2020 — Is Blockchain still a thing?
A review of 3 years blockchain development
This is a story about Cryptocribs and Cryptokitties, Quantum Computers and Bitcoin Heists, Blood Diamonds and Mandalorian Bountyhunters. A lot has happened in the last 3 years.
The past years, blockchain was one of those hype topics which consumed and moved vast amounts of money but at the same time was on everybody’s bulls***t-bingo card. The technology itself already existed for over 10 years but only in the past 3 years it really took off, impacting massively the realms of technology and finance. Today the market of blockchain technologies is worth 3 billion USD. In financial assets you can find around 250 billion USD in cryptocurrencies.
As an engineer I focus more on the technical development than on the financial aspects so even though the mentioned numbers are impressive, they are only a weak indicator for the maturity of the technology itself. There are these stories about putting the word “blockchain” into your company name and see investments going up through the roof without any evidence that blockchain technology would make sense in the given context or was even used. I even found a bachelor thesis which investigated “The effect of blockchain related corporate name changes on stock prices”.
In 2018 Bitcoin reached the peak of its popularity and value and subsequently brought the peak of hyping the topic of blockchains. Entrepreneurs invented and reinvented everything with blockchain, including amazing gems like Cryptokitties. That year everything was blockchain.
Once upon a time — in 2018
If you follow our work at AS Ideas Engineering, you know that in 2018 we researched and developed multiple prototypes based on blockchain so that we gain a better understanding of where it makes sense to invest in blockchain and where it is just a waste of resources. We built the “Blockchain Time Tracker”, the “Vacation Smart Contract Assistant”, the blockchain-based “Credibility Score” and we conducted a study about utilizing browser-based crypto mining as an alternative way of monetizing content on the web.
If you want to learn more about our innovation process which spawns these prototypes, read this article here.
None of these prototypes found their way into production. Our conclusion was, despite the vast potential of this technology, none of our businesses could directly benefit from it at this point in time. On the other hand our gained knowledge helped us and our units understanding the advantages and disadvantages in depth and all year long we educated our brands with what we learned. The talk which was requested the most was “Blockchain — Or the Slowest Database on the Internet” by Sebastian ‘Waschi’ Waschnick and Tarek Madany Mamlouk. We toured from event to event and the rooms were always packed with people who wanted to understand what the hype is all about.
One of the highlights of our tour was the Awin Travel Day 2018 in Berlin, where Waschi and I were invited for presenting a case-study about blockchain in the travel industry. This was a very hot topic that year with automatic door-locks coupled to smart contracts at shared apartments and distributed instant-rewards programs of airlines. Cryptocribs planned to take over the private vacation-rental market of Airbnb by cutting out the middleman. Their whitepaper “CryptoCribs: A Peer-to-Peer Electronic Rental System” explains in detail how a blockchain based solution could automate the financial and reputational intermediation and therefore make this service cheap and more efficient.
Back in 2018 our audience asked about how the market will evolve in the following years but I never dared to make a prediction. This year, in 2020, I looked at those businesses I evaluated for the case-study to see if they actually took over the market or just disappeared. My findings were kind of disappointing: Nothing really happened. None of the evaluated services disappeared but also none of the services revolutionized the industry.
Does that mean the blockchain revolution failed?
2019 — Did Google just kill the blockchain?
Blockchain architecture provides solutions where you need a distributed, forgery-proof data-storage. The premise for this to work is math. Blockchains use symmetric encryption and hashing for authentication and verification. This works as long as our computers are unable to solve these mathematical challenges and so far this was a save bet.
In October 2019, Google claimed that their quantum computer solved a complex computation in seconds which would be virtually impossible to be solved by even the strongest conventional super-computer. This development changes the premise of secure encryption and hashing and makes blockchains practically worthless.
This is of course only partially true because Google’s scientific breakthrough in quantum mechanics is more a proof of concept and not the new standard for computation. Ahmed Banafa cites in an article that the quantum computer would require 1500 qubits to actually break the challenges of current state of the art encryption, while Google currently has 53.
For now it seems that blockchains remain save and Google’s breakthrough in quantum computation does not really threaten the foundation of encryption-based IT security.
