Lachlan Feeney is the Founder and CEO of Labrys – Australia’s leading provider of blockchain development and consulting services. Lachlan founded Labrys out of his bedroom at the age of 19. He was an early adopter of cryptocurrencies and blockchain technology and immediately realised the potential to build a better, more democratised future, with the technology. Labrys has worked with ASX listed Downer EDI, The Government of the Solomon Islands and global blockchain platform NEM Group, among others. Lachlan is on a mission to turn Labrys into a global blockchain-consulting authority as the technology moves further into the mainstream. Prior to starting Labrys, Lachlan has worked as a developer at fellow blockchain agency; Civic Ledger and as a cryptocurrency researcher at the Student Trading and Investment Association. Lachlan is also a co-author of The Handbook of Board Governance (2nd Edition).
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You're listening to KBKast, the Cyber Security podcast for all executives cutting through the jargon and height to understand the landscape where risk and technology meet. Now, here's your host, Karissa Breen.
Welcome to the show. I'm really excited to have you here today. Now, blockchain is something that depends on who you ask. People have different versions, different theories on what it is, how it works, why we should care about it, and also, more importantly, because this is a Cyber Security podcast, the security side of it. So I want to sort of get into your background and then dive more deeply into the blockchain side of things. But I'm really keen to hear from you to start off our show talking a little bit more about you, Lachlan, and your journey. So please go ahead, tell a listeners where you started to where you are now.
Lachlan Feeney (01:08)
Sure, yeah. Thanks for having me. Super excited to be here. I love talking about blockchain. My name is Lachlan Feeney. I am the founder and CEO of Labrys. Labrys is one of Australia's largest blockchain technology and consulting agencies. I founded Labrys five years ago now when I was studying at university. So I've always sort of been super into blockchain, even from a young age. I've actually spent almost the last decade focused around blockchain. I was an early adopter of Bitcoin and always found it super, super fascinating. Sort of went down the rabbit hole from there and yeah, when I was at university, I was working for another blockchain company. I studied at Queensland University of Technology doing an information systems degree. And, yeah, blockchain has always been my thing and I got together with a couple of mates while I was studying at Uni. We came up with the concept of Labrys. So this was about five years ago now and, yeah, I ended up I had a lot going on at the time. I was obviously studying full time at university. I was working outside of Uni. I was actually heavily involved in sort of a few different clubs and that sort of thing at Uni as well.
So shortly after starting Labrys, I ended up deciding to drop out of Uni. So I never actually managed to finish my degree and I've spent the last five years basically solely focused on blockchain, trying to bring blockchain a lot more mainstream, particularly within the Australian market, but also a lot more broadly. And we've built up over that five year period laboratory to where it is today, which is we have more onshore blockchain development talent than any other agency in Australia, which is something we're pretty happy and excited about. And, yeah, I'm just on a mission to try and spread blockchain as far and wide as possible.
Wonderful. I love that I like how you said trying to create blockchain to be more mainstream. Now, blockchain fundamentals, people are still quite confused by it, and as I started interview off, depends on who you are, so get different answers. I think people are still confused by what it is, how to build on it, how to protect it. So I'm really keen to hear from you today to demystify a lot of these blockchain theories. So just so everyone listening is on the same page, can you explain what blockchain is? Because as I've said, people have many versions and interpretations of what it is and I just want to be clear and start the interview that everyone knows where we stand, what your definition is, and that way when we're going through the interview, there's no sort of room for error. So please give your definition of what it is.
Lachlan Feeney (04:55)
Sure. So blockchain is pretty complicated with it, which I think is where a lot of the confusion comes from, but I'll try and keep it as simple as possible. A blockchain, in my eyes, is just a database where once you write information to that database, it cannot be changed or modified by anyone anywhere in the world. It's a database that once you write some data to it, you can't modify or change that data. There's no admin user who has control over that database, who can modify any of the data within it or historical data within it. Once you write data to a blockchain, it can never be changed. And a blockchain also in addition to that, it should basically always be up. It should have 100% up time. So this is a database that doesn't go down, it's always there. And the information that's in that database, once it's written there, at least the historical state of it cannot be changed or modified. It can't be changed by any individual entity, by any hacker, by any government. It is what we call an immutable data store. So yeah, it is a database. You can get a lot more complicated than that.
