Is blockchain's potential overhyped?

[BWV]

Not talking about crypto-currencies, but the technology itself. the standard argument one hears is something like 'bitcoin may be a scam, but blockchain represents a revolutionary breakthrough that will change the world'

Asking about the technology itself, will it really become the backbone for most financial transactions, contracts, intellectual property etc?

Everyone says the blockchain, the technology underpinning cryptocurrencies such as bitcoin, is going to change EVERYTHING. And yet, after years of tireless effort and billions of dollars invested, nobody has actually come up with a use for the blockchain—besides currency speculation and illegal transactions.

Each purported use case — from payments to legal documents, from escrow to voting systems—amounts to a set of contortions to add a distributed, encrypted, anonymous ledger where none was needed. What if there isn’t actually any use for a distributed ledger at all? What if, ten years after it was invented, the reason nobody has adopted a distributed ledger at scale is because nobody wants it?

https://hackernoon.com/ten-years-in-nobody-has-come-up-with-a-use-case-for-blockchain-ee98c180100

 

[phinds]

My own take is that the jury is still out but I've only read a few articles about it.

 

[cosmik debris]

The idea behind blockchain seems quite nice, a database which is distributed and whose transactions are traceable. With current technology the problem appears to be transaction time

Cheers

 

[gleem]

It is useful in that it assures authenticity as well as will generally keep transactions safe. So It should be useful. One problem that has not be talked about at least in PF is the electric power that is consumed in the "mining" procedures used for the transactions. Mining factories that process transfers are composed often of thousands of mining CPU's needed to de-encrypt the information to validate the transfer. These CPU are dedicated to this process and thus fast but require serious power even more than 1Kw per CPU. Thus mining factories often clustered in areas where electricity is cheap. Late last year I read that the world mining power consumption for cryptocurrency was greater that the total power consumption of Denmark. Expanding its utility could thus increase the world power consumption significantly since faster processing time will require more CPU's.

 

[Stavros Kiri]

It is useful in that it assures authenticity as well as will generally keep transactions safe. So It should be useful. One problem that has not be talked about at least in PF is the electric power that is consumed in the "mining" procedures used for the transactions. Mining factories that process transfers are composed often of thousands of mining CPU's needed to de-encrypt the information to validate the transfer. These CPU are dedicated to this process and thus fast but require serious power even more than 1Kw per CPU. Thus mining factories often clustered in areas where electricity is cheap. Late last year I read that the world mining power consumption for cryptocurrency was greater that the total power consumption of Denmark. Expanding its utility could thus increase the world power consumption significantly since faster processing time will require more CPU's.

Recently I attended a seminar on blockchain. Didn't get much out of it, but they said too that energy (and/cost) is indeed the main problem and disadvantage for now, but they are working towards ways to overcome it. I think once (/if) they get past that ... it will be a great technology.

 

[Laurie K]

The idea behind blockchain seems quite nice, a database which is distributed and whose transactions are traceable. With current technology the problem appears to be transaction time

I agree, I saw one of those thingy's with all of those complex doodahs that looked like it cost a moolah and they were obviously complex and difficult to make initially but now I'm sure that everybody will want one of the super great new ones because they are obviously superior to the old ones and don't cost as much so the must be a real bargain.

In 1987 I worked in a Communications Design Office on PC LAN computer projects (Pay and Allowances/Project Management/Development Forecasting) and would have to say that blockchain is the biggest piece of marketing crap since they abused the term 'Cloud'. If you ever worked with Communication (Electrical) Engineers back then you'd know that (they are very pedantic and entirely coincidentally the only people x 2 who I have ever known to accidentally format their work PC's) if you let them they would draw every single bit of telecommunications plant (plugs, switches, pillars, exchanges) between two computers on their network plans. So we just drew a 'cloud' shape around where the complex stuff would be and labelled it 'Packet Switched Network'.

With current technology the problem is that something whose entire purpose is to check itself is still a waste of time regardless of how efficient it is at checking itself or wasting time.

 

[Rive]

It is useful in that it assures authenticity as well as will generally keep transactions safe.

Despite being called 'safe' it seems to be quite frequent to get news about stolen bitcoins.

Can't help keep asking myself that if at the end the problem burns down to safe and trusted computers as usual, then what is it actually what we can get from the blockchain tech?

