EBC22 | How do you trust the Blockchain?

three two one hello so so i'm gonna start by actually disagreeing with uh with bill because actually 85 percent of icos failed so if you were going to follow bill on the ico track uh i'd suggest that you might want to think about whether you want to be in the 85 percent or the uh or the 15 percent and and greg about your trees and who checks them uh well guess what as auditors we get lots of people contacting us and asking us about trees and we've had people ask us to confirm the validity of them and that's actually a lot of what we're now starting to do about how we actually bring trust uh to blockchain and how do we actually make sure that the tokens that are being sold actually do exist so very very interesting questions and happy to move on uh from from the uh from the riveting previous uh panel uh uh hosted by mai who i've got a lot of lot of time for as well so very very briefly ladies and gentlemen because i also have to rush and catch a plane sadly um i wanted to quickly start by just talking uh very quickly on how we at eyc web and and web one web to web 3 and how it's how it's evolved so we see web three very much now as a many-to-many construct uh as as to allow the the democratization as we've just heard over there uh be it or finance be it of content uh or be it of of various other forms out there and and and we see a as an important piece of that actually bringing that trust right bringing that trust to uh to the to uh to the ecosystem um many of you would recognize something like this we're all trying to create our own clutch clutcher on on different types of tokens be it fungible or non-fungible how do you start to uh how do you start to break them down how do you start to uh to to put them into into different types but key for us again is it it's not a it's not a theoretical exercise we see this as an important exercise to be able to then understand what do people understand of these tokens what are the expectations of them and again then how can we then bring that trust right and how can we provide that trust to the the users or the people who might who might actually buy those tokens who might be transacting with those tokens or as my referred to you know the legal uh the legal the lawyers etc who are who are looking at what these are and trying to figure out how they actually act so with that in mind um we here we go so with that in mind we've tried to pull together a global uh a a an overall risk management framework and for those of you who are sort of as old as i am sadly and remember things like netscape and and and stuff like that uh you know uh you you will recognize that uh a com this is actually a pretty standard and traditional risk framework and the reason why this is a pretty standard and traditional risk framework is because i'm very much of the view that we that while this is a brave new world that we are moving into a lot of what we know and a lot of the tools that we have for risk management apply still right let's not throw out the baby with the bath water to use that that english phrase you know so let's actually use a lot of what we already know governance right oversight or risk appetite of organizations do you know as an organization what you're going into do you have appropriate governance you have appropriate oversight what is your risk culture what is your risk management framework what is your risk management tools what is your internal control framework so if you're an exchange somebody else can actually rely on you somebody else can actually trust you all of that's pretty you know 101 in the current world right but in the world that we current that we are now moving into be it the digital assets world or the distributed ledger world etc the key now is to understand how those risks may now manifest themselves differently that's the that's the special bit so you know 80 of these risks are traditional risks people still sadly press wrong buttons still sadly code incorrectly but that might mean your spot smart contract might do something very different right your smart contract risk may not have existed before that's something new but how that might go wrong is actually a pretty traditional id risk right so to me a lot of what we're trying to do at ui in terms of trying to bring trust to this space is to actually look at how firms organizations and for that matter auditors etc can actually take risk management frameworks bring bring them to form look at the different risks that arise and think about how those can then actually uh manifest and so one of the things we try to do for example is look at the product life cycle think about you know from the time when you are actually bringing on an asset or bringing on a client and then all the way through to safe keeping that asset settling that asset servicing that asset and the technology that would encompass all of this are you clear about you know throughout those processes what what can happen what can go wrong and the risks that you are trying to mitigate and the risk that you're trying to to uh to to sort of allow for and and if you actually then look at some of the risk considerations on here again most of these are current risk considerations for those of you who are in finance at the moment a lot of this will look very familiar to you a lot of these will look very similar to you although then there are some new ones on here right key management risks for example you know the classic story of a firm putting its private key in escrow in case it goes bust and then sadly when the firm does go bust you go to the provider to get the key and guess what it doesn't work because it was corrupted et cetera sadly all of those are new risks but if we think about again our current requirements that we have we've got requirements for bcp we've got requirements for operational resiliency we've got requirements for continuity all of those still exist they just manifest themselves differently uh in this in in potentially uh some of the uh blockchain world or some of the crypto world that that we're operating in why because in the traditional finance world most of the time if anything went wrong during the week you knew you had the weekend to sort things out i've been involved in sadly numerous projects where you know there's a mad series of activities at the weekend just to clear up reconciliations or clear up things that went wrong in the week doesn't exist for dlt right this is a 24 7 365 constantly going constantly moving world you get it wrong it's a mess it's going to be difficult to rewind it's going to be difficult to fill up so those risks now manifest themselves slightly differently in the new world but nevertheless let's keep let's remember let's remember all the fact that actually all of this we are things which we are already used to dealing with and you know to me a lot of the times people just go into some sort of you know oh my goodness this is all new i don't know what to do um but let's not forget that actually we do know what to do because a lot of these exist already now in our currency and what we're trying to do so to sort of pull it all together in terms of what we then um that what we then you know would strongly suggest to to firms to look at if you are a provider if you are exchange if you're in this space if you're trying to win win money if you're trying to raise money if you're trying to get auditor trying to list etc think about having proper internal controls in place think about it properly design it front to back make sure that it's working think about your assets be clear about custody of it as we've discussed numerous times over the last two days you know the devil is still in the detail it's still in the contract until you read it all and know what you're actually buying and like those people who bought that dune book and never forget that story uh you know all of that sort of situation just keeps showing that you may not know what's happening and then for the minute because aml kyc regulation is where it bites make sure that you're on top of that and make sure that if if the regulation starts to grow that you continue to be on top of that because that to me is what's going to start to win the trust of your customers and win the trust of your clients and hopefully put you into a a a virtuous circle of of of of you know growing your business and getting where you want to get to uh some ideas on the uh i'm going to get my left and right wrong now on the left side of the slide for me in terms of some of the assurance type services that are out there now smart contract analyzers blockchain analyzers sock reports etc if you want to have a look at some of our our tools it's on blockchain.ey.com you can play around with them they're all free you can upload a smart contract uh your erc20 it'll tell you what we think about it uh and and some of the security issues just to have a look at as well um but uh just want to leave you with the thought that you know to me a lot of what we're suffering from is a trust deficit in this in this space trying to think about how can we actually improve that and increase that thank you for listening and have a good afternoon