Lachlan Feeney (06:43)
There's a lot of different things that blockchains can do beyond that. But yeah, in its simplest terms, it's a database. It has similar functionalities to most other databases. Everyone can read from a blockchain database, but you still have sort of your traditional right permissions so that some people can write to certain accounts and others cannot, the same way as any database. But that key differentiator is once you're right there, you can't change it. And once you start phishing about the applications that you can do with that, obviously everyone's most familiar with Bitcoin and that use case, there's a million different things you can do with it. But yeah, it's a database that you can't change the data within it once you write that data to the blockchain.
I'm curious to know, from your perspective, a lot of people out there, and I know this because conferences and people talk about blockchain. People still seem to be apprehensive towards it. I'm curious to know why.
Lachlan Feeney (07:55)
I think it stems from where blockchain started. You kind of have to go back to the first use case of blockchain, which was Bitcoin. The Bitcoin blockchain is a blockchain, there are other blockchains out there, but it was the first implementation of a blockchain, creating this concept of digital money. Once again, there's sort of many attempts, not everyone knows this, but prior to Bitcoin there's actually many different attempts to sort of create digital online currencies, and all of them failed, basically because people would hack into the databases or admins would abuse powers and different things, or they'd get shut down in certain jurisdictions. So bitcoin was the first implementation. When it first started. There were incidents like the Silk Road and things like this, where people were finding all sorts of very interesting use CISOs for a technology like this that we had no access to before. So I think that's where a lot of the caution comes from, because of those early days of blockchain technology, where there was a lot of apprehension to Bitcoin, particularly early on, is where some of that stigma sort of comes from. But I think we've matured. Blockchain has been around for over a decade now.
Lachlan Feeney (09:41)
We've matured, vastly beyond bitcoin. It's obviously still a big part of the space, but there are so many other amazing applications for blockchain and the technology as a whole. So I think it stems from those early days of Bitcoin. I've certainly noticed sort of just in the industry over the past few years, there's definitely been a shift in sentiment. If you go back sort of maybe six or seven years, no one had any interest in blockchain at all, they wouldn't even entertain a discussion around it. If you go back five years, people might listen, but wouldn't really sort of take it that seriously. Whereas I think over the last couple of years, I've certainly noticed a big sentiment change where serious individuals, boards of very large companies, major brands and organisations, are now looking at how they can adopt this technology. And I think there's still big question marks from a lot of these people within businesses of, well, actually, I'm going to listen now, I'm not ignoring it. I understand that there's some value there. I still don't understand where that value is for my business, but I'm at least going to listen and entertain it.
Lachlan Feeney (11:20)
And so I think that's where the sentiment is at the moment, and that's sort of my perception of how that's shifted. And then the next step is once we start getting some really sort of killer use cases of the application that can be rolled out, where we've sort of achieved easily replicable success stories with the technology, that's when that sentiment is even going to shift a step further, which is, okay, now I get it, I can see how it adds value I know the use case. Let's get going.
Wow, that is really interesting. I'm curious now to know from what you're saying in terms of the timeline, like the last couple of years you've seen the update, what was sort of the appetite towards blockchain in terms of like, was there anything specific that perhaps caught people's attention that you can sort of shed some light on, perhaps in.
Lachlan Feeney (12:20)
Well, you should say before that in recent years, more boards and companies are now open to the conversation. Was there anything specific that people were sort of hanging their hat on that you sort of noticed as a common trend that people were open to having the conversations about blockchain?
Lachlan Feeney (12:40)
I think where that interest in sentiment has come from, I hate to spend so much time talking about bitcoin, but I think bitcoin has been in the news. It hasn't been mainstream, but it's been in the news for a good sort of eight or nine years now. And every time the bitcoin price goes crazy and then it crashes back down and everyone goes, that was it, the technology is dead. It happened when bitcoin hit $1,100 back in 2013, and then in 2017 it was up at $20,000 and then crashed back down. And then over the last twelve months or so, we saw it back up as high as over $60,000. So I think that bitcoin, the bitcoin news cycle has been somewhat of a catalyst for the interest where these people that were laughing off bitcoin when it crashed down to $3,000 or so and sort of wrote it off, and now seeing it come back going, oh my god, what's happened here? Clearly I've missed something. This thing isn't dying. What's actually going on here? And there's been a lot more institutional adoption, even of technologies like bitcoin. There are some countries where now bitcoin is legal tender, and so I prefer to talk about the applications and use CISOs of blockchain technology.
