As befits any new interesting technology, blockchain is in search of problems to solve. Those who understand blockchain and those who might benefit from using it live in different worlds. Bridging the knowledge gap between the two worlds depends on communicating clear and credible attributes of blockchain, as these attributes are the trigger for understanding where they could deliver value.
The stated attributes of blockchain are: secure, immutable, and transparent.
Blockchain is secure because it is still in low use and platforms have not consolidated around a standard. Standardization and wide adoption will increase the rewards and ease of hacking. Only after wide adoption will we able to confirm whether blockchain is more secure than current best practices.
Most important, the intersection of technology with humans is an unavoidable point of vulnerability, as was demonstrated by the 2011 security breach of iconic RSA. Olga Mack from Quantstamp, a company auditing smart contracts, agrees. She was quoted in the Zage report saying:
“While blockchains are secure, smart contracts are not. Smart contract creators need scalable, cost-effective ways to enhance the quality of their code in order for this technology to achieve mainstream adoption.”
The “secure” argument is not compelling because it is not yet made credible by experience.
“Immutable” means that all changes and corrections to mistakes are recorded forever and visible to all on the distributed ledger. Finding out both mistakes and corrections will require user friendly search software. In this case, “user” does not mean a highly trained programmer, but a data entry clerk.
There are already use cases where immutability is of value, all with a current solution. In some cases, the solution works (real estate ownership records, stock ownership), while other cases are still in need of improvement (national and state IDs). In the latter, the weak point is in human interactions (verification), not in achieving immutability.
“Transparent” currently means specialists/computer programmers can see all recorded entries. This can be said about a lot of code, data, and recorded documents, not just blockchain.
Blockchain providers might want to rethink how they articulate unique attributes of blockchain technology. “But this other method also does this” indicates room for improvement.
Adoption is slow because attributes are in search of compelling and credible value propositions. Let’s examine a few:
Peer to Peer exchange without intermediaries: peer to peer exchanges already exist (E-Bay, e-commerce sites, Western Union, and PayPal…). “No intermediary” is a dream: the exchange occurs and is documented in the physical world. Those providing the tools are intermediaries: blockchain exchange, cloud storage service, ID management app, customer service…They will be paid for the value they provide, be subject to government jurisdiction, and be a gathering point for fraud.
Proof of ownership: What happens when you need to prove that you really own something you bought several years ago? The same thing you experience today. Will you remember when and where you bought it, and more importantly, where you stored your proof of ownership? Your unique blockchain ID for the transaction is even harder to remember. What happens when your descendants need to access it because your life has come to an end? The blockchain record of real estate ownership by the Hungarian government will be a most interesting test.
Smart contracts would be better called “Automatically Executed Contracts”. Most of the examples in progress involve digital delivery. An example is AXA offering flight delay insurance. What is not clear is what blockchain contributes that e-commerce did not provide. Of course, that could be AXA’s proving ground for a broader implementation. That would be smart.
A truly smart contract would appear to think and make complex decisions linking options to situations. Examples where this would really provide value and efficiency include payment of auto insurance claims, healthcare reimbursement, and healthcare institution procurement. In the last two cases, in particular, the cost of complexity is massive and many of the claimed attributes of blockchain could provide value. In the Zage report, Steven Parker, CEO of Crypterium, cites research by Deloitte that shows that 40 percent of health executives see blockchain as one of the top 5 priorities. But that would require not just decision algorithms, but a shared platform for all those who provide inputs, including the consumer. This could happen when blockchain matures and settles on widely adopted standards.
At the core, blockchain records data. Wide adoption will require the data manipulation tools that we currently enjoy: indexing, search engine, filtering, exporting to established tools for data analysis and visualization, permissions…. Data validation before creating a block would be particularly valuable, given the immutability of blockchain records. It is telling that among the hundreds of interviewees of the Zage report, only a few are working on ancillary functionality, all but one related to bitcoin. That exception is the smart contract auditing firm mentioned above.
Many experiments for applications are in progress. That is normal and good for a young technology. When we see several instances of adoption for the same application in the same industry, we will know that blockchain has found a purpose, likely one of more to come.
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Jocelyne O. McGeever has transferred technology into new applications and new markets for several decades, mostly in manufacturing and healthcare, both in startups and Fortune 500 firms.