Transcript: Digital Transformation Agency on blockchain to Australian Senate Finance and Public Administration Legislation Committee, Tuesday 23 October 2018

Back in May, Australia’s Digital Transformation Authority got AUD$700,000 in the May budget to “provide $0.7 million in 2018–19 for the Digital Transformation agency to investigate areas where blockchain technology could offer the most value for Government services” — apparently at the personal request of then-Prime Minister Malcolm Turnbull.

Yesterday morning, Australia’s Chief Digital Officer, Peter Alexander of the DTA, gave a verbal report to the Senate Finance and Public Administration Legislation Committee. The widely-reported pull quote was:

For every use of blockchain that you would consider today there is a better technology.

But there was, of course, quite a bit more detail. The transcript is up, but only as a PDF — so here’s a text version, for your convenience. Questions are from Senators Dean Smith and Zed Seselja, answers are from Peter Alexander and Randall Brugeaud, Chief Executive Officer of the DTA.

Senator DEAN SMITH: Who do I speak to about blockchain? You again, Mr Alexander?

Mr Alexander: Yes.

Senator DEAN SMITH: You were very good at last estimates—on the cloud, if I recall. Where are we up to with blockchain? What is the Digital Transformation Agency doing? The budget carried the following statement:

The government is also exploring innovative ways to deliver reliable and secure government services, using modern technology such as blockchain.

Mr Alexander: We’ve been doing work on blockchain. We’ve commenced the discovery piece of work—

Senator DEAN SMITH: A discovery? It’s been around for a while.

Mr Alexander: Discovery in the sense of agile delivery. The agile delivery method is: frame the problem, understand the problem, develop a prototype to consider how you might implement a solution to the problem. Take it out and test it with people and users of that service, and then replace an existing service. When I say ‘discovery’, I mean it in the agile sense of discovery, which is to understand the problem well. We were tasked with looking at blockchain and understanding what is happening. We are developing a ready-reckoner to assist technology and business executives across government to understand blockchain better, how we can use it and what opportunities are in distributed ledger technologies.

We’re working with Data61 who have done a series of white papers on blockchain and they’re doing specific work with us on furthering blockchain. We’ve got agencies together who are doing work on blockchain from Home Affairs, who’ve been looking at it in terms of cargo and border protection, to agencies who are looking at it for validation and verification of datasets that they might have. So there’s a range of activities going on. We have been looking at blockchain for several months, most of this calendar year. We’re looking at prototypes to potentially prove the technology and consider it.

I would say our finding of blockchain is that it is an interesting technology and a set of technologies from ledger to programmable currency. We’ve also done some work with the Commonwealth Bank who have been looking at blockchain programmable currency, particularly in disability payments. It would be our position today, and this is early in our write-up of this, that blockchain is an interesting technology that would be well worth being observed. But, without standardisation and a lot of work to come—for every use of blockchain you would consider today, there’s a better technology—alternate databases, secure connections, standardised API engagement. Blockchain is an interesting technology but it is early on in its development.

It’s at the top of a hype cycle, and the uses of it—outside trust—and I should be really clear: one of the advantages of blockchain is it is great for low-trust engagement. But, generally speaking, when government is engaging with someone, we want to have a trusted relationship with them. We want to know who they are, we want to know what they’re entitled to and we want to give them a service that is personalised and meets their need. Blockchain is good for low-trust engagement, where you don’t know who you’re dealing with, you have low trust with that person or business but you have a series of ledgers that can give you some validation and some support.

Senator DEAN SMITH: But it operates in a low-trust environment in order to build trust.

Mr Alexander: Exactly.

Senator DEAN SMITH: Not to maintain the low-trust environment.

Mr Alexander: That’s right. To build trust. But it’s transactional in that interaction. It doesn’t build a maintenance of trust ongoing; it just does that transaction and builds a trusted transaction.

Senator DEAN SMITH: We might come back to that if time allows. Which of the departments and agency across government are the most responsive to exploring the blockchain opportunities? You mentioned border protection.