Lachlan Feeney (14:29)
There's so many that really exciting, use CISOs that the industry is working on at the moment. But if I'm being perfectly honest. I do have to admit that the news cycle around the price of bitcoin and the fact that this thing just isn't dying and seemingly is seeping its way into the highest levels of society is definitely a catalyst for people to reconsider and go. Maybe I wrote that thing off and maybe I was wrong. And maybe my business doesn't want to use bitcoin or buy bitcoin. But maybe I should pay attention to the technology behind it and see what that can do.
Yeah, that's excellent. I think there's a lot of good things that you said in there. So interesting comment that you made around, like, when bitcoin crashed. So a few weeks ago I released an episode about crypto scams, and someone responded to me saying like, oh, crypto is dead, much to what you were sort of saying. And on that day from memory, like it had plummeted quite hard, but then it recovered. And so I can start to see the trend of everyone saying, oh, it's not going to be sustainable, there's no longevity. People have been saying that for years. And you are right, there has probably been that mainstream media, that negative connotation attached to it, but it's still here, it's still showing up. I mean, if you look at traditional stock market, that's taken a hit. So I think that again, it depends who you ask. So that was an interesting observation that you had. One of the things that you said earlier, Lachlan, is companies are starting to see value in blockchain. So would you be able to perhaps highlight what the value is? So the listeners, perhaps you are in early days of exploration on blockchain and are keen to know more.
Lachlan Feeney (16:23)
I'm happy to hear it from you, the blockchain guy that's been doing it for what, a decade and what the actual value is for people, because I still think as well, a lot of people are very unclear on this.
Lachlan Feeney (16:36)
We are still early on in the use cases. So the way I try and look at blockchain and where we're at sort of compared to other technologies, we're kind of in like the email era of the internet. So if you go back to probably like the late 1990s, the internet, obviously it exists, it's there. One of the primary use CISOs of it is email and people are using that. The analogy that I've made for sort of blockchain is bitcoin is like bitcoin is to blockchain what email is to the internet. And so if you went back to the 1990s and you tried to explain what the value of the internet is, well, someone would probably give you this really technical answer of, well, it's this global network of information and it operates on this sort of TCP IP protocol. And this is revolutionary because so and so. But it would be very hard to describe value in terms of companies like Facebook and like YouTube and Google. These use cases and applications of the internet are just unfathomable back at that point in time. So I kind of see that as this is where blockchain is at the moment, we kind of have bitcoin and some people go, oh yeah, that's interesting, I can see some value there.
Lachlan Feeney (18:32)
But there will be the Facebook's and the Google's and so on of the web three era. They don't exist yet. But they're coming and to try and I could sit here and speculate all afternoon on what those companies are going to look like and I'd probably be wrong. But the value that blockchain is going to deliver or is going to enable what we call web three. Which basically it builds in trust in a digital sense and allows us to take control back over our own data. So when you have these blockchain systems, these Immutable databases, where once you write to them that data or information that you've written can never be changed. What you can actually do is instead of just storing a piece of information, like in the case of Bitcoin, a number of bitcoins in an account, because that's all Bitcoin can do, it's just a ledger of Bob has five bitcoins and Alice has two, and you can update those values. Now, with blockchain, you can actually write and programme entire applications into this Immutable database, where once they've been written, the code in those applications can never be changed. So they'll execute and run exactly as you expect them to 100% of the time.
Lachlan Feeney (20:29)
So you can now start creating applications where typically you would need middle men, trusted third parties, because you don't know how the other counterparties going to act and you can't necessarily trust them. Well, with these blockchain and web three applications, both parties can see the rules crystal clear. The application can only run according to the rules. The rules can state that you maintain total ownership over your data. It's not transferred to that of the company or some other entity or these sorts of things. Once again, I'm getting a little bit technical here, but this is where the value comes from, where you can recreate processes digitally and contracts digitally, but typically you could only do with a trusted third party where you needed to pay them for the service that they're providing. You can now do this peer to peer, B to B, with absolute certainty as to how things are going to play out.
