Blockchain: back to the drawing board?
By: Enrique Dans
Tags: Blockchain, Trust, Hype, Bruce Schneier, Vint Cerf

IMAGE: Tumisu — Pixabay

Over recent years, blockchain has been hyped as one of the most important developments for carrying out failsafe transactions of just about any kind. Based on the concept of a distributed ledger of transactions where every modification is logged and timestamped using a cryptographic proof of work, the original paper by Satoshi Nakamoto (whoever he, she, or they is/are) was elevated to the status of a latter-day incunabula, seen by many as the perfect solution, mathematically and computationally elegant.

Overnight, blockchain became the new mantra, beyond question, the universal solution. But… what if it wasn’t? What if, as on so many other occasions, a promising technology follows the familiar pattern of the hype cycle and, after scaling the peak of inflated expectations, it turns out that it falls into the trough of disillusionment? In other words, it fails the mass adoption test. Can we question blockchain without fear of looking ignorant or a technophobe?

Vint Cerf’s July 2018 tweet with its simple flow diagram showing that nobody needs blockchain should prompt some serious reflection, and not just about the fallacy of argument from authority. Vint was merely raising concerns that he had been analyzing for quite some time.

On February 6, another legendary figure, in this case in the field of cybersecurity, Bruce Schneier, published an article in Wired entitled “There is no good reason to trust blockchain technology”, which went into much more detail than Vint, with a much clearer separation between the technological foundation as such, blockchain, and some of its specific implementations such as bitcoin. According to Schneier, the idea of trust in a blockchain was not as crystal clear as some argued, while the consensus algorithm was definitely the most expensive and inefficient ever seen.

Indeed, the uses of public blockchains so far have led to energy aberrations like the one underlying the speculative explosions in popularity of cryptocurrencies, where practically the only hopeful scenario relates to Vitalik Buterin and the possibility — or better, the need — to reduce the energy consumption of transactional mechanisms of Ethereum by no less than 99%. But beyond energy consumption, which in itself would already be a major brake on mass adoption, it turns out that, in addition, Schneier is right about the trust mechanism, and statements along the lines of “in crypto we trust”, “in math we trust” or, “in code we trust,” which all sound very nice, but behind which lie an obvious reality: blockchains, like everything else in the world, have vulnerabilities that can be exploited.

The result of this progressive questioning is evident: in the analysts’ lists of the technological trends of 2019, blockchain is conspicuous by its absence. That said, analysts are not infallible and technology is not a hit parade. At the same time, this is the first time blockchain has been seriously questioned in its short life. We are now moving from questions based on “I do not understand”, to “I understand it and I’m not interested”, either because it’s expensive, it’s highly inefficient or because the trust aspect isn’t secure.

Do such problems require an amendment to the whole? Perhaps not: many aspects, such as the distribution of the ledger, the cryptographic proof of work or the concept of consensus itself, could be developed for future use. But in its current state, everything indicates that blockchain technology is probably not ready for mass adoption and that pushing ahead with that goal could have unintended, if not irresponsible, consequences. In short, a brilliant paper with an unclear origin is not necessarily enough to set in motion a process that changes the world as we know it.

From being one of the technologies considered key for the future and the apparently natural and definitive solution for all transactional systems, blockchain is entering a new phase, the trough of disillusionment, and from which it may never emerge. Some companies that were considering launching developments based on this technology are rethinking them, while the disproportionate initial interest is cooling, and growing numbers of people are now aware that blockchain technology probably needs to be taken back to the drawing board.