If someone were to ask you to define something, how would you do it?
Often, our definition of something is based on the way it has affected us. Our personal definitions usually aren’t technical. Rather, they are an aggregation of our experiences with the topic at hand. The topic in our hand right now is blockchain. So, how will you define it?
Defining Blockchain
Let’s take a few examples of how different people would define a blockchain.
A Bitcoin Investor
A sensational mechanism to lose all your money overnight without ever having the hope of getting it back!
We are very much aware of the cryptocurrency market scenario. Its volatility, its scams, and the crash that happened in 2018. There are millions that were invested by people who lost a lot, if not everything. Therefore it is not hard to imagine why ‘early adopters’ consider blockchain as the worst thing in the world.
And if you weren’t aware of it, here are some news articles that will sum it up for you:
- Bitconnect — The $2.5 Billion Scam
- Approximately — $76 Million (5 Billion INR ) crypto fraud in India
- $30 Million exit scam disguised as a theft
You can find hundreds of these large scale scams online and hundreds more on a much smaller scale. This just shows that it is a global problem and not something that’s localized to a particular region.
An Academic or a Scientist
A world-wide experiment worth hundreds of billions of dollars trying to break the traditional way of doing business.
Many consider blockchain to be an ongoing and expensive experiment self-funded by the people who use it. Academics and scientist study the potential of blockchain to disrupt the traditional way of doing things.
As an experiment, its success hinges on its successful use by the common folk around the world, the outcome measured by the extent of blockchain adoption in their daily lives.
A Coder or a Developer
An easy way to use others’ code and sell it as the next big thing to uninformed individuals and organizations.
First off, I’m aware this doesn’t apply to all developers and coders. There are hard working developers out there, doing a phenomenal job of advancing the blockchain development but…
You can find innumerable examples where the blockchains are exact replicas of the ones out there and almost all of them are dead. Open-source is the reason for these replications. Starting from the likes of HyperLedger Fabric by IBM to the financial ones like the Bitcoin, Ethereum, and more are all open-source software. Though this is a boon to the blockchain community, it is often misused.
A looming threat here is that the replicas bring in the same features and vulnerabilities from the source. So, an exploit found on one of the blockchains can affect all the replicated ones.
Rest of the Blockchain-aware World
A beautifully crafted decentralized network that gives power BACK to the people.
This simplistic definition encapsulates the essence of blockchain. It’s what the creator(s) had in their mind. We can understand why there are people wanting blockchain to not just survive but thrive through this definition.
What does all this mean?
The definitions above are not meant to be technical but are meant to highlight the impact blockchain has had on millions of people around the world.
Most of the people aware of blockchain have believed (and many still do) that it is there to help them. For some, they think that it is the New Internet, while others consider it is a means to regain privacy. The list of beliefs is as varied as the people involved in blockchain. However, this demonstrates that people believe in the future where they need and help each other, and not corporations.
Stepping into Reality
Promises were made, but in reality, these are still far away. Since blockchain is an emerging technology with its shares of problems, it also comes with its fair share of snake oil salesmen trying to exploit these new opportunities whichever way possible.
My goal here is to share some of the most prominent issues that are stunting the growth of blockchain and what we can do to help weed out the negative elements from the ecosystem.
The Issues
1. Dominance in cryptocurrencies
Cryptocurrencies are the largest working example of blockchain in action. There are thousands of these out in the market and if someone has heard about them, it is very likely for the wrong reasons.
Cryptos have always been receiving bad press and that is because of the scams that it harbors. A recent Bloomberg study revealed that over 80% of the ICOs were scams. This alarmingly high rate of fraud is ensuring that people stay away from anything that says cryptocurrency or blockchain.
Solution
Education is an essential way this issue can be tackled. The following are some of the ways that can be done to resolve this problem:
- Share with people on how to stay vigilant in an unregulated market such as the cryptocurrency. Reading more about projects, speaking with the community and team members, and talking about it with crypto enthusiasts can help a lot.
- Understand the difference between blockchain and cryptocurrency. It has the same difference as an engine and a car. We can use an engine to build a lot more things that just a car.
2. Illogical Use of Blockchain
Blockchain is a solution to many problems and not all problems. There will be a lot of use cases where blockchain cannot be applied.
However, many individuals and organizations don’t seem to realize that. I have observed scenarios where organizations are using blockchain just as a marketing term and often in a misleading way. It is unfortunate that they are fitting the use case to blockchain rather than to check if blockchain fits their use case.
This is very concerning because unlike traditional ways to store and manage data ( using databases), blockchains are much more expensive to maintain. So, when they are used where it doesn’t make sense, there is bound to be some performance issues. That would, in turn, make it extremely difficult to manage and extremely expensive to scale.
Solution
You might be a technical architect, a developer, or an entrepreneur who is thinking about building a solution. Let’s say that you want to evaluate if blockchain is right for your solution. To do that, here is what you can follow.
Look at all the features that blockchains provide like:
- Immutability — Once some data has been added to the blockchain, it remains there forever. The thing about immutability is that it will be held only when certain conditions are met. One of the most important conditions being, the blockchain should be truly decentralized( that is a lot of people must be involved in maintaining it). Without which, the blockchain remains vulnerable to attacks which will take away the feature of immutability.