So when you say third party, what do you mean specifically when you say.
Lachlan Feeney (21:51)
yeah, this could really be anything, depending on the use case. So, once again, looking back to how the industries evolved, it started with Bitcoin, which was very finance heavy and money focused. So inherently, a lot of the initial applications of blockchain technology have been financially focused just as a result of where the industry started. And so there are now applications on the blockchain that are like peer to peer banks. So you can go and you can go and take a loan out on a blockchain directly, peer to peer from a lender. There's no bank that's necessary to facilitate that transaction, to hold your deposit, to pay you interest, these sorts of things. You can completely connect a lender to a borrower directly, totally peer to peer, business to business, these sorts of things.
Got you, then. That makes sense, would you say? I mean, from what I'm hearing, from what you're saying in terms of value, I hear there's accountability, like you said, database that you can't change, people can view it. Historically, that's not always behind a company. You can't necessarily, unless you break into it and hack into it and you go through it with a fine tooth comb to the end degree, you don't have that. So would you say from your experience that that's something perhaps that can be good, but they can also be worrying for some people as well, because it leaves them very open to vulnerabilities, but then also to perhaps things that they're not doing necessarily. Right. So do you sort of see that people are sitting on the fence about it because it could be used for good, but then also it could expose a whole bunch of things because there is that level of accountability there?
Lachlan Feeney (23:59)
Yes, there's definitely that aspect of it you can create just because you have a blockchain system. I think this is where it catches a lot of people out. Just by having a blockchain system and an application that runs on a blockchain doesn't mean that the rules of that application are honest or that the application, the owner who was sort of deployed the application to the blockchain is going to be held accountable. So there are some of those. There is that aspect to it. I think this captures a lot of people out. You can write a programme to the blockchain, which is like a clone of Bitcoin, except there's an admin account that controls everything and can delete your bitcoins and all of these sorts of things. So just because you have a blockchain doesn't mean that the applications on it are honest or accountable. You can write whatever rules into them you want. Yeah, I would say there's an aspect of it as well where, because it's so finite, people sort of get scared by the finality of the blockchain systems. For example, if you send a cryptocurrency or something to accidentally send it to a wrong address on the blockchain, there is no bank or government or anyone that you can go to to reverse that transaction or go, okay, obviously there was an honest mistake here.
Lachlan Feeney (25:55)
So there is that challenge about it. Some people get quite scared about that. I think this is not a technology problem, but more of a sort of user experience problem. And there's a lot of work being done to try and abstract these challenges away so that they become much less of an issue. But yeah, in terms of accountability, I think it's the same as any other technology. It's a new technology, people are scared of it as they see it mature, they'll become much more comfortable.
Go make the crypto example. So if I was sending you crypto and I accidentally didn't mean to, and I supposed to go to someone else, how are people reacting to that? I mean, I interviewed a guy recently and told me NFT, and so his sort of theory was, and he lives in the United States and he was sort of saying it was quite crazy, similar things what you are saying. And he was saying six out of ten from his experience with Scams, which is quite high, that's over 50%. So I'm curious to hear from you if people are there was an error in judgement and they sent crypto to someone they shouldn't have. And what's like the response? How do people respond to that? Because you've probably seen over these last few weeks of how much money people have lost and entertains and all these types of things. And admittedly the market does come back, but in this particular instance, like you said, there's no bank, there's no government where you can go and say, hey, I accidentally sent money to someone I shouldn't have. What does that look like?
Lachlan Feeney (27:34)
Okay. I think it depends on the user and their knowledge of the space. To someone who's a bit older, has been used to the banking system and the way things have worked for decades to come into a system that's as final as these blockchain systems, it seems quite scary. And I've certainly met a few people over my time who have run into issues here where they have been scammed, or they have accidentally sent things to the wrong address, or they've lost their keys to their wallets. That's always you see plenty of stories of those going around where the guy was mining bitcoin and then threw away the computer and lost access to billion dollar fortune. So the reaction is always like, people never take that lightly. But I think it comes down to at the end of the day, it comes down to education and it comes down to abstraction at the user experience level. So for me, as in seemingly sort of advanced blockchain use, I don't come across any scams or ever have any issues with these types of things because I'm just not in those circles. I'm not doing things that I should be because I know what to do and what not to do.
