Most blockchain discussions fall short

Bitcoin discussions tend to be distracted by the shiny. A surprising number of commentators are unaware of the real limitations and breaking points of the blockchain. It’s a hard technology to discuss well! This is quite frustrating, because even in well-informed discussions you will find misconceptions, misinterpretations, and occasional inaccuracies.

Here are some key things worth bearing in mind when discussing and assessing blockchain technology:

a) Bitcoin caters to a *very* specific set of circumstances. The blockchain stops being useful or even practical very quickly if your own needs differ. (Edit: In particular, the “trust” provided by the blockchain is constrained to a specific set of concerns: a guarantee that a certain amount of currency exists, that it is known who owns which parts of it, and a record of who has traded currency with whom. Next-gen applications that seek to establish trust about any other concerns would need to provide their own mechanisms to do so. This particularly includes any transactions involving external processes.)

b) Yet surprisingly few people writing about Bitcoin (or developing apps!) have fully grasped the tech, or even read the original paper; they’re not actually qualified to assess it. In the context of blockchain discussions, be careful about whose statements you can take at face value.

c) The decentralisation promise hinges on social assumptions that don’t seem to hold in practice. As of 2015, Bitcoin fails its decentralisation promise on at least two accounts. (Majority-share mining pools, and core developers as gatekeepers.)

d) A surprising number of people promoting Bitcoin and the blockchain have conflicts of interest; they’re consultants, startup founders, they own lots of coin, etc.

Once you consider all these, many proposed future blockchain applications stop making sense. Most are best thought of as proposals for socio-technical experiments, but many next-gen applications are plainly infeasible. (I don’t actually remember seeing any proposed next-gen uses of the blockchain that made any practical sense.)

There is a lot of excitement about fintech innovation, but people involved in such discussions are rarely actually knowledgable in these matters. Earlier in the year I spoke to an academic expert who says she’s now frequently sitting in meetings shooting down proposals for institutional and government stakeholders that violate some very basic assumptions. In her assessment, much of the time a vanilla database will do the job that is being asked for, and will do it better. “What you’re really asking for is a computer.”

Bitcoin introduced a novel kind of capability with thought-provoking implications. As a socio-technical phenomenon the blockchain is fascinating. However in the form of a mass-market consumer product it’s probably best avoided. At the very least, it is advisable to remain sceptical of innovation promises that are based on wrong assumptions.