Ps.: I'm no expert in this, but I have a strong feeling that this tech won't solve the problem - it'll just add one more layer of false security to the thing...

 

[anorlunda]

It is almost an axiom that all new technologies get hyped in the press. Almost all of them get forgotten in the long run, but the few exceptions can have a big impact. Then there are high impact developments that never do get press attention. The popular press is a very poor method of judging new technology.

Blockchain is an application of encryption, or more basically one-way-functions, or more elaborately secure computing. I think we have a vital interest in secure computing, and therefore it must play an important role in our future.

You exclude crypto currencies in the OP, but some of the pitfalls of bitcoin apply to all encryption based applications. An unverified report I saw claims that 15% of bitcoin are lost due to hard disk crashes, lost thumb drives, or trusting third party management companies that prove to be untrustworthy. Big business and big government with deep pockets can best create the culture and discipline to handle keys. It will take much longer and more effort to bring that to the small business/small government/consumer level. Each level downward you achieve adds 1000x (a guess) times more customers.

 

[phyzguy]

What exactly is the problem that blockchain is supposed to solve.? We have systems in place for financial transactions today. How is blockchain an improvement over those systems.? When I spend a dollar, do I really want/need to know every transaction that dollar has gone through since it rolled off the printing press? I just don't see the utility.

 

[anorlunda]

What exactly is the problem that blockchain is supposed to solve.?

I'll give an example based on the just anonymity advantage (which is just one facet of the whole.)

I used to work for a regional ISO. We managed power markets that covered tens of millions of consumers, multiple utilities and multiple states. Something new coming fast is micro payments to consumers who voluntarily curtail their electric use, thus saving expense for the grid. The per-person magnitudes of these payments are very small, but they are politically important and appeal to people's sense of social justice.

So consider the hypothetical case of distributing $1 billion to 50 million recipients.

The overhead of keeping 50 million user accounts and making micro-payments to them is crushing. We are talking financial transactions so user name/address/contact/banking info must be kept on file, accurate, and up to date. That means web sites, and customer service phone banks. Staff is also needed to handle returned payments. More staff for complaints, staff for HR, lawyers, IT, security, and management. The staff needed to administer this would be several hundred, perhaps 1000 people. It needs to be very secure, because $1 billion makes it an attractive target for thieves. Without security, the whole idea become infeasible.

Then think about scalability. The following year, we might have only $1 million to distribute rather than $1 billion; yet the overhead remains the same.

Done the old fashioned classical way, reminds me of class action suits. The lawyer gets $25 million, the financial institution gets $5 million in fees, the post office gets $0.50, and I get a check in the mail for a lousy $0.05. I also get a form to sign and to send back via return mail (another $.50 for the post office and $1 million in fees to the institution to process and archive those forms.)

Anonymous blockchain micropayments hopefully enable payments with much lower administrative overhead. The payer has no need to know the identity of the payee. Of course it's not ready for prime time yet. Problems (including energy) need to be worked out. So I think the accurate status description today is "hopeful."

 

[phyzguy]

As a society, do we want the capability to make anonymous financial transactions? Isn't this just an invitation to crime?

 

[anorlunda]

Isn't this just an invitation to crime?

Sure, that's true. But as my example showed, you can also spend nearly 100% of your money avoiding crime. It's like many things in life, you must find a happy balance. New technology enables new balances.

How would you propose distributing $1 billion to 50 million people?

 

[gleem]

This is a pretty good explanation of how bitcoin works and how block chains fits in.

 

[cosmik debris]

I think people are getting a bit off subject, as the original poster said this is not about Bitcoin it is about block chain technology..

Cheers

 

[gleem]

The video I posted in #13 is an explanation of block chains using the transaction of the transfer of bitcoins as the object of its use. check it out.

 

[FactChecker]

My understanding is that a (the?) major selling point of blockchains is its security regarding verification of transactions. But that its security depends on having a lot of users with copies of all the data who can verify any transactions. People who mine for bitcoins are the backbone of the verification process and get paid with bitcoins for their efforts. If that is true, I can't see that any database with a relatively small number of users has the same advantage.

That being said, it would still be true that blockchains may be a very disruptive technology in certain applications.

 

[Vanadium 50]

Isn't this just an invitation to crime?

And isn't that the major use of cryptocurrencies? (I am not calling speculation a "use") If you want illegal drugs or to have someone whacked, you can use Bitcoin to pay for it.