Lachlan Feeney (29:23)
But there's certainly that issue with new users who are new to the technology, who haven't been educated in the technology, find themselves in places on the internet that to you or me, would be obvious scams places promising several thousand percent returns, and click this link in this email. These are all classic cybersecurity challenges. I don't see blockchain space really any different to any other space other than obviously the finality, but yeah, people never take lightly to it. But I think as the technology matures, as we build better wallets and technologies, this will become a lot less of an issue. So, for example, there's a lot of wallets working on account abstraction at the moment, or social recovery wallets. So these are things where rather than using a singular private key to store your cryptocurrency, for example, you would create a smart contract where members of your family and friends or whatever would be able to reactivate your account if you ever lost access to it. So you might put in like five very trusted family or friends and say that you need three of them to be able to recover account. So you can build all of these things in these technologies are coming.
Lachlan Feeney (31:10)
And I think once we make some headway, there this sort of issue of losing keys and scams and these sorts of things will become much less of an issue.
Do you think that this space will become regulated? So going back to your example, a guy obviously threw his laptop out, he lost all his money or whatever. That's pretty frustrating, but then there's no one to complain to, so I'll give you an example. A few weeks ago, my business credit card had all these random charges on it. Obviously it wasn't me, whatever happened, I don't know specifically, but called the bank and they're like, yeah, cool, we can obviously tell that wasn't you. And I recovered the money. At least I as a consumer, not even as a business, as a consumer, there was some relief knowing that someone was going to deal with it. So going back to the example, or just any example that you probably have, if that were to be the case, and just how hypothetically, I called the bank and they're like, Too bad, so sad, not our problem, they just hung up. Yes, people are aware that this could be a thing, but it's still upsetting. Right. And how do you go back to potentially burning yourself again when there's an error in judgement or there was some oversight? I'm curious to know then, have you seen anything in terms of people's reaction?
Is that sort of going to be where we start to get this regulated or what?
Lachlan Feeney (32:35)
Yeah, so there's a couple of questions there. Regulation is no doubt coming. We can already see it in a bunch of jurisdictions across the globe at the moment, so there's no doubt that that's coming. It's just the question of what this regulation is actually going to achieve and how effective it will be. So, personally, I think that some level of regulation is going to be necessary to give businesses the confidence to sort of move into the space, because it is a grey area at the moment and large enterprises is nothing that they dislike more than sort of operating in really grey areas. They want it to sort of be crystal clear. So that's coming and that's necessary. But solving the problem that you're talking about here in terms of funds being stolen from a wallet or being sent to the wrong address or losing keys or these sorts of things, government regulation can't fix these things. There's no government that can come in and reverse a transaction on a blockchain. Like, remember, these things are designed so that once some data is written to it, it cannot be changed, no matter who it is. So I think we need to look to technological solutions, not to regulatory solutions, to solve some of these challenges.
Lachlan Feeney (34:14)
So I think the way it will work is the way it will end up unfolding, is if you want to be in total control of your wallet and take all risk on that's. Fine, you hold your own private key and you self custody. You do that and you bear the risk for that. I think there will be some solutions that evolve, which are custodial solutions, which we already sort of see at the moment, where you go, actually, I don't want to be responsible for managing my private keys. And if something goes wrong, if there's a technical issue with this application and some funds are stolen, that's the business's problem, not my problem, the same way it would be the bank's problem. And I think that you'll probably start saying you can already take out decentralised smart contract insurance on these blockchain platforms, so you might be able to take out a policy where if any funds are lost or stolen from your wallet or these sorts of things, and you can prove that, then you'd be able to make a claim. So I think there's going to be some really promising technological advancements that will solve some of the problems that you're sort of talking about.
