Shin’ichiro Matsuo on Blockchain and its Potential Sustainability

Dr. Shin’ichiro Matsuo has been engaged in research on cryptography and related protocols for more than 23 years. He is currently the head of blockchain research in the Cryptography & Information Security (CIS) Lab here at NTT Research, and serves as a research professor at Georgetown University, where he is a director of the CyberSMART research center and lead of blockchain technology and ecosystem design. He is an acting co-chair of the Blockchain Governance Initiative Network (BGIN) and leads international research collaborations on Blockchain as a co-founder of the BSafe.network, a global and neutral research test network for Blockchain technology.

Dr. Matsuo has served as program chair of the Scaling Bitcoin Workshop, an annual event for the engineering and academic communities launched in 2015. He has been a committee member on many blockchain-related academic conferences, such as the IEEE Security and Privacy on the Blockchain (S&B), the International Workshop on Cryptocurrencies and Blockchain Technologies (CBT), the Stanford Blockchain Conference and the Crypto Economics and Security Conference. He serves as leader of a project (ISO TR 23576) on Blockchain security at ISO/TC 307 and is a member of the Blockchain Expert Policy Advisory Board (BEPAB) at OECD.

His career previously overlapped with that of Professor Tatsuaki Okamoto, director of the CIS Lab, when as noted in the Q&A below, he implemented some of Dr. Okamoto’s theories while working on the Japan E-Cash system. Dr. Matsuo has a Ph.D., M.Sc and B.Sc. in Computer Science from the Tokyo Institute of Technology. The Q&A below outlines Dr. Matsuo’s thoughts on internet trust, permissionless vs. permissioned blockchain and other areas of blockchain research.

You and Professor Okamoto both did previous work on the E-Cash system. Did you collaborate at all back then? How does that research relate to blockchain?

I did not work with him at that time. The E-Cash system, an experiment with the Bank of Japan, was based on the theory by Dr. Okamoto. My work was making his theory a real-life system.

The theory and system were very different design principles from Bitcoin. The goal was to digitally implement central bank money, which is centralized. Yes, it was the first Central Bank Digital Currency, or CBDC, the current buzz word, 23 years ago. The goal – creating digitalized cash – seems similar, but the design principle is the opposite from Bitcoin: centralized vs. decentralized.

In what ways would you say that the trust mechanism of the internet is broken?

My answer is, it is not broken, rather, it was not considered from the beginning.

What I often hear from Internet pioneers is, “the Internet didn’t care about security and trust.” This is true. When they designed the Internet, it was “for them.” They were honest users of the Internet; hence, security and trust mechanisms were out of the scope of the Internet architecture. Security mechanisms were and are added ad-hoc. On trust, the Internet only provides the elimination of a single point of failure in transmitting data. Public key infrastructure (PKI), web of trust, etc. have all been added as trust mechanisms, but are not enough.

Is that lack of trust one reason that telecommunications companies should be engaged in blockchain? Are there other reasons?

It is the biggest reason. The Internet provides communication without a trusted party. But it is only for the transmission of data. Communication among humans and organizations, however, is a series of processes to confirm that all stakeholders have the same understanding and reach some consensus on a specific statement, for example, in a contract. 

To realize the “communication” rather than data transmission as a social process online, you need a smart contract over a platform to ensure time-wise confirmation and certification without a single point of failure. In other words, a decentralized timestamp or blockchain.

How much of current challenges with blockchain are related to business models and how much to technology? Where do they overlap?

We need to be careful with the use of the word blockchain, especially distinguishing between permissionless blockchain and permissioned blockchain. Permissioned blockchain, aka private blockchain/consortium blockchain is “Timestamp 2.0,” to be honest. It is not sustainable when some companies in the network stop its operation, because it does not produce a profit. On the other hand, such a centralized blockchain may generate a profit.

Decentralized architecture does not produce a profit. It is just creating horizontal layers and unbundling business; but it is a new foundation of re-bundling. A profitable business is born as a vertical over the horizontal. Thus, permissionless blockchain itself does not produce any profit. As a result, companies are far from permissionless blockchain. But this direction is not good for innovation because it is just the preservation of existing business structure by utilizing a part of new technology, like Intranet and groupware like Lotus Notes/Domino. 

The true challenge is making blockchain efficient and sustainable for re-bundling businesses. This effort enables a business entity to externalize the cost and uncertainty to the permissionless blockchain. The biggest technology challenge is the scalability issue. To see one consideration of how to apply these technologies to the field of bookkeeping and accounting, which I contributed to, see this blog post

Can you tell us a little bit about your work involving the CyberSMART Center at Georgetown University?

CyberSMART is a multi-disciplinary research center for blockchain and security. Thanks to the location of Washington, D.C., we have many opportunities to talk with regulators and politicians. Georgetown University has a great business school; thus, we could have great collaboration around the scientific, economic, legal and policy aspects of blockchain and security. 

At CyberSMART, we are researching how to leverage computer science and add contributions from a wide range of backgrounds. This is essential for blockchain research because blockchain technology is usually subject to financial regulations—researchers with a wide range of backgrounds author most of our papers. Even in a paper on cryptographic techniques for blockchain, we typically write a section on regulation considerations.

What are your current research priorities?

At NTT Research, the main research question I am looking at is if we can make permissionless blockchain sustainable. We need experts on economics and game theory to answer this question. This is the reason why top-level researchers of game theory are on our team.

The other important research question is around privacy. This is essential for citizens. But at the same time, we need to prevent crimes and money laundering. Balancing both characteristics is critical. It is an excellent research topic to leverage within our cryptography research group.

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