Serial Entrepreneur and Fintech Expert, Dr. Abdalla Kablan, serves as a senior technology advisor for the Maltese government and was involved with drafting the distributed ledger technology (DLT) regulations for Malta. As a long-time academic, Dr. Kablan has spent years lecturing and researching topics such as deep learning, AI, computational finance and computing. Dr. Kablan had the opportunity to read the Satoshi Nakamoto Bitcoin whitepaper just three weeks after its publication and has since been exploring the use of blockchain technology in different respects.
“I remember being completely blown away by Satoshi’s whitepaper. I kept repeating the rhetoric that this technology is going to change finance in the same way that the Internet changed information,” Kablan told me.
Even though the word “blockchain” was not mentioned once in Satoshi’s famous whitepaper, Kablan’s interest in cryptographic hashes being used to process transactions in the form of a chain – later coined blockchain – was massive, encouraging him to look seriously at blockchain technology about four years ago.
I had the pleasure of sitting down with Dr. Kablan in Malta to discuss his thoughts on blockchain technology, how the Maltese government is regulating the space and what he thinks the future holds for the industry.
Rachel Wolfson: What were your initial thoughts after reading the Satoshi Nakamoto whitepaper?
Dr. Abdalla Kablan: The first Internet browsers allowed us to democratize information. After reading Satoshi Nakamoto’s white paper, I just knew that this technology would enable us to democratize money, wealth and value in a very similar manner. This technology is utterly disruptive because the central bank means nothing anymore .
However, the question remains – when will we see that “browser moment” happen with blockchain?
Throughout history, in order for a civilization to thrive, two components were necessary – a system of trade and a store of value. A system of trade could be bartering, exchanging or payment. A store of value could be anything from assets, commodities, gold or silver to cryptocurrencies. Fiat versus crypto has become such a philosophical argument, but if we look at fiat as the world’s largest currency, we see that the USD is based on a promise from a government mired in debt. No one in their right mind should actually put trust in this system because there is so much debt underpinning it, however, it’s become the defacto store of value, which properly designed cryptocurrencies could be set to disrupt in a major way.
Now, going back to the question of when will we see that “browser moment” happen for blockchain, I think it will happen once we start tokenizing assets. As soon as we manage to tokenize value in general, we will have blockchain-based marketplaces where tokenized physical or digital assets will be listed for transacting value. The immutable ledger of blockchain will allow a person to own certain things and to exchange value on the blockchain, and cryptocurrency will become legal tender. However, we are still in the early stages and first, we need to concentrate on solving other problems such as how to verify identity on the blockchain.
Having blockchain based or DLT marketplaces where we can store value is the evolution of bartering we sought prior to the ultimate necessity of creating money as no alternative existed. Cryptocurrency offers another alternative, yet many cryptocurrencies will disappear as fast as they arrived. I haven’t been involved in initial coin offerings (ICO) before, simply because many projects are often just about raising money and the coins themselves are not actually needed. I see a future where through tokenization, we will be able to redefine capital, not only in financial terms, but in a social and cultural sense as well. With our current monetary system we are simply unable to capture social capital, meaning so much value is wasted and unuseable.
Wolfson: What initially drew you to Bitcoin then?
Kablan: My interest in Bitcoin has always been quite academic. It was the first cryptocurrency and therefore, revolutionary, from decentralisation to immutability, it’s architecture was quite different that the norm. From a technology perspective, I knew that Bitcoin was different – a way to transact value without the involvement of middlemen. With Bitcoin, there is a visible ledger, which is updated with every transaction. Furthermore as with many innovations, it was hard to capture using the existing regulatory frameworks as they weren’t technology centric, so it was essential to update the regulation.
I am also an admirer of the concept of smart contracts as introduced by Ethereum, being able to inject code into transactions and execute processes with conditional statements. This is why I like to look at this technology from a DLT perspective, rather than just blockchain. I believe that DLT will be the umbrella term of the Internet and that whatever protocol is underneath it will remain irrelevant. I don’t want to limit DLT to just blockchain; no one knows where this will go, so we need strategic foresight.