Lachlan Feeney (35:39)
And with the credit card situation, it's important as well not to just look at, okay, well, it's great that the bank solved it, but how did that actually happen in the first place? There's obviously some sort of vulnerability there, but with a blockchain wallet, the only way that anyone can ever spend your funds is when they get access to your private key. There's absolutely no other way to do that.
Lachlan Feeney (36:06)
So Traceability is there
Lachlan Feeney (36:08)
because there's only one option. Whereas someone saying to me, like, how do you think your card got skimmed or whatever? And I was like, who knows, it could be I was in a taxi, it could be my credit cards used for SAS, maybe that was compromised. It could be a bunch of stolen credit cards sold on the dark web, someone bought it, happened to use mine. Who knows? Like, who actually would know? And to be honest, I wasn't going to go on some quest to find out because it could be any answer. So would you say that there's a correlation between the custodial solutions and then probably the adoption towards it? Because people feel that level, perhaps, of security that not taking all the risks themselves? Do you think that when there's that equaliser, there where you're not taking all the CISOs, there is still some sort of body per se that can help you? If there is an issue, do you think that will be where further adoption potentially could stem from?
Lachlan Feeney (37:08)
That's what's happening at the moment. So most of the adoption of cryptocurrencies and these sorts of things, and I should say as well, we're spoken a lot about cryptocurrency, there's a lot of blockchain use cases sort of outside of cryptocurrency as well. But this is where the adoption is happening at the moment. Like most people who own cryptocurrencies own them on custodial exchanges. They don't self custody themselves, and that's. Definitely accelerated adoption. In the long run, I don't think that is the best solution. I feel like if all the cryptocurrency or all of the data or all of the access rights to these smart contracts just end up back in the hands of a few sort of custodial brokers or custodians, I think we're sort of phishing the purpose of the technology a bit. So I think this is a short term sort of solution. But I think in the long run it's about how do we make non custodial wallets and key management applications because not every interaction with the blockchain is through a cryptocurrency wallet. But how do we create these solutions where individuals and organisations can create or can self custody. But with the user experience that they used to add a traditional bank and with the recourse and tools available to solve problems like a traditional bank or systems that they're familiar with.
Yeah, got you. Okay, so I think what I'm hearing from what you're saying is if we keep going down the custodial solution, it's just basically going to end up being like a bank is today, but in a different form with having someone responsible for that, which completely defeats the purpose of it.
Lachlan Feeney (39:27)
Yeah, I think this is one of the big challenges for the blockchain industry and this is certainly something that we do a lot of thinking about at Labyrinth is if we don't think about these problems, all we're going to end up doing is rebuilding all the old, terrible, horrible systems of the past just with a shiny new technology. This is what's happening with a lot of the, what we call DeFi applications at the moment, where we seem to be just building the same systems that led to the global financial crisis and in many ways they're no better, they're just running on a new flashy technology. But the technology does have the potential to build new and much better, more secure, more sound systems than we've been able to architect in the past. And that really is the key challenge. It's something we spend a lot of time phishing about here is how do we actually use this technology to make new and better systems, not just rebuild the bad systems of the past.
So would you advise someone to take the risk themselves? Because then exactly what you just said. If we're just going to have that custodial solution, it's rebuilding the same stuff that we've already kind of got, right? So we don't really need that. And the whole benefit of this is to have that complete control, is that what you're saying?
Lachlan Feeney (41:10)
Well, I think it's up to businesses like Labrys and other builders within the software and blockchain industries to build solutions that allow the benefits of blockchain to actually take place. But to give a user experience and customer experience, that is of what the average user and average person would expect. That's really the challenge. I don't think you should be advising your mom to go out and buy a bunch of bitcoin and self custody it herself and write down her 24 word mnemonic. That's probably a bad idea, but I think it's up to those in the industry to build solutions so that your mom can go out and access the blockchain and take full advantage of owning her own data, her own assets, information, these sorts of things, but do it as simple as using any other application.
So, switching gears now, I'd like to sort of talk on the security side of things. Now, there's probably this fallacy in the space that blockchain is going to solve security problems. So from your development perspective, what are your thoughts on this?