 

[anorlunda]

And isn't that the major use of cryptocurrencies?

That is much more true in regards to cash. A junkie on the street buying drugs can't easily pay by check or crypto-currency. Also, crypto transfers are much easier for law enforcement officers to trace than wire transfers or checks or cash.

The more traditional methods of wire transfer and the inter-bank SWIFT system also have major insecurity and crime problems. For example, https://qz.com/1210659/swift-the-me...f-the-1-8-billion-punjab-national-bank-fraud/

I was the victim of a wire transfer failure. I sold a house in Europe and moved back to the states. The wire transfer of my proceeds from the sale got lost. It seems there was a 1987 fire in an office building in Los Angeles that burned up the records of wire transfers in transit. My sending bank said, "We have proof that we sent it." My receiving bank said, "We never got anything." Who do you sue for recovery? With a block chain electronic payment, I could have verified the transfer instantaneously at the house sale closing.

The OP said that blockchain is a separate topic than crypto-currency, but they can't be separated while crypto currency remains almost the only application so far.

 

[Vanadium 50]

With a block chain electronic payment, I could have verified the transfer instantaneously at the house sale closing.

I don't think blockchain entirely protects you from a fire in a critical building.

 

[anorlunda]

I don't think blockchain entirely protects you from a fire in a critical building.

I'm not an expert, but I believe that the distributed processing nature does protect you against single point failures in the transfer process. Perhaps others with more detailed knowledge about blockchain can help confirm that.

 

[FactChecker]

And isn't that the major use of cryptocurrencies? (I am not calling speculation a "use") If you want illegal drugs or to have someone whacked, you can use Bitcoin to pay for it.

It appeals to criminals and Libertarians. ;>)

 

[kith]

I think that the basic idea of the blockchain is quite interesting and that it is too early to evaluate its future impact. As for now, I just note that I haven't seen any implementation where the blockchain was used for a clear benefit (as long as I exclude Bitcoin itself).

Besides obvious nonsense (like blockchain ice tea) I have only seen applications where I didn't understand what exactly the contribution of the blockchain was (like blockchain-based online dating).

Also I haven't heard of people who tried to implement a good idea using the blockchain and failed due to technical limitations (like transaction time) or publicly discussed such shortcomings in the context of the actual idea.

 

[anorlunda]

Go to your public library and search for past issues of Scientific American. Both currency and non-currency applications are mentioned. The general topic is secure communications; messages with guaranteed delivery, non-falsifiable, non-deniable, and anonymous (identity can be provided in the content, not the delivery). Blockchain is one approach.

The Future of Money - Scientific American
The ultimate social impact of blockchain technology depends on who controls ... ScientificAmerican maintains a strict policy of editorial independence in reporting ...
https://www.scientificamerican.com/report/the-future-of-money1/

The Evolution of Trust in a Digital Economy - Scientific American
The ultimate social impact of blockchain technology depends on who controls ... ScientificAmerican maintains a strict policy of editorial independence in reporting ...
https://www.scientificamerican.com/article/the-evolution-of-trust-in-a-digit...
Bitcoin-Based Blockchain Breaks Out - Scientific American
Blockchain: The Bitcoin Network relies on a distributed, redundant architecture that might be applied to other online transactions, such as messages sent between ...
https://www.scientificamerican.com/article/bitcoin-based-blockchain-breaks-out/
Blockchain Enhances Privacy, Security ... - Scientific American
Latest news and features on science issues that matter including earth, environment, and space. Get your science news from the most trusted source!
https://www.scientificamerican.com/article/blockchain-enhances-privacy-secur...
There's a much bigger world than bitcoin within blockchain ...
Jen Schwartz, Scientific American senior editor, discusses her piece on a deep dive into blockchain technology.
https://www.cnbc.com/video/2017/12/15/theres-a-much-bigger-wor...
A Guide to the World Bitcoin Created - Scientific American
Hundreds of central banks and corporations are incubating a game-changing technology called blockchain—and ... More in the January 2018 issue of Scientific American.
https://www.scientificamerican.com/article/a-guide-to-the-world-bitcoin-crea...
The Imperfect Crime - Scientific American
The Imperfect Crime: How the WannaCry Hackers Could Get Nabbed. Even if they can exchange their ransom, the criminals will have a hard time accessing their money ...
https://www.scientificamerican.com/article/the-imperfect-crime-how-the-wanna...
Blockchain Enhances Privacy, Security and Conveyance of Data ...
Blockchain, the technology ... Scientific American is part of Springer Nature, which owns or has commercial relations with thousands of scientific publications ...
https://icons.duckduckgo.com/ip3/aws.scientificamerican.com.icohttps://aws.scientificamerican.com/article/blockchain-enhances-privacy-secur...
What to Expect from Cryptocurrency in 2018 - Scientific ...
Expect some of the major central banks to announce plans for blockchain-based ... ScientificAmerican maintains a strict policy of editorial independence in ...
https://blogs.scientificamerican.com/observations/what-to-expect-from-cryptocu...

