Blockchain – Hype or Reality?
Blockchain, and its iconic offspring, Bitcoin, are trendy topics now a days. To those knowledgeable on all Blockchain, the following thoughts, my own, are perhaps more of a reflection of my frustration with not been able to find adequate answers to some basic uncertainties about its enabling technologies and the fundamental problems Blockchain seeks to solve.
To start with, let me assure you that I am not a hater or a troll, and that I have real reservations on the topic as from everything I read about it, it feels like we may have seen this movie already, the hyperbole may be creating a bubble that may cause more harm than good as it may prevent people from raising legitimate questions and lead them to invest their hard earned money in the wrong places, and its ultimate evolution may be a fait accompli. And, if I have these questions or concerns, others may do as well.
Since I don’t want to loose readers prematurely, let me preface by saying that I think that eventually there will be use for Blockchain technology or its recent moniker, distributed ledger technology; it may eventually find a place and use, perhaps as a component of something else or the precursor of some other revolutionary platform. But right now, and I mean the next 5–10 years, Blockchain feels like the early days of Unix back in the late 80s; a solution looking for a problem to solve.
The things or questions that I wonder about wrt Blockchain, some are technological while others conceptual; note to the readers: I assume you (and the critics) understand the underlying construct, concepts, and technologies of Blockchain. As for me, I am not a programmer or an expert, nor do I profess to be one. I am not even sure that I fully understand how it all works completely, but I did use to dabble in Pascal, C, and ADA back in my day (ancient stuff, though). That knowledge and my engineering background help somewhat to grasp how Blockchain is supposed to works, its intent, possible issues and challenges, and formulate the thoughts herein (or so I think, who knows.) In reality, as I jot down these thoughts, more questions pop up in my mind as I dig deeper.
To start with, I think we probably could agree right off the bat that the innovators that came up with or developed the block chain technologies (software and hardware) are the kind of mavericks that could remind us of those rebels that once looked at Big Blue with disdain, and wanted nothing to do with centralized structures. Most likely, these modern rebels weren’t even around when we had centralized data centers and mainframes, PD-11, nor did they live the migration to decentralized client / server architectures, and the eventual PC revolution. Nope, they grew up with the cloud. A few probably bothered to read the evolution of IT, and as we know, those that fail to read history are doomed to repeat it. As such, we can envision that, what they intent us on running away from is where we would be heading to regardless – the underlying technological challenges discussed herein will eventually prove themselves overwhelming, an only a handful of entities will emerge to own or dominate the massive decentralized data storage and processing sites around the globe that will be required to store, quickly search, and verify as to the credibility of all the blockchains and the stored data therein that is envisioned – i.e. the recreation of central banks, but instead of these been government owned, privately owned yet heavily regulated). At that point in time, IMHO, the trust factor will wane unless circling back to Government Sponsored Enterprise, federated authorities, or large well capitalized privately owned entities which may somehow defeat the genesis of thesis (perhaps).
Back to the rebels and the original thesis, their insurrection, IMO, seems mostly against authority figures, central banks, currency boards, dark suits calling the shots, and perhaps to a lesser degree some environmentalist ideal (eg reducing paper use). But fundamentally, it seem that they despise the notion of authorities and centralization. Yet, for Blockchain to work effectively, in a decentralized world, the solution must have standing. Such standing must convey and be the result of unquestionable trust; to achieve such level of public trust, the foundation, the fabric of the construct, must ooze indubitable feelings of security, impenetrability, and reliability.
The technological construct of Blockchain is based on an ever growing immutable chains of individual records, each storing for perpetuity all the relevant aspects of its subject matter (e.g. transaction date, source of origin, destination, amount of the trade, etc etc). Provenance is the key operating word here. Accurate identifiable validation as to the specifics of the trade, documents, and its owner as of a specific point in time is paramount. That role is played now-a-days by presentment or possession of original papers with signatures, kept in safekeeping (e.g. deeds, mortgage notes, loan agreements, stock and bond certificates, deposit and checking account statements, and the like), the possession of property and collateral that supports value, or the existence of a social covenant in support of a particular fiat money system.