Lachlan Feeney (42:52)
Yes, this is sort of one of my pet peeves in the blockchain industry, is this between blockchain and security. So if we go back to the definition of what is a blockchain, it's this sort of database where once you write information to it, that data cannot be changed by anyone. And some would sort of describe that as an unhackable database, blockchain, bitcoin and these sorts of things, they're often described as unhackable. And so people often sort of take that and then they go, an unhackable database, that sounds great. This sounds like the perfect solution for me to store my most private and confidential information, because it's like locking up my data in a digital Fort Knox. And the blockchain is going to be this sort of cyber security sort of silver bullet for such scenarios. But the reality is actually pretty well the opposite. And so the way that blockchain actually achieves immutability, the whole way that it works, and the reason why you can't modify the data that's in it is because that data that is stored within the blockchain is publicly available. Everyone can read it and it's spread as far and as wide as possible.
Lachlan Feeney (44:49)
So, once again, coming back to the case of bitcoin, you can actually go on. You can look up online, you can see every single bitcoin account that's ever existed, you can see every single transaction that's ever taken place on the bitcoin blockchain. And that's why we can achieve that immutability, because everyone can see it, everyone agrees what the correct state is. And if someone tries to modify that state or that history, then there's 10,000 other copies out there that all say that that modification is wrong.
There's an accountability piece there,
Lachlan Feeney (45:28)
Correct. Yeah, it's a common misconception. There is accountability, but there's not necessarily privacy. And so, as a development agency, we get asked all the time, a big one is medical data, where sort of people come in and they go, you've got this. I've heard about the blockchain and this unhackable, unpenetrable database. I want to take my medical records and these sorts of things and store them in the most secure database available, which I've heard is blockchain, but it's not a good use case at all because you're just exposing all of that information. Now there are technically different blockchain zero knowledge blockchain systems where you can hide some of that privacy and there's technically private blockchains and all of these sorts of things which we could spend hours and hours talking about. But for the most part, if you intend to use a blockchain system because you want to lock up some confidential information in it, then you're probably using the technology incorrectly.
Lachlan Feeney (46:55)
Can you see how many Bitcoins someone has to their name?
Yes. As well, what you can see is you can see addresses which look like to the average person, it just looks like a random string of characters. So you can't search up lachlan feeny and find my Bitcoin account, for example, but you can see every single address and you can see every single amount of Bitcoin in each address, and you can see every single transaction that that address has ever done.
But you can't detect if it was you specifically. It could be anyone.
Lachlan Feeney (47:42)
It could be anyone. But what ends up happening is there are companies out there, chain analysis is one of them. There's a bunch of different firms who, when you interact with a custodial solution such as an exchange, there are regulations, KYC AML regulations that come into place where these exchanges have to verify your identity. And every time that you go from a noncustodial, every time you go on and off these custodial solutions, they can see which wallet you're coming from and they can see which wallet you're going to. And so what these companies do is there are companies out there, they buy up all the data of which wallets are going to and from exchanges and they can actually map out and pretty much see basically take that transparency away and they can see and identify a lot of the wallets on chain who they actually belong to. So a lot of people think that bitcoin is entirely private and entirely anonymous. But we have over a decade's worth of data of people moving in and out of KYC solutions. And if you put all of that data together, you can make a really good map of what actual real world people can control which addresses.
Lachlan Feeney (49:24)
And so it's actually nowhere near as hard as anyone thinks to try and work out how much Bitcoin someone has and what they're spending it on.
Do you have Bitcoin?
Lachlan Feeney (49:37)
Okay, so that is super interesting and all my security bones in my body just freaks me out. What would be the purpose? Okay, so hypothetically I've gone out chain analysis was it? I've now discovered I've got all this information. So then what happens? What do they then do with it? Do they then on sell it to people to understand, okay, this person in this country has billions of dollars in it, which makes them a high target potentially. What's that intelligence for sure.
