Cleaning the air on Blockchain
A look at Blockchain through the eyes of a designer
Last week I went to an interesting blockchain event. The event was around rush hour, which is always a nightmare in San Francisco downtown. Somehow, against all odds I made it on time. The moment I walked into the building I asked the security guy if there was a blockchain event going on. He gave me a surprised look, almost as if I had asked something super offensive and asked me, “Does blockchain still exist?” He seemed to have bit of a sarcastic tone towards it and didn’t seem to love the idea of blockchain even though their building hosts tons of such events. Anyway, I made it to the event and was a little surprised to see how many attendees seemed to have misunderstood blockchain and crypto. They stormed the presenter with questions about crypto in the middle of the presentation, which was not even the topic she was covering.
The talk was not actually about crypto but more about how blockchain technology works and how us designers need to start thinking about this space to make solutions more user friendly. I think it was super informative with respect to looking at various startups and how they are leveraging this technology to solve some very serious problems. Instead of this being the focus, it turned into something of a heated discussion about blockchain replacing the middle-man aka banks/govt. There were a few people in the room who were just upset about the mindset of having a monetarily-incentivized approach towards things since blockchain’s emergence. This is what inspired me to investigate this topic and to see what makes blockchain so extraordinary.
As for crypto, to me it is a byproduct of blockchain, and for just a second, I want you to try thinking of this technology and its use cases with an open mindset, without labeling it to be anything spooky, despite how it sounds.
I combined a list of four characteristics that make this technology so distinctive and trendy
1. Public Ledger: A blockchain database is like a publicly distributed ledger where everyone can see everything on it. If anyone needs to verify a transaction, they can look it up publicly and even track it. It is very different from traditional databases, which typically have central authorities like organizations or banks that govern them. Such central authorities have full control over the servers, and they can decide who has access, what to store, or what to archive. If a central authority gets compromised, the database is subject to all sorts of risks. Blockchain, however, is a database that is installed on a vast number of individual computers that are used by the people who use the database. In a blockchain database there are no servers whatsoever, making it more secure and almost hack-proof. A copy of the same database is installed on the computers of every participating stakeholder. In general updates on blockchain cue up and sometimes it can take quite a while for changes to be reflected. All of these changes are updated based on a consensus algorithm that determines which changes to accept and which to reject.
2. Alignment of incentives: Blockchain technology aligns incentives. This might be one of its most distinctive characteristics, even considering its many other attributes. Anyone who has malicious intent won’t have a malicious effect. That is the core reason that bitcoin and blockchain technology are so very promising. Nothing in the past reformed a malicious actor into a benevolent one. Blockchain changes a malicious actor into a miner, who participates in the network to solve a very complex mathematical equation which earns them a reward — for instance, bitcoins. Because it is in the self-interest of someone with malicious intent to help the network to grow, any potentially ill-meaning individual cannot remain so any longer. This is what keeps the system going and, overall, promotes trust and integrity.
3. Reduces cooperation overhead: Another interesting characteristic of blockchain is that it leads to the reduction of overhead costs and the increased speed of transaction processes amongst participants. It pushes the ownership of data to an individual level by eliminating a central authority, which in the long run, saves time and functions more seamlessly. Maersk, the world’s largest shipping company, is teaming up with IBM to implement blockchain in order to improve global trade and digitalize the supply chain. They intend to provide end to end supply visibility, enabling all participants to exchange information in a more secure and timely manner. Think of how much time that will end up saving and how smoothly they will be able to track shipments. Another great use-case example is real estate loans; with current methods, the process of applying for a mortgage can be quite intimidating. According to realtor.com, “The entire mortgage process has several parts, including getting pre-approved, getting the home appraised, and getting the actual loan. In a normal market, this process takes about 30 days on average. During high-volume months, it can take longer — an average of 45 to 60 days, depending on the lender.” However, if my identity were entered into a blockchain database, along with my records and credentials, the loan process could be expedited significantly. I did some research, looking into identity management and blockchain, and found out that there are some interesting companies working on this problem. Uport and Slockit.io stood out to me the most.
4. Immutability: Immutable means that something is unchanging over time or unable to be changed. Once data has been written to a blockchain database, no one, not even a system administrator, can change it. Blockchain permits transactions, changes, and entries based on a consensus. Blocks are only added, never deleted, and all changes are captured as new blocks. This feature defines it as an immutable database and provides many benefits with respect to auditing. As a provider of data, you can prove that your data hasn’t been altered, and as a recipient of data, you can be sure that the data you are receiving hasn’t been tampered with. This is especially useful for databases dealing with financial transactions. Blockchain is designed to be complex — dare I say tedious? — and therefore, secure. It spends tremendous amounts of both energy and computing power in order to duplicate a merkle hash, but in doing so, it can nearly guarantee security. The only way to hack it would necessitate acquiring so much mining capacity that it would no longer be in the hacker’s best interest to scam the system, but rather to apply those mining abilities toward earning bitcoins, which in turn supports the network. You cannot alter or tamper with any previous data in the blockchain. If something new is added, it needs to have the consensus approval of at least 50% of the nodes participating. This makes it much, much harder to hack.
After looking at all of these characteristics, I realized that the technology itself is not very new. Distributed ledger technologies have been around since the 80s, and consensus algorithms and network protocols have been rising and falling for even longer. Blockchain simply combines several old pieces of technology in a new way that enables a sequence of agreements to be made in a way that everyone can trust. If everyone keeps their secret keys secure, then no activity can be forged on the network — at least, there is very little chance of someone managing to do this. Technologically speaking, that is the only innovation here. What most people who criticize blockchain don’t understand is that systems consist of more than just technology. Systems consist of lots of different components, the most important component being the user. What blockchain allows the protocol designer to do is craft incentives in a way not possible before. That’s the core innovation, and that’s why blockchain is exciting. It forces us to think differently about technology in general. There is one thing for sure, we can’t deny the growth of this technology or how it will impact the entire tech-ecosystem. It has numerous revolutionary applications in sectors as distinct as financial services, supply-chain healthcare, transportation, and more.
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