Take for example, smart contracts. These were debated quite heavily at first, but now they are defined. I see a world where smart contracts are going to execute intelligent code. I see a future where AI processing will happen on the chain. Instead of us having blocks of identical transaction hashes for verification, we will actually process different pieces of AI code for the two to converge. When put together, we will have a smart AI that performs a task. But if we say that is how a smart contract should look like today, we are not leaving it open to how it will look like in the future. This is why Malta has put clauses in their laws that will allow updates in the law to be made in a flexible manner.
Wolfson: The Maltese Government has recently passed regulations for distributed ledger technology (DLT). What is the difference between DLT and blockchain?
Kablan: Blockchain is a type of DLT, but it’s not the only architecture out there. You can have different types of blockchain technology. For example, there are the Bitcoin and Ethereum blockchains, Ethereum having the advantage of smart contracts.
However, flaws in traditional blockchain architectures have been identified. For example, blockchain technology is supposed to eliminate middlemen entirely, but now we have miners acting as middlemen. Also, the blockchain is really just a brilliant way of data storage, acting like a distributed database .
Wolfson: Should blockchain technology be looked at from a technical or legal standpoint?
Kablan: I think we need to look at both sides of the spectrum. However, it’s time to focus on blockchain technology from a technical standpoint and have a clear understanding of the technology. Of course, we need brilliant lawyers to help us come up with regulations, but we first need these lawyers to understand the technology. The Maltese government was really attentive to this notion and designed a brilliant team of experts in law, technology and finance to help develop the new regulation.
I believe that this new sector will thrive in Malta. Extremely talented people are now relocating here, along with more and more venture capitalists that have finally taken the decision to move into this space having been wary of touching an unregulated market.
Venture capitalists don’t want to invest in an “onion coin” initial coin offering (ICO) that will be a currency only to buy and sell onions, while owning nothing of a company. Venture capitalists want equity, which is why we are now seeing the rise of Equity Token Offerings (ETOs), where shares of a company are tokenized and ownership is registered by a smart contract on blockchain.
In this case, if a company pivots and venture capitalists decide not just to own shares of onions anymore, they still own equity in that company. And even though in Malta we are creating a framework for ICOs to thrive, equity token offerings and tokenized assets will thrive as well since we decided to look at this industry from a technology first standpoint.
What this means is that we first look at the technology behind a project to see if its scalable, secure and able to handle the of volume of transactions it claims to. Then, if we have a financial product on top of that, it needs to be looked at it by financial regulators. The interesting thing about this is that other regulators have to come up with their own procedures, which is why we have passed three laws in malate. We are now at a stage where we are the only country in the world that has decided to regulate this space from a technology-first perspective, starting with DLT. But the dream and idea is to move into artificial intelligence (AI) and the Internet of things (IoT) from a regulatory standpoint.
Furthermore, as an AI expert, I do think that AI is the biggest threat to humanity. Once AI achieves high cognitive capacity, it will become a threat, which is why this technology needs to be regulated and updated continuously.
Wolfson: What does Malta have in store for the future to innovate the blockchain space?
Kablan: Once the Maltese government realized the extent of what has been accomplished via DLT regulations, we decided to create a big event to celebrate being the first country in the world to regulate technology arrangements and services. The DELTA summit is the official government-backed blockchain conference in Malta and will take place between October 3-5. We’ve managed to bring together the most innovative thought leaders, entrepreneurs and thinkers in this space from all over the world to share their visions for this industry.
Yet we are not going to stop at DLT. What we have in Malta is an entire Digital Innovation movement, which is reflected in the name of the new regulator, the Malta Digital Innovation Authority. We have started by regulating DLT, out of which blockchain is a type, but we have a vision to move towards regulating Artificial Intelligence, and IOT. This will present its own challenges, but I believe we have taken the right step in the right direction.