Lachlan Feeney (50:16)
It's for lots of different things. There are other companies like Manson and these sorts of things. There's plenty of companies out there that do it. The primary use case is government and sort of police, and these sorts of things are very interested in that sort of information. So if a bunch of bitcoin has been stolen or is being used to fund illicit activities, then they can see who's behind that bitcoin or where that bitcoin is going. And if it ever ends up on a custodial solution, those custodial solutions can freeze the bitcoin because they know that it's dirty bitcoin and these sorts of things. So the biggest use case is definitely for sort of law enforcement, that side of things. But there are lots of different other use cases as well. Like Nancy, they do this, and you can use tools like this. As a trader, you might be interested. Like, some of these services have tracked down, like, the really big funds in the crypto space. And so if you can track down and identify their wallets, you can see what they're investing in and when they're investing in it. I'm sure a lot of these companies is kind of like the guy on Twitter who was, like, tracking and following Elon Musk's private jet and where it is and where it's going.
Lachlan Feeney (51:54)
And I'm sure a lot of these companies aren't very happy that people are sort of peeping in to see what they're doing with their wallets. But yeah, that's what this tracking is being used for.
So creepy. Okay, definitely hear what you're saying. So if you were Elon Musk and someone's tweeting about where you're flying on your private jet, how do you think that makes him feel? Or do you don't think he cares?
Lachlan Feeney (52:26)
No, he definitely cares. I think he tried to pay off that guy, if I remembered correctly, for him to stop. These guys, they're obviously not very happy about it. And many people would argue that this is sort of against the intention of blockchain. And bitcoin has addresses for a reason, and it's meant to be anonymous and these sorts of things. So there's a lot of work being done in terms of privacy solutions so that in five years time, I'd be pretty confident that you won't be able to do these things and track this much sort of account information. There are technology solutions and upgrades that are coming out that are dealing with all of these issues. So there's a lot of people who are unhappy with this, and I expect that this won't be the case for much longer. But for now, there's a lot of people who think that just because they're hiding behind a bitcoin address that they're totally anonymous. That's mostly incorrect.
Yeah, that's wild. So my final question for you today, Lachlan, is after all this conversation, and we definitely did run half time, but I'm keen to sort of hear from your perspective, and I mean, you sort of touched on it. So I probably already know the answer to this, but do you believe blockchain will become quite ubiquitous, similar to the internet? There were people saying, oh, the Internet is not going to be the biggest thing, and of course it is today. So do you think blockchain will be like the internet?
Lachlan Feeney (54:15)
Look, I'm always the first person sceptical whenever anyone says that blockchain is a silver bullet for absolutely everything. So I'm always cautious about sort of implying anything of that nature. But I will say that blockchain sort of continued to exceed even my expectations. And I think we're still incredibly early, and there's so much growth for this technology to expand across many different industries and use cases for decades to come. So I'm sure if you went back and asked even the most bullish bitcoin people a decade ago in their absolutely most optimistic scenario, that could actually realistically unfold, many of them probably wouldn't have told you that, well, nations would adopt bitcoin as legal tender and people would be using it to store wealth. Hedge funds and public companies and these sorts of things would make it their mission to their sole mission to basically buy and acquire as much bitcoin as possible. So I think the technology has already exceeded most people's wildest expectations, but I still think it's extremely early. I think there's so much more room to improve. As I said, we've seen a lot of financial use cases to date, but that's mainly because we started with bitcoin, which is a kind of financial instrument, and so that's how the technology sort of naturally evolved.
Lachlan Feeney (56:21)
But there are so many more use cases for blockchain way outside of the financial sector. We didn't even touch on NFTs at all today. But even way beyond anything that we've seen today, I think it's still coming. As I said, if you try and predict or explain Google or Facebook or TikTok or these sorts of things in the 90s, you couldn't even imagine them. And that's where we're at today. There's certainly be many applications, web changes doesn't make much sense, and you shouldn't be trying to fit blockchain into everything, but there are certainly applications which have not been explored yet, which will completely change the way we do business, the way we interact with each other, the way we share and own information. We can touch on the metaverse either. There's a lot of really exciting stuff to come, but of course there will always be applications that just don't make sense for blockchain as well.
Yeah, you're so right. Well, I guess time will tell. We don't have a crystal ball, we don't have all the answers, but we'll see what unfolds. So thank you so much, Lachlan, for your time. I think this has been an exceptional interview because I wanted to demystify blockchain, and I know that we didn't get to every single angle, but I just rolled with it today. I really enjoyed the chat, so thanks very much for your time.
Lachlan Feeney (57:59)
My pleasure to be here. Thanks for having me.
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