The hype around the blockchain suggests that it can do anything you want it to; that it’s like magic dust that will save the world. Is it as fantastic as the blockchain messiahs claim it is, or does it actually have some limitations?
What is the blockchain?
It’s a series of linked blocked and each block is composed of a series of transactions. Think of a train where you have a series of carriages that are coupled together, or any item that has units linked together.
In the case of the blockchain, the transactions there are specific rules about how you input the data about the transactions (consistency), you can’t overwrite data that is already inputted (immutable) and each transaction has an identifiable owner. Added to this, there is a consensus about what is in each block without the need for a central party controlling it (decentralisation).
Decentralisaton is the perceived ‘magic’ of the blockchain, because this factor guarantees that there is “no single point of failure.” In other words, nobody can mess with your transaction on the blockchain. You also don’t have to trust a central body; hence it is called ‘trustless’. This is the element that gets everyone most enthusiastic.
What’s the downside of the blockchain?
Creating the system described above is not so easy. Building in consistency and preventing bugs corrupting the data is a real challenge and one that needs to be taken slowly, because if you don’t, the chances are you will lose consistency and then the blockchain is worthless.
Think of it this way: if you have a centralised database and something goes wrong, you fix it by starting over. But, you can’t do that with a decentralised system. And the reason for that is, you need consensus, or the agreement of all players in the system, in order to change the database. The blockchain is a public source with no central ownership. That is its big claim to fame, but also one of its weak links.
When it comes down to it, decentralised systems are very difficult to work with, expensive to maintain, hard to upgrade and a pain to scale. It would be much easier to stick with a centralised system, but where’s the ‘brave new world’ feeling in that?
What’s the upside of the blockchain?
In a nutshell, it removes a single point of failure or control. It is answering problems in sectors where IT infrastructure is outdated, such as healthcare, logistics and financial services. For many blockchain believers, the main appeal was that it would remove government control and prove to be a liberation movement, but as we’ve seen in the last few months, it is extremely hard to bypass governments and their regulatory bodies.
It is also proving hard to scale the blockchain for sectors where that is needed; money being the exception. As Jimmy Song writes in Medium: “Immutability and difficulty in changing the rules is a positive for money and not a detriment. This is why blockchain is the right tool for the job when it comes to Bitcoin.”
But, for other business sectors with specific IT requirements, it is not the case that a blockchain solution will cure all your ills, but that is how the blockchain is being sold. Being wary doesn’t necessarily mean that you need to turn your back on the blockchain completely, it just means “Caveat emptor” (let the buyer beware) as the Romans used to say.