most important or critical steps to gaining adoption is broader understanding of the technology. And one of the first, most basic, steps to doing that is agreeing upon a common terminology. X9, as the accredited national standards body, is really the right body to try to pull all the different players together that are working this technology to come up with that common set of terminology. I think that’s the most important message of all. It’s fundamental, but at this stage of the market evolution, which is very much in its embryonic stage, everybody can benefit from this effort.

 

What is the end goal of the technical report? Could it be a definitions standard?

The intent on this new work item would be to develop a set of standardized terms for blockchain technology. That means trying to reach out and talk to all the different entities that are involved in it and look at the terms, how they use them, and come to some form of consensus on a definition that everybody can agree on and move forward with.

Think of all the different functional areas that need to have the same understanding of blockchain terms. There are auditors, regulators, IT groups, and legal that will benefit from having a common reference. Each needs to understand in their terms and from their perspectives. We want to be able to reach out to different entities from different disciplines to try to integrate their perspective into the work. That might be a little bit of a different twist that we’re going to try to achieve within this work.

 

How long will it take?

Standards process is slow. You need to build a consensus, and you need to get the right experts involved in it. You seldom see something that gets done any faster than 12 months. I would hope it would be in a 12- to 15-month timeframe that something could get wrapped up.

[The work group made terminology a top priority], but there are a lot of other areas where I think that this technology could benefit through further standards development. …Some of it might make more sense to wait another year or year and a half, as the industry evolves a little bit more. An example of that might be the consensus algorithms. Right now, blockchain technology struggles to perform [in a timely manner]. If you’re going to get into high-volume payment transactions, you’re going to need to perform in sub-second time. The consensus algorithms and processes today just cannot meet that standard of performance, and so there needs to be more innovation. That might be an area where it would make no sense for standards to step in—other than to maybe help identify potential methodologies to stay away from because they may not be considered secure enough.

Editor’s Note: Professionals from relevant organizations are invited to be part of the technical report initiative. For more information about participating, contact X9 at https://x9.org/contact-x9.

 

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