Mr Alexander: Yes. Home Affairs. We’ve had a number of agencies we’ve been dealing with. In fact, I would categorise that our engagement has been—every agency has been very engaged. Human services, the ATO, Defence—Home Affairs have been particularly engaged—Treasury, the Reserve Bank—

Mr Brugeaud: IP Australia.

Mr Alexander: ASIC, APRA. We’ve had engagement with lots of agencies. All have been—

Senator DEAN SMITH: I’m one of those people that likes to get into the detail. Broad-brush statements make me very irate. So let’s just narrow this down. You said: Home Affairs, ATO, Human Services, Treasury, IPA. Are they the ones that are most engaged around blockchain work?

Mr Alexander: And ASIC.

Senator DEAN SMITH: For each of those, just demonstrate to me how or what area of focus they might take? You mentioned cargo—

Mr Alexander: Cargo and Home Affairs.

Senator DEAN SMITH: Explain that point to me.

Mr Alexander: In that kind of low-trust consideration, where you get freight coming from a destination going to another destination, the ability to use blockchain and distributed ledger to monitor the progress of that particular piece of freight builds trust in that low-trust environment and potentially it can accelerate things going through borders.

Senator DEAN SMITH: Clearances, yes?

Mr Alexander: Yes.

Mr Brugeaud: There’s also the potential for smart contracts with go along with the blockchain to allow things like tariffs and duties to be automatically calculated based on a given transaction.

Senator DEAN SMITH: That’s exactly what I’m looking for. Yes. So then?

Mr Alexander: Department of Human Services has been around programmable currency and the ability to use the smart contracts. Programmable currency is another term for smart contracts. When someone receives a welfare payment or a balance in an NDIA, for example, where someone is allocated a certain amount of money and is able to access that for various purposes—used for some purposes, not used for other purposes—the smart contract, programmable currency, can release that fund for a particular purchase and say no for another, without having an intervention. So—

Senator DEAN SMITH: Meaning that the NDIS recipient would get the flow of payments more quickly—

Mr Alexander: Yes.

Senator DEAN SMITH: because not every payment is being challenged or assessed—

Mr Alexander: And there’s not an approval and validation program. The programmable currency would do that. Then, in the Treasury portfolio—Treasury, tax, ASIC—around settlements and payments and considering how they might work in the programmable currency sense—from trade settlements to financial payments.

Senator DEAN SMITH: IP Australia?

Mr Brugeaud: Food provenance. They’re looking at, initially baby formula and a range of other important products, to ensure that you understand provenance, so they’re doing a trial at the moment based on food provenance.

Senator DEAN SMITH: Focusing on those departments and agencies, how would you characterise their level of understanding and engagement around what I think are very, very tangible ways of demonstrating the utility of blockchain technology in the government context? What’s their level of maturity interest? How would you characterise it?

Mr Alexander: Their level of maturity is growing. I guess it is where you would expect it to be in a technology like blockchain or a set of technologies like blockchain. It’s maturing. They have got some people in their agencies who are very mature and very au fait with blockchain. There’s others who, when you talk blockchain, think cryptocurrency, jump straight to that. It does vary across entities but, within the entity, each of those organisations have capability centres of people who understand blockchain well. To go to my point earlier, a lot of the engagement with them is comparing blockchain against existing technologies.

I want to say, to be clear, we’re not saying blockchain doesn’t have potential; it’s just today, without standardisation, there is a challenge of blockchain becoming a little fragmented. When we get into a standardised world of blockchain, which is coming—Standards Australia are looking at blockchain, as in a standard set for blockchain domestically and internationally. When we get to a better standardisation, the opportunities for blockchain will grow.

Senator DEAN SMITH: When you look internationally, what do you see? Do you see the same level of hesitation on the part of other governments to use blockchain, waiting for this standardisation, as you call it? Or do you see other governments in other jurisdictions, sort of, out in front more than the DTA might be suggesting?

Mr Alexander: I would say that the Australian government is at a pretty similar state to most progressive governments: looking at blockchain, trying to understand it, doing examples, doing prototypes and doing testing of the technology. I think it would be fair to say a lot of big vendors and technology vendors are pushing blockchain very hard. They see sales opportunities in it. Internationally, most of the hype around blockchain is coming from vendors and companies, not from governments or users and deliverers of services who are saying, ‘Blockchain’s the solution to our problem’.