It appeals to criminals and Libertarians. ;>)

It also appeals to corporations and banks. (but I guess criminals, libertarians, corporations, banks are overlapping sets :-)

 

[gleem]

For some Innovative uses of block chain technology. see
https://www.nasdaq.com/article/4-innovative-use-cases-for-blockchain-cm901636

 

[Stavros Kiri]

Anyone expert on 'Bitcoin vs Ethereum' ? ...
(both are Blockchain apps)
For those not familiar with Ethereum e.g. :
"Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.

These apps run on a custom builtblockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.

This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middleman or counterparty risk."
https://www.ethereum.org/

Also: "Is Ethereum similar to Bitcoin? Well, sort of, but not really. If you want to know what is Ethereum, how it works, this guide is perfect for you."
https://blockgeeks.com/guides/ethereum/

"
What is Ethereum Guide?
Beyond Bitcoin & first generation decentralized applications

Although commonly associated with Bitcoin, blockchain technology has many other applications that go way beyond digital currencies. In fact, Bitcoin is only one of several hundred applications that use blockchain technology today.“[Blockchain] is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.” Sally Davies, FT Technology Reporter
"

Edit: + here's a good one:
https://www.genesis-mining.com/ethereum-vs-bitcoin

 

[qspeechc]

Despite being called 'safe' it seems to be quite frequent to get news about stolen bitcoins.

Can't help keep asking myself that if at the end the problem burns down to safe and trusted computers as usual, then what is it actually what we can get from the blockchain tech?

Ps.: I'm no expert in this, but I have a strong feeling that this tech won't solve the problem - it'll just add one more layer of false security to the thing...

The exchanges got hacked, not the block-chain itself. The problem is that people let these third parties, the exchanges, keep their crypto for them.

The original idea of block-chain was actually to get out of the criminal financial sector, so it's a bit funny to read that crypto is mainly used for crime. I wonder how people think terrorists and drug cartels ever operated before block-chain technology, if not with dollars and through banks. It's precisely because the financial sector is poorly regulated, corrupt and a law unto itself that the bloch-chain arose. It was this free-for-all in the financial sector that lead to the '08 crash, which is comparable to The Great Depression.

If you don't believe me:

https://www.theguardian.com/world/2012/jul/21/drug-cartels-banks-hsbc-money-laundering
https://www.theguardian.com/world/2011/apr/03/us-bank-mexico-drug-gangs
http://www.nytimes.com/2013/01/03/opinion/how-bankers-help-drug-traffickers-and-terrorists.html
http://www.businessinsider.com/hezb...dering-miami-united-states-banks-2016-10?IR=T

 

[Rive]

The exchanges got hacked, not the block-chain itself.

Yeah, I know. But then, can you please answer my question there?

Can't help keep asking myself that if at the end the problem burns down to safe and trusted computers as usual, then what is it actually what we can get from the blockchain tech?

Because I can't. As it is now, it's just one new layer on the inherently false security.

 

[Laurie K]

The Australian Taxation Office has begun to bring crypto-currencies under regulation (for personal and business use) starting with bitcoin (as a generic crypto-currency) so the anonymity of blockchain type technologies will become a moot point in the future.

https://www.ato.gov.au/General/Gen/...rrencies-in-Australia---specifically-bitcoin/

Transacting with bitcoin
Transacting with bitcoin is akin to a barter arrangement, with similar tax consequences. Our view is that bitcoin is neither money nor a foreign currency, and the supply of bitcoin is not a financial supply for goods and services tax (GST) purposes. Bitcoin is, however, an asset for capital gains tax (CGT) purposes.