In the absence of physical stock, or central power figures to bestow credibility, reliability, ensure provenance, and afford the system with public trust and prevent chicanery, Blockchain relies on redundancy and immutability. Redundancy as each ledger (the cornerstone for record keeping) is kept, maintained, searched, and amended simultaneously in a multitude of locations (we will need to come back to this point – i.e. who do we trust to maintain these data bases?). Simpler said that done, as those simple concepts have gargantuan technological connotations. If every record must be created and maintained for perpetuity, unadulterated, and every modification (for even the smallest of change to a document, a dot, a coma, a date, a cent) requires the verification of provenance and property rights prior to affecting a record, and creating a new one (i.e. mining), vast amounts of ever growing storage and processing capacity will be required. Those doing the verification must be trusted to ensure that they did not cut corners and indeed searched across sufficient data bases maintained at different locations and under the control of unrelated entities to corroborate authenticity. Thus far, none of these discrete aspects can be documented and verified independently. Bitcoin, for example, is operating in the back of fumes. While most users won’t comprehend the implications of such simple statements, IT people should cringe at the realization as to what will be required in terms of compression algorithms, data transmission, storage capacity, search capabilities, authentication, auditing, and disclosure if Blockchain is to become a mainstream medium for commercial transactions. Btw, I assume someone will one day try to ascertain whereas the solution is in effect more cost effective and efficient that current methods.
As for Bitcoin, for example, no one can tell for sure the real reason as to why this Blockchain was designed with a known maximum quantity of units (21 million). A reasonable explanation is perhaps because the creator(s) probably realized the limitation of the technologies as outlined herein; each unit requiring individual record, and every time the coin is used or changes owner, a new record must be created, each and every time, and then each new record added to the previous one in the chain linked to its predecessor (by indexation) and replicated across each site storing all the records in a ledger (i.e. for record keeping). Then, each time a transaction is contemplated or completed, the old record (i.e its provenance) corroborated across multiple storage sites to ensure the records have not been subject to fraudulent manipulations. If a rogue code breaker tries to amend a blockchain record in one ledger (for example create counterfeit bitcoins or steal by amending records) its content would not be cross validated against other ledgers, ergo the trust factor stems in the replication and inability of hackers to amend indiscriminately all the ledgers containing the historical data of a particular record or create new ones from scratch without proper provenance (i.e. create a birth certificate from thin air). But this elegant solution means that for transactions to be efficient, multiple ledgers located across vast different locations must be able to communicate effortlessly and be searchable quickly, and as previously stated, with each transaction, the storage capacity is stressed, as to ensure provenance no records can be destroyed. Perhaps there may be Blockchains, for example created for documentation related to certain financial transactions that after some regulatory period (5 – 10 years) may be deleted. However, until then, the data storage, compression, search capabilities, transmission, et al represent real bottlenecks for Blockchain to become mainstream.
Back to trust and foretelling the future of Blockchain, and giving it its fair opportunity to evolve and succeed, it would seem that based on current knowhow, the ubiquitous adoption of Blockchain may be predicated on the agents that emerge as the key players acting the various roles previously enumerated. Whereas consortiums emerge, or loosely defined collaboration groups, or GSE, the success of Blockchain will require unquestionable trust, reliability, and efficiency. It will be interesting to see who emerges as the leaders and followers, as it seems large money center banks are quickly moving in to become the safe keepers of the data bases, and it would seem like the obvious players to assume the role of validators (miners) should be auditing firms of unquestionable credibility, each earning decent fees for their respective functions. As this topics evolves across the world, it would be interesting to see if somehow the players may change, but the game may remain the same.
Again, all these opinions are my own. Views, Suggestions, Opinions, Comments, Corrections, Critiques, et al are all welcomed.