Here’s Why The Blockchain Might Change the Future (And Why It May Not Live Up To the Hype)
It’s 2018, and here are some things that people are obsessed with: fizzy water, sriracha, purple everything, and… blockchain.
Yes, that blockchain. The thing that everyone — from that guy you know who is suddenly crypto rich, to John Oliver to, well, us — has tried to explain to you. It is, as you may know, the platform that powers every cryptocurrency. And now it’s started to expand beyond it into applications both useful and bizarre.
One more super brief explanation: Think of a blockchain as an expanding list of records (ledger). Each record documents a transaction between two parties, (for instance “Mary gives Paul three bucks for five apples”) and is public to everybody on the blockchain. The data of this ledger is stored across everybody’s computers — no central authority holds all the records. “Mining” a cryptocurrency means doing complex mathematical calculations to verify each transaction on the ledger; by doing so, the miner gets a little kickback in the form of a little bit of the cryptocurrency in question.
If blockchain evangelists are to be believed, the technology truly has the power to change the world. But before you start praying to the Gods of blockchain (yes, blockchain has got its own church), there’s plenty of things the technology just doesn’t get right, at least not yet. In fact, it might be a really bad idea to have society go whole-hog on blockchain.
But let’s back up for a second. Blockchain has plenty of advantages over the conventional ways we store data:
- Transparency. All transactions are visible to everybody, eliminating all middle men, like banking institutions or other central authorities; suppliers are directly connected to the customers. This not only makes using blockchain more straightforward to use, it makes every actor using a blockchain accountable for their actions — no shady backdoor deals, or deceiving the public.
- Near-anonymity. Anybody can create their own address on a blockchain-based network, like a bitcoin wallet. And while it’s not totally anonymous, it’s at least “pseudonymous” — you are represented by an address or username that, if you choose, has no relationship to your real-world identity.
- Security. The entire blockchain is made up of nodes that all act as notaries for every new transaction. That could make banking more secure — it’s in everybody’s interest to have everybody paying attention to all transactions, since just one unverified transaction could undermine the legitimacy of the entire blockchain.
- Versatility. Uses of blockchain are not limited to cryptocurrencies. A blockchain network could be used in real estate (real and virtual), package delivery, smartphones, elections, and much more that we’ve already thought of, plus probably a lot more that we haven’t.
- Playing with virtual cats. It allows you to collect pointless pictures of cartoon catsfor thousands of dollars. Win.
But before you get your hopes up too high — or, worse, start investing your hard-earned cash in shady ICOs (initial coin offerings) — you should know that blockchain does have some risks.
- Privacy Data privacy laws are changing to catch up with the technology sharing user data. Recently, the European Union implemented the General Data Protection Regulations (GDPR). As the Wall Street Journal points out, blockchain networks that span different legislative bodies (like governments of different nations by simply being online and accessible worldwide) might make those laws impossible to enforce. And that could put user data at risk for abuse if it ends up somewhere with laws that make it more vulnerable. For instance, U.S.-based blockchain networks that hold data of EU citizens may not comply with GDPR. Conventional (but less secure) data storage methods, like storing encrypted user data on private server farms, can be scaled, moved, and modified to suit different legislative approaches to privacy in different countries. That’s not simple for blockchain networks to accomplish — ironically, that’s what makes them so secure in the first place. A scaleable approach to blockchain could ensure that EU citizens get their privacy protections, regardless of where and how their data is stored, but that kind of technology is still in its early stages.
- Failure to bridge the “last mile.” It can be surprisingly difficult to link the real, physical world with abstract tokens, records, or addresses; to tie an abstract digital representation to an object or person, you have to find a reliable way to do so in the physical word, such as QR codes or RFID tags, but there has to be an honor systems to trust that these tags are where they should belong. Relying on human honesty to record transactions exposes blockchain technology to a ton of vulnerabilities. Governments around the world have been struggling with data breaches thanks to poor identity verification, and blockchain hasn’t addressed this root problem yet, either. But there’s hope. As blockchain technology improves, “new types of intermediaries will emerge that turn the last-mile problem, of keeping digital records in sync with their offline counterparts, into actual business opportunities,” according to a recent piece published in Harvard Business Review.
- The environment. Cryptocurrency mining has turned from a harmless way to make an extra buck into something much uglier: an energy behemoth that costs the world as much power as the nation of Switzerland uses each year. Having an army of computers solving extremely complex problems taxes the electrical grid and produces a ton of heat. In many parts of the world, energy production still relies on harmful methods, like coal or the burning of fossil fuels. So using more power to mine cryptocurrency means more harmful byproducts end up in the atmosphere.
- “Crypto-jacking” Hackers have found all sorts of ways to take advantage of the crypto-mining process, including taking over your smartphone’s processing power through your web browser to mine digital currencies. Even regular internet-of-things devices like smart kitchen appliances are vulnerable to this growing trend. And once malware is installed on other people’s devices, hackers could have unprecedented control, opening up a huge can of cybersecurity-worms.
- Complexity. Cryptocurrency may be in the news regularly these days, but the blockchain that supports it is still complicated. Explaining it to the uninitiated is going to be a slow and arduous process.
This isn’t the end of the road for the blockchain, not by a long shot. We are still in the very early stages of trying to figure out how to best implement the technology. And there are already many creative ways companies have started to address some of these issues, from tying medical records on the blockchain to biometric markers to solve the problem of verifying user identities, or creating more sustainable forms of cryptocurrency mining.
Those who treat blockchain as a panacea for all of society’s ills might not be considering the negative aspects of the technology that haven’t yet been resolved. We have to talk about blockchain’s disadvantages, before we all start devoting our lives to the Gods of blockchain.