You need to keep the following records for bitcoin transactions:

• the date of the transactions
• the amount in Australian dollars (which can be taken from a reputable online exchange)
• what the transaction was for
• who the other party was (even if it’s just their bitcoin address).

...
Past transactions
On 17 December 2014, we finalised a number of rulings (a GST Public Ruling and several Income Tax Determinations) relating to the application of tax laws for bitcoin and similar crypto-currencies. All of these rulings have application to tax periods before their date of issue as they discuss the operation of laws that were already operative.

However, the Commissioner of Taxation will not generally apply compliance resources to tax periods that started before 1 October 2014 for goods and services tax, or 1 July 2014 for other tax issues. This is for taxpayers that can show they have made a genuine attempt to determine the tax treatment of bitcoin and have adopted a consistent position on this in those past tax periods.

 

[qspeechc]

Yeah, I know. But then, can you please answer my question there?

The block-chain can't be hacked, per se, there's currently too much computing power behind it (I'm no expert, I'm just typing based on my limited knowledge), so I don't understand your question. If you have control over your own wallet, there's no way it can be "hacked", the problem is when people leave their crypto with the exchange, which I for one can't understand for exactly that reason; if these people took a little more care their crypto they would never get hacked. What exactly are you asking?

 

[FactChecker]

Can't help keep asking myself that if at the end the problem burns down to safe and trusted computers as usual, then what is it actually what we can get from the blockchain tech?

With a blockchain that is distributed on a huge number of computers, a person trying to cheat would essentially have to simultaneously corrupt all the computers at once -- a very hard thing to do. Otherwise, they can detect the attack.

 

[russ_watters]

Go to your public library and search for past issues of Scientific American. Both currency and non-currency applications are mentioned. The general topic is secure communications; messages with guaranteed delivery, non-falsifiable, non-deniable, and anonymous (identity can be provided in the content, not the delivery). Blockchain is one approach.
sted source!
https://www.scientificamerican.com/article/blockchain-enhances-privacy-secur...
There's a much bigger world than bitcoin within blockchain ...
Jen Schwartz, Scientific American senior editor, discusses her piece on a deep dive into blockchain technology.
https://www.cnbc.com/video/2

For some Innovative uses of block chain technology. see
https://www.nasdaq.com/article/4-innovative-use-cases-for-blockchain-cm901636

I was thinking of the WWW analogy before the video said it, but for a different reason: the WWW truly exploded onto the scene in 1995, with immediate acceptance/adoption and wide-ranging utility. Its potential became real in months. Blockchain technology has now been in use for 9 years and still remains strictly one use, with no wider adoption. All of the potential uses remain completely hypothetical. So after 9 years, I think the quote in the OP must be considered trivially true: nobody wants it.

 

[nsaspook]

The block-chain can't be hacked, per se, there's currently too much computing power behind it (I'm no expert, I'm just typing based on my limited knowledge), so I don't understand your question. If you have control over your own wallet, there's no way it can be "hacked", the problem is when people leave their crypto with the exchange, which I for one can't understand for exactly that reason; if these people took a little more care their crypto they would never get hacked. What exactly are you asking?

The major risk for the current Blockchain implementation is a deep weakness in ECC. (Elliptical curve cryptography)
http://blog.bettercrypto.com/?p=1004
http://blog.bettercrypto.com/?p=1917

There is also the 51% of the network attack.
https://www.investopedia.com/terms/1/51-attack.asp

 

[BWV]

Bitcoin apparently would not be safe from a quantum computer, and I wonder how the technology would fare overall if and when quantum computers become operational

https://www.technologyreview.com/s/...ers-pose-imminent-threat-to-bitcoin-security/

 

[anorlunda]

Bitcoin apparently would not be safe from a quantum computer, and I wonder how the technology would fare overall if and when quantum computers become operational

That's a good point, but it is not limited to bitcoin. It could mean the erosion of trust and security in nearly all aspects of civilization. Science Friday did a recent segment about new technologies for making fake videos, good enough to fool almost anyone. I'm willing to hope that the military can keep our nuclear launch codes secure, but in the broader context we are moving in the direction that makes trusted communication an oxymoron.

 

[Rive]

in the broader context we are moving in the direction that makes trusted communication an oxymoron.

At the end we will be back to the good old combination of the leather dossier and a horde of guards...