Blockchain isn’t a Panacea: Understanding the Technology’s Role and Limitations
A look at Wachsman’s rapidly-expanding client list demonstrates just how many roles blockchain technology can play in today’s economic, technological, political, and even cultural climate. Blockchain can help citizens find alternatives from their countries’ inflated currencies, can help artists prove ownership and maintain control of their intellectual property, and can help financial institutions streamline international transactions currently slowed down by several time-intensive steps. And yet, for all the value that it’s created and all the potential that remains untapped, it’s important that the blockchain community understands the technology’s limitations. Blockchain holds tremendous value for dozens of industries; however, as we forge ahead, it’s increasingly important that we set tangible expectations for the future of the technology. Yes, blockchain is a tool that will solve some of the world’s leading problems, but that doesn’t mean it has to overshadow every pre-existing solution.
If I want a latte on my way to work, I can stop by the corner coffee shop, place my order, and pay with cash or card. The process is so convenient and frictionless that it’s nearly automatic. If, on the other hand, I’m trying to get money to a friend in Venezuela, I’ll have a much harder time and will have to resign myself to inscrutable fees, slow turnaround, and unreliable results. And that’s assuming my friend has a bank account. If she’s unbanked, I have even fewer options.
In a blockchain-dominated future, Starbucks will continue to accept my Visa and my five-dollar bill; the average commuter need not fear the prospect that blockchain will disrupt their morning routine. So what will have changed? Sending remittance payments will be as easy as paying for a latte. Within a few years, I’ll likely have forgotten that such transfers were ever difficult.
In the early nineties, the internet was solely the domain of enthusiasts and techies, and the public needed metaphors to describe this epochal new technology. You could call this period the “information superhighway” era after the quaint analogy eventually settled on to express the internet’s promise and capabilities. Twenty-odd years on, the internet is so enmeshed with our daily lives as to be inextricable from them. We don’t need to call the internet a superhighway, because we no longer need to explain what it is.
Blockchain is still early in its “superhighway” phase; there’s no universally accepted metaphor for conveying its impact to the general public, most people don’t have a daily interaction with it, and its most zealous enthusiasts promise it will remake the world from its foundations. Some of these predictions are unlikely, and thought leaders must distinguish between the hype of the false and the promise of the real. Contrary to some predictions, the technology will not, for example, replace fiat currency; it will not lead to the abolition of the Federal Reserve, much less the withering away of the state, but its actual global repercussions are already significant and are expanding every day.
Below, we examine three unlikely claims, one about data security, a second about the internet, and a third about payments, that you’re likely to hear about this world-changing technology. By recognizing the flaws of these visions, we hope that you come to a more nuanced assessment of blockchain’s transformative capabilities.
Blockchain utopians flock to data security, and with good reason: The need for change is profound. Identity thieves have more tools and fewer scruples than ever before, and every few months, hackers breach another retailer, bank, or credit agency. Blockchain will help users maintain their privacy and provide better control to who has access to their information, yet some data will remain consolidated in one location, rather than spread across the world in a distributed ledger.
Another sort of blockchain visionary argues that blockchain will ultimately replace the internet as we know it. There would be some satisfying irony to this — blockchain is, after all, one of the internet’s many children — but we can’t expect this just because it’s aesthetically appropriate. Blockchain’s security and versatility offers many tools for improving the web, but the net is too entrenched to supplant, even should we want to.
As the example of my morning coffee suggests, we may not need to upend the way I pay the barista, though the way I make international payments could stand streamlining and acceleration. Any blockchain proponent who expects the entire overthrow of conventional finance stands to be disappointed, yet they will be far less surprised than those prognosticators who claim that blockchain will leave the financial world unshaken. Blockchain is already revolutionizing payments along international supply chains; today’s tremors presage tomorrow’s seismic shifts.
As we proceed ever further into the blockchain era, we need to remember that blockchain should change many things, but need not change everything. Not every centralized system is a problem, and some middlemen ought to remain in place. As an industry, we must devote our energies to identifying — and fixing — the real problems that plague us. As we leave the superhighway era, we’re in fact only speeding up.