Blockchain in 2020
The blockchain hype is over. While 2 years ago everything was blockchain, today blockchain is what it is supposed to be: A clever solution for specific problems. And now it starts to get interesting because now we can focus on serious blockchain applications. Gartner agrees by naming “Practical Blockchain” one of the most important technology trends of 2020.
One thing that did not change over time is the relevance of global cryptocurrency trade. Trading remains the most important and valuable application of blockchain technology. Global crypto exchange Coinbase is available in more than 100 countries and established itself as the standard exchange for the 25 most stable cryptocurrencies. In terms of market capitalization the world wide biggest player is crypto exchange Binance. Sadly Binance gained massive public attention when hackers stole Bitcoin worth around 40 million USD in 2019.
So, even if the value of blockchain for business applications might be questionable for critics, the relevance in the financial sector is still obvious. And profits are gained not only in trading but also in mining. Riot Blockchain built an impressive enterprise whose core business is mining Bitcoin. They invest massively in mining-capable hardware and blockchain-related ventures and make millions (USD) in revenue.
But let’s have a look at some successful implementations of blockchains in the real world by big players:
Diamond producer De Beers uses blockchain for tracking individual diamonds from miner to retailer. Another high profile name is General Electric who implemented a blockchain for tracking construction and maintenance of engine parts of GE Aviation. There are also implementations for average consumer products as shown by Walmart, using blockchain for tracing items in their food supply ecosystem. A case study shows the time from tracing an item decreased from 7 days to 2.2 seconds. China-based Ant Financial released their Ant Duo-Chain Blockchain Platform which allows companies in supply chain channels instant payment for ordered goods. Figure Technologies from California incorporates their blockchain for handling their home equity line of credit, student loan refinancing and mortgages.
Hyperledger: Modular blockchains for business
Some of todays most popular blockchain applications arise from the Hyperledger project. The project started in 2015 and is hosted by the Linux Foundation. Supporters are influential companies like IBM, Intel, SAP, Oracle and Accenture. Their approach differs from other blockchain implementations by not having a digital currency associated. This confused me when I first read about it because originally a blockchain’s currency was the mandatory fuel which was needed to finance the blockchain’s nodes. Hyperledger approaches this challenge in a different way. Instead of providing a completely open, distributed ledger for pseudo-anonymous users, the Hyperledger project is an open source platform for business applications. You can use the modular architecture to create exactly the personalized blockchain infrastructure your business needs.
The core of blockchain applications consists of so called smart contracts. In the Hyperledger context smart contracts are generally referred to as chaincodes. Currently chaincodes can be written in Go, Node.js or Java. This is where the developer includes custom business logic into the blockchain.
The Hyperledger ecosystem consists of multiple frameworks and tools which can be orchestrated to the project’s specific needs. If you want to start writing chaincode, start by looking at IBM-contributed Hyperledger Fabric. Are you building mobile applications? Check out Hyperledger Iroha. Will your application represent a distributed ledger for supply chain management? Hyperledger Grid might be the framework for you. And don’t forget to use the Hyperledger Explorer to browse through and manage your data.
A great overview of the Hyperledger project can be found here.
Blockchain in Star Wars?
If you are a Star Wars nerd like I am, the term “chaincode” might sound familiar to you. When I watched “The Mandalorian”, Disney’s tv-show about a mandalorian bounty hunter in the Star Wars universe, I heard the characters talk about “chaincodes”. Even though they never explicitly mention blockchains, it absolutely makes sense to understand them in the context of blockchain-based smart contracts! As an intergalactic bounty hunter, the user receives access to a chaincode which defines the payment of a certain amount of currency after the delivery of a fugitive was verified by the chaincode partner. So it is a reasonable assumption that interplanetary transactions in the Star Wars universe are managed via smart contracts in blockchains.
As you can see, Star Wars is totally realistic and scientifically accurate is any way. (At least regarding chaincodes.)
Where do we go from here?
The hype is over and serious businesses are implementing blockchain-based solutions. Nevertheless Gartner still describes blockchain as immature for enterprise deployment but sees todays development as steps towards full implementation within the next 3 years:
“Blockchain, which is already appearing in experimental and small-scope projects, will be fully scalable by 2023.”
Tooling-ecosystems like Hyperledger demonstrate how businesses can easily assemble their custom blockchain based solutions today without the overhead of early blockchain architectures. The last years taught us how to build blockchains efficiently, the next years will bring maturity, scalability and interoperability.