Why A Blockchain? Maybe you should just use pieces of paper…

One of the questions we get when presenting VinX is “Why the blockchain element? and then Why not just use centralized servers?” I have to say, amazed that people ask that — but then realize that I understand why they are asking. Our underlying business mission is sound, compelling, and exciting. Why are we messing around with buzz words like Blockchain or tokens? This is a case, however, where there is real utility value in using these modern technology pieces of infrastructure to power a business.

Great fortunes were made over the thousands of years of recorded history — and in every generation different technologies were used. And some technologies were lost — to this day we don’t really know how the Egyptians built the pyramids! That was an engineering feat. We know from the bible the story of Joseph helping Pharaoh become even “richer” and more powerful during the seven lean years. First everyone gave in all their items of value, later the ownership of their land. But how was Joseph managing all this — after he didn’t have access to Excel! And without IOT (Internet of Things) how did he manage to store food that would last for seven years?

Henry Ford pioneered the modern assembly line for car manufacturing — and he didn’t used a cloud based project management system. In fact — I believe he didn’t even have email. So how did he do it?

Technology has been part of every generation, sometimes allowing us to do things faster, better, cheaper, more efficiently, or all of those at once. And sometimes technology is “cool” but doesn’t have any real impact (think first version of Google glass).

I find questioning the use of Blockchain very similar to discussions I heard over the past 20 years of:

“why use the internet — what’s wrong with existing managed networks?”

and

“The cloud — you think I am going to trust my sensitive business information to remote servers run by an online bookstore?”

and

“Who will buy ______ online? That’s the kind of thing you need to buy in person”

and of course

“Noone will ever buy an electric car.”

All of the above obviously happened — not at the exact timing or pace that people predicted, but happened all the same.

In 1987 I started to work as a clerk in a law firm in Manhattan — not a single lawyer had a computer, that was only for legal secretaries. Today every attorney not only has a computer on their desk but walk around with more computing power in their pocket than the whole law firm had 30 years ago.

The first time I tried to use an e-ticket on El Al (Israel’s national airline), I was asked to show the printout. Why — because security needed to put the sticker on the ticket. No ticket, where to put the sticker? (by the way, Israel airport security still uses stickers…so much for Israeli advanced technology…these days they put the sticker on the passport — what will they do when we have electronic passports?).

Blockchain technology (not cryptocurrency, but rather the concept of a distributed ledger that can verify validity of records) is an infrastructure technology that could have as much impact as the internet and cloud computing. As told by the oracle of all wisdom, Wikipedia:

By design, blockchains are inherently resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”.[8] For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.

Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been achieved with a blockchain.[9] This makes blockchains potentially suitable for the recording of events, medical records,[10][11] and other records management activities, such as identity management,[12][13][14] transaction processing, documenting provenance, food traceability[15] or voting.[16]

What do you not see in the intro of Wikipedia? Powering “cryptocurrencies.” Over the past few years we have seen all kinds of forced uses of “tokens” to justify ICOs (Initial Coin Offerings) that are used to raise funds (usually in the form of other crypto, if based on Ethereum then mostly Ether). Most of these are at best concepts but unfortunately many are simply scams. And they have raised billions in $USD value.

But Blockchain as a technology choice is no scam. As ecommerce is not. And the cloud is very real.

Blockchain may not transform humanity as we know it — but to question a start-up’s choice to run its database driven service on blockchain is akin to asking why they are using Amazon Web Services rather than buying servers and keeping them in their office.

I remember a few years ago being criticized by someone brought in by an investor for my choice to use python for our back end servers, and for using Google App Engine. Once the investor heard from his “expert” there was no recovering. It did not matter that python was (and even more so today) used by some of the best internet services out there, or that at same time Snapchat, which was then the fastest growing app/service was powered by Google App Engine. The damage was done.

Today those of us rolling out real use cases on blockchain are suffering from a bad reputation caused by many bad actors, multiplying the effect of that “expert” noted above by thousands of times over. The tech and venture ecosystem has been taking sides recently, dividing the world between those who have drunk the blockchain/crypto Kool-aid and those who have not.

I hope that the bubble will burst soon and all the folks trying to raise money on the basis of buzzwords will go away, and the rest can get on with the goal of building real businesses that leverage the power of blockchain.