Don’t Judge Blockchain Until You’ve Tried It
What follows is a sample of viewpoints that research firms have recently shared in their latest papers on Blockchain, and some of their conclusions are pretty severe. Excerpts:
“This new technology’s bubble will burst in the next two years and will have lost much of its gloss by 2025.”
“Blockchain protocol certainly has some value, but it’s not magic.”
“In 19 out of 20 cases where blockchain’s use is touted, it can easily be replaced with a database or other kinds of technology.”
“The distributed ledger technology is complex to implement, extremely resource intensive to operate, and will not replace modern database technologies on a wholesale basis.”
“Blockchain will always be slower.”
“It would be insane to make 50,000 copies of a song on 50,000 machines, instead of using a secure database.”
“Smart contracts are not that smart.”
Fact: Blockchain Is Not for Everybody
Blockchain is not for everybody. That’s why so many tech dinosaurs like IBM via its Hyperledger product provide developers with the possibility to build decentralized applications (DApps) and push data to a shared Blockchain network. This is also why the same IBM has joined forces with Maersk to create a Blockchain network that will facilitate the mega shipper’s logistical operations. The two companies have generated a combined revenue of $110 billion last year. AMEX is investing millions of dollars in a Blockchain project, and The American Express Company that’s actually $37 billion in revenue in 2017. No one builds and runs a Blockchain network from his or her air-conditioned dorm room at Arizona State University, simply because it’s a party school and there’s always a beer pong tournament going on at the main cafeteria. More seriously, anyone with the proper coding skills can build a DApp, however the developer has no other choice but to run it on top of a major Blockchain platform, simply because the IBM, Neo, Ethereum and Lysk of this world have the financial and technological resources to engineer the computer power to facilitate the process.
When hearing about the necessity to deploy a significant level of computer power, a logical question that comes to mind is to wonder the speed to which the system operates. This is a legitimate concern. Allow me to share with you two numbers to illustrate the issue: The Ethereum Blockchain can process approximately 15 transactions per second (half that or less for smart contract transactions) compared to 45,000 processed by Visa and 16,500 for Facebook. Those are ratios respectively of 1:3,000 and 1:1,100. So, if 1,000 DApps on Ethereum need to perform 1 transaction per second, then what? The next 15 transactions would occur one second after having been submitted, the following 15 two seconds after their submission, and so on. You can easily imagine the then created traffic jam that would easily put to shame the daily congestion during commute hours on the 405 in Los Angeles. From this perspective, the Blockchain has got to be slower. However, this issue solely pertains to the public version of Ethereum. All businesses that are investing in Blockchain technology to streamline B2B exchanges do so by building DApps that run on private Blockchains. On a private Blockchain network, the volume of nodes is limited to the number of stakeholders, consequently the volume of transactions to execute per second is fewer and farther between. On a private Blockchain network, at least 45 transactions can be processed every second. And again, significant financial resources are required to run a private Blockchain.
Blockchain Is Freedom?
One of the most compelling benefits of Blockchain technology is that it’s a peer-to-peer network, and peer-to-peers signifies a direct relationship between the transacting parties, which infers that intermediaries are nowhere to be found in the equation. Transactions on a Blockchain network can indeed be executed without the need for a single, central and coordinating authority. Thanks to asset-backed tokenization, you and I will be able to transact with each other without the need of an attorney, real-estate broker, agent, you name it! Have you ever dreamt of buying a house, without being forced to pay a three percent commission to a realtor? Blockchain brings you this sense of freedom. Now think about the financial advantages such a system provides to artists, for example. No more agent who takes a 10 percent cut ad vitam aeternam. Moreover, is it truly “insane to make 50,000 copies of a song on 50,000 machines, instead of using a secure database?” As an artist, I certainly don’t want my creations to be stored inside a secure (centralized) database, because there isn’t such a thing as a secure database. After the Equifax data breach, do you trust having this company continue to store your social security number, your name and address on their “secure” database? It’s very simple: There is always someone out there, who is at least one step ahead of the game and ready to compromise any centralized system in existence.
The feature that enforces a transaction without the intervention of a third-party is a smart contract. And the word around the skeptics’ water cooler is that “they’re not that smart.” Why don’t we check it out? The way smart contracts work may actually resemble what your ERP-embedded workflow does: A data triggers an alert that sends a message requesting that an action be taken. A major difference between a Blockchain network and an ERP system though is that all stakeholders who are part of a Blockchain network have access to the exact same information, which creates transparency and trust, whereas only the owner of the ERP system can access what’s happening inside his or her workflow. Furthermore, smart contracts are “smart” for one reason: They are triggered and executed automatically as soon as a data hits the Blockchain and is recognized by the smart contract’s code as a trigger for execution. Each step that ultimately leads to the execution of a financial transaction is validated through the execution of its own smart contract. And this applies to any industry. Some research firms affirm that smart contracts provide no way of verifying the quality of a shipped merchandise, for example. This is where they’re mistaken. Major Logistics and Supply Chain organizations are leveraging IIoT sensors, GPS, barcode scanners and other mobile applications to push to private Blockchain networks information pertaining to the merchandise that’s being shipped or in transit or that’s been delivered. Approving or disapproving the quality of the goods will execute a smart contract, which in turn will require that the appropriate action be taken.
Blockchain: Unfairly Judged?
New technologies always create fear, and it’s in human nature to feel uncomfortable with what’s unknown, uncontrollable. Inside society’s mind, Blockchain has a bad rap because it’s solely viewed from its public network perspective, where the Bitcoin frenzy takes place. Private Blockchain networks function much differently, and to many organizations they represent a unique opportunity to conduct business in a highly secure, transparent and streamlined fashion.
Research documents are about 45 pages long and will cost you about $10,000. I’m always suspicious of literature that is so categorical and unilateral in its rhetoric. In this case, the reason is that many lobbies are spending a lot of money to discredit the Blockchain technology, and they’re backed by professions at risk of disappearing, if Blockchain were to be widely accepted. You know, those intermediaries…