Blockchain & The Future Of Futures

May 14, 2018

Stephen WolframTheoretical physicist and artificial intelligence/blockchain expert Stephen Wolfram believes in a computational universe.

From Mathematica, the programming language that Wolfram wrote and designed, to Wolfram|Alpha, the answer engine that underpins Microsoft's Bing and the Siri artificial intelligence in your iPhone, Wolfram has built his career on the premise of a computable world: that if you break knowledge into easily digestible bits and pieces, you can model anything—from financial markets to musical theory.

ETF.com recently spoke with Wolfram at Collision, one of the fastest-growing annual U.S. tech conferences, held in New Orleans, May 2-4, 2018.

Wolfram was there to give a talk on computable or "smart" contracts, or contracts written in computer code that could be distributed on a decentralized blockchain network, without the need for any third parties. We asked him what impact such contracts might have on financial markets, where billions of contracts are traded every day.

A lightly edited transcript of our conversation follows:

ETF.com: The idea of a "smart contract" is fascinating. What sort of applications could it have in the financial markets?

Wolfram: In the world of finance, it's already happened a bit. For the last, I don't know, 30 years, options [contracts] have been expressed in essentially an algorithmic way.

But mortgages haven't. So, if you take this multipage mortgage document and express it in computable form, then you can take 10,000 and do systematic analysis on them.

That's a rather sterile example. But there are plenty of other examples; say, whether you’ll deliver 10,000 pounds of grade-A bananas to this site at this time.

ETF.com: Right, I mean, that's essentially a futures contract.

Wolfram: Yes, and those are very stylized contracts. But when it comes to delivery, the question is, were they really grade-A bananas? Or were they rotten?

Today one would write a contract that says, "According to the USDA classification of bananas, they need to meet these criteria …" But when the contract becomes computable, a machine-vision system can be set up that’ll look at these bananas and decide if are they grade-A or not.

ETF.com: So computable contracts could mean greater accountability for both sides of that contract.

Wolfram: Yes. Also, automatic executability. Now, a human inspector has to show up and say, "OK, that banana works; that one doesn't work," and so on; as opposed to just a device that's watching these things. So the efficiency of commerce gets higher, if the contracts are computational and can be executed automatically by machines, rather than having to involve lots of humans in the loop.

Of course, not every computational contract will need a blockchain.

ETF.com: However, it's not too hard to see how this could be used for, say, crude oil futures, or any sort of hard asset that needs to be assessed and warehoused. Settlement takes two or three days now. What I'm hearing from you is that computational contracts could potentially speed that up.

Wolfram: Yes, I think so. But in each different industry, there's a different set of things that take time and that involve humans, etc. The trick is how to encode those things in such a way that computers can execute them automatically. But I think we can actually start to do this stuff now.

Except, if you look at what actually exists on blockchains right now, the big missing link is "smart oracles."

ETF.com: What’s a "smart oracle"?

Wolfram: It answers the question, "What actually happened in the world?" for the blockchain. It's that link between the real world and the blockchain.

For example, I've got this parameter in my abstract contract, and I need to know, "Was the temperature in Timbuktu above 90 degrees yesterday?" That's something the blockchain doesn't know. So how do you find that out? That's our thing.

The Wolfram|Alpha system, which empowers Siri and so on, is basically the only example right now of a broad, multidomain source of computable knowledge. The people who try to build these oracles for blockchains basically all use our technology stack for that.

 

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