Meet blockchain, the hot new buzzword.
Has the term blockchain lost its meaning?
Every once in a while it makes sense to stop and take some bearings and make sure that your heading still looks right.
I think that’s where we are with the word blockchain. It’s getting thrown around so much that it’s become a new type of hype jargon.
What blockchain is, a review
So far, the best uses for blockchain include instances where trust in a digital environment is really hard, or impossible to achieve without some kind of intervention. This is why bitcoin’s blockchain was first conceived. At its root, the distributed ledger that is foundational to bitcoin allows for users to engage in trusted transactions without an established intermediary (by which, in this case, we mean some kind of corporate or government entity).
Other blockchain systems followed bitcoin, looking to apply the same kind of model to industries and enterprises outside of finance. And then came the idea of smart contracts, and of layering, and so on.
By now you have probably noticed that the word blockchain is getting tossed around everywhere. From file storage to porn, companies are rolling out blockchains for all kinds of purposes, some of them good, some of them unnecessary.
Either way, it’s gotten to the point where it’s time to have some way to evaluate what’s going on and to decide if these ideas are deploying blockchains merely to cash in on the hype, or if building blockchain really is a revolutionary step.
The marketing power of blockchain
There’s a chance you have already heard about companies like the New York-based Long Island Iced Tea Corporation, which makes bottled beverages, and how they changed their name to the Long Blockchain Corp. With the rebrand came a promise that the company would start investing and working with blockchain-related companies.
The company’s stock traded higher on the news that the beverage company had moved into the digital distributed ledger space, proving, from a marketing standpoint anyway, that blockchain did have value.
It would hardly be worth mentioning if it were the only example, but there are dozens more. Many of them are less publicized but equally motivated by trying to ride the rising blockchain tide.
The photography company, Kodak, for instance, announced that it was getting into the blockchain business to use the tech as a means to secure photographers’ copyrights. And a new flying car company is building a blockchain as a backbone to its business model. Whether these companies really need to deploy blockchain is still up in air, but it will be interesting to see how these cases unfold.
So if there is a takeaway, maybe it’s this: When evaluating whether or not a company or project needs blockchain, it’s important to remember where the technology is actually useful.
Five key blockchain attributes
- Security: While public, permissionless blockchains are not perfect, (and there have definitely been instances of high profile security failures and hacks) they do offer a layer of security unobtainable by traditional networks. Usually, the larger the decentralized network, the more secure it becomes. Of course, there are vulnerabilities such as a 51 percent attack, but those kinds of situations take massive computing power and/or government-level cooperation. One of the main attributes of blockchain is that it brings a new, higher level of security to the internet, especially for individual users.
- Trust: At the moment blockchain is slow in terms of the number of transactions or records that can be processed per minute and cumbersome to work with because of interoperability issues with other networks and systems. But despite those current limitations, blockchain is still the best technology available for two or more entities to interact in a digital environment and without needing third-party apps or companies to verify identity or hold funds. Most likely, the most successful blockchain of the future will be the ones that have some combination of trust/privacy/transaction at their core.
- Longevity: Part of the reason why blockchains are slow and resource-intensive is that they are designed to be an immutable digital ledger. This means that over time the information contained on the blockchain will be preserved. So in that sense, blockchain is a great tool for storing and archiving important information in a secure (and distributed) environment. Unlike other services, there is no owner of permissionless, public blockchains, which will certainly change the way that we look at digital ownership, rights, and intellectual property transfer.
- Multiple parties: Another instance where blockchain excels, compared to other technologies, is when there are multiple people involved in transactions. While smart contracts might not pick-up on the nuance and flexibility required for more than the most basic of transactions, where blockchain might add value is when there are multiple entities (like people, machines, companies, etc.) need to share information in order for something to happen.
- Clean data: So far blockchain is best suited to digital environments where data comes in clean, or is somehow verifiable off-chain. Adding garbage to blockchain could create downstream issues for others running and maintaining the network. Also, issues with data verification before it is recorded on the blockchain will remain a problem.
Known issues with deploying blockchain for everything
Blockchain, or distributed ledger technology, is a database that can be used for all kinds of things where trust and a disintermediated environment is desirable. While there represents a massive opportunity and will likely lead to business use cases and ideas that haven’t even been conceived yet, it’s not a good fit to replace every digital function.
While a movement toward a decentralized internet should be fostered as a method of preventing censorship and control, it is equally important not to pretend that every digital function will somehow be made better by claiming it will become a blockchain.
Also published on Medium.