Senator DEAN SMITH: How does the DTA inform itself around blockchain technologies, given that you’re obviously a bit suspicious of vendors coming and putting their wares in front of you, so to speak?

Mr Alexander: We have a team who are working on this blockchain work. We’re working with Data61, as I mentioned, and agencies.

Senator DEAN SMITH: Who’s Data61?

Mr Alexander: Data61 is the CSIRO’s—

Mr Brugeaud: technology research organisation. Formerly NICTA.

Senator DEAN SMITH: What does Data61 actually mean? Why is it called Data61?

Mr Alexander: It’s a clever play on titles. Of course, 61 is the Australian international telephone code, so Data61—data Australia.

Senator DEAN SMITH: Too clever for your average senator.

Senator Seselja: It’s well received amongst IT nerds.

Mr Alexander: A fantastic organisation with amazing capability and some of Australia’s pre-eminent data scientists.

Mr Brugeaud: They have the greatest number of PhDs in Australia working in the technology R&D field.

Senator DEAN SMITH: So Data 61 works with you—

Mr Alexander: With on this piece of work? So how do we keep informed on what vendors are doing and what’s happening internationally? We talk to them regularly. We understand what they’re doing. We work really hard to cut through their sales people and talk to their practitioners and their experts and their R&D teams and we’ve had great success with that.

Senator DEAN SMITH: In addition to Data61, who are the individuals or organisations that the DTA trust when it comes to wanting to better understand the utility of blockchain technology?

Mr Alexander: Agencies. We talk to research companies. We talk to the vendors. It’s not that we don’t trust any of the vendors. I think that would be an unfair characterisation. We trust the vendors but note their motivation is generally sales and making revenue, so we talk to their people. There are lots of individuals who work in ICT companies who are expert and offer a lot of value.

Senator DEAN SMITH: Who do you trust the most, Mr Alexander, when it comes to understanding the utility of blockchain technology?

Mr Alexander: I trust my team within the DTA. They are expert. I trust the guys who we’ve got seconded from agencies. We have a secondee from Home Affairs who is an expert in blockchain and has great knowledge and has done practical implementations. And we trust the guys at Data61. As I say, we engage with the vendors. I think it would be unfair to name individuals from those companies who have a great reputation and we deal with them—

Senator DEAN SMITH: Why would that be unfair? Endorsements are a very, very powerful motivator for people.

Mr Alexander: But not endorsing others where they’re okay and trying to do the best they can is probably not fair to them.

Mr Brugeaud: More independent than Mr Alexander mentioned, this research organisation, such as Gartner, that have experts globally who provide advice and commentary on emerging technologies is an organisation that we use as well to seek advice in addition to the technical advice that we get from organisations such as Data61.

Senator DEAN SMITH: So Gartner is your preferred external source of—

Mr Brugeaud: We have a number of external research providers. Gartner is one that we have drawn upon specifically for blockchain.

Senator DEAN SMITH: Have they been helping you with the research project?

Mr Brugeaud: They have not been on the research project specifically, but they’ve been providing general advice on the capability.

Mr Alexander: There would be a couple of others. Trustgrid is an organisation who we’ve spoken to. The Linux Foundation of Australia is an organisation we’ve spoken to. So there are foundations and bodies that are not vendors who we have spoken to who are also useful.

Mr Brugeaud: There’s also interjurisdictional engagement that we have—the New South Wales government, for example. Mr Alexander mentioned Trustgrid. The New South Wales government has been trialling digital drivers licences in Dubbo to allow people to prove their identity digitally.

Mr Alexander: And blockchain to do the validation of the drivers licence digitally.

Senator DEAN SMITH: Who in the DTA is responsible for the work that’s being done around blockchain? Is that you, Mr Alexander?

Mr Alexander: That’s in my team and our CTO, a gentleman called Matthew Goonan.

Senator DEAN SMITH: Thank you.

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