- Traceability — The ability to track any digital asset on the blockchain to when it was created and the transfers that it underwent.
- Privacy — The ability to have control of the transactional data generated by you.
- Decentralized Operation — The ability to operate without a trusted third party maintaining it.
and more. An infographic from Delloite shares the top features of Blockchain. Once you have the features of blockchain, you will have to map it to the features of your application. Once you start mapping, you will be able to find correlations between your application and blockchain.
Once there are correlations formed and you have discerned that there are sufficient features in your application which require certain features of blockchain, you can proceed to build your app powered by blockchain. If you see that none of the features of the blockchain map strongly to your applications, then maybe it’s not for you.
3. The serious case of centralization
Blockchains are inherently decentralized in nature. However, most of the applications right now cannot be run in a public manner due to laws, or sensitivity of data that needs to be stored. Organizations, to overcome this, build private blockchains. Ones only they can control. The blockchain thus loses its decentralized nature as central control is enforced upon it.
In many cases, it’s unfortunate that centralizations become easy targets to hacks or exploitation. Public decentralized blockchains are robust because it takes a gigantic amount of computational power and money to hack into it (a.k.a take control) and fudge the ledger. This is the exact thing which is lost the moment a blockchain becomes private and centralized.
Solution
The solution to this problem is quite obvious. use public blockchains. But how can that be done?
Organizations can use a hybrid approach. This approach would use a public blockchain to store hashes of data (and not the data itself) and use traditional databases to store encrypted data. This way, the sensitive information is not public but it is available for those who own that data. This methodology uses the best of both worlds to meet the immediate demand for using blockchains to solve some of the fundamental problems in various sectors.
There is another interesting approach which is a modification to the one explained above. This approach uses a public blockchain to support the private one. In this hybrid approach of using two blockchains, the public blockchain will ensure that there is accountability on what is being done on the private counterpart and that there hasn’t been any compromise of the private network.
4. Blockchain maintenance strategies have flaws
If you have been around in the blockchain space, you would have noticed a separation that exists in most of the public blockchains out there. The separation between the blockchain users and maintainers ( a.k.a the miners). Though there are some people who are both users and miners, that percentage is very low.
Most of the public ledgers have two ways of maintaining the network. One is called the “Proof of Work” while the other is called “Proof of Stake”. Both these techniques result in a race where there is one winner. The winner gets to add a block of transactions to the blockchain. The winner also gets rewarded with coins for successfully performing the “proof”. This race occurs for each block that needs to be added to the blockchain.
If you’re interested, here’s an explainer on what is Proof of Work and Proof of Stake
While Proof of Work requires a miner to perform computations that satisfy pre-defined rules, Proof of Stake works based on the volume of blockchain assets being held by a miner. Both of these strategies favor the rich.
Anyone who is very rich can invest in server farms which have extremely high computational capabilities. These capabilities drastically increase the probability that they complete the Proof of Work for each block before anyone else. Along the same lines, anyone who is rich can purchase large volumes of blockchain assets and use that stake to influence the Proof of Stake algorithm.
Both these scenarios can lead to mining monopoly. So, there is a chance that these vastly robust public blockchains are actually controlled by a single entity. The separation I mentioned earlier, well, most users don’t even have a clue that the blockchain they are participating in is no longer decentralized.
Solution
The major task in solving this problem is to ensure that achieving monopoly is almost impossible or extremely difficult. There are a couple of blockchains which have managed to do this and their solutions are truly elegant. We will look at two fairly successful attempts by blockchain developers who have managed to solve this issue to a great extent.
- IOTA DLT — This distributed ledger solves the issue by removing the gap between miners and users. Every user of IOTA is also a miner. The way this works is that each user who is trying to perform operations like sending a transaction first needs to do some work to evaluate previously sent transactions by other users in the network. By implementing this, the developers have ensured that there are no transaction fees and mining does not have any incentives.
- Verge Currency Blockchain — Developers of Verge have implemented five algorithms for mining compared to most of the others out there which have only one. Each of the algorithms would require a different set of hardware to mine. Monopolizing a single algorithm blockchain takes ridiculous amounts of money both in initial expenses and maintenance. With five algorithms, the expense increases five folds making it nearly impossible to have a profitable monopoly.
Key Takeaways
There are surely more issues, but we have covered the most pressing ones. People are hopeful that blockchain can still bring about a revolution in many ways, but shortsightedness and greed can destroy all hope.
All of us can contribute in various ways to ensure that blockchain’s potential is realized and we have thriving decentralized ecosystems in all walks of life. To sum it up, here are a few things that you can do to help blockchain in its fighting to survival.
- Educate yourself and others on what blockchain is and help others understand the difference between blockchain and cryptocurrencies.
- Before implementing blockchain in your application, thoroughly evaluate the use case to see if blockchain is the right technology to use.
- use hybrid approaches to ensure that there is a public blockchain that provides accountability and element of decentralized behavior to your private application.
- Design new or implement existing alternative mining techniques which makes monopolizing public blockchain impossible.
