Why people get blockchains so wrong

The “blockchain magic” piece I wrote in 2017 is still topical. Every single day the public is exposed to delusional articles about how “blockchains” and “distributed ledgers” are going to revolutionize some new business areas. The main reason why there is so much fake news about blockchains is that “blockchain technology” does not actually exist. People make empty statements about an empty concept. Before nailing that down, let’s review other reasons why the blockchain delusion developed.

1. Hype as a marketing strategy

In recent years, the news media has switched from rigorous fact-based reporting to emotion-driven click-bait infotainment. Corporate marketing has followed the exact same trend. Selling the hard-cold truth is more challenging than selling the next revolution. Businesses now optimize for attention and clicks, outrageously exaggerating the benefits of their services and products. Facts don’t matter anymore. Hype has become an integral part of the marketing strategy. In this regard, the Gartner hype cycle is a self-fulfilling prophecy: a technology is hyped by the business community who has an interest in selling it, and when the target audience realizes that the promises cannot be delivered as sold, the business community calls that “disillusionment” and “plateau of productivity” and moves on to the next hype campaign. From my point of view, the Gartner hype cycle is a mischievous way to post-rationalize silly hype campaigns. We don’t “have to” go through the hype peak, we could simply explain what the technology can do and cannot do from the beginning.

2. Everyone has an agenda

A huge majority of the pieces about blockchains are written by people who have something to sell (technology providers, consultants, speakers, etc.). Don’t expect them to tell the truth about the limitations of blockchains. Always check who is the author and what are his/her conflicts of interests. The following saying from Upton Sinclair applies similarly to anti-Bitcoin mainstream economists and to enterprise blockchain cheerleaders:

“It is difficult to get a man to understand something, when his salary depends on his not understanding it”

In particular, technology providers have an interest in selling “blockchain” because it means selling several times the network bandwidth, several times the computing power and several times the storage necessary to deliver the same service that could be delivered with a regular system!

3. Lack of IT education

Most people lack IT education in two ways:

1/ People don’t know how standard development methodologies work. They jump to a blockchain solution when they should start with the business requirements. If they did so, they would realize that a blockchain is not necessary to solve their business problem.

For instance, the “provenance” problem (a/ the secure storage of digital proofs and b/ the validity of the proofs themselves) is different from the problem solved by Bitcoin  (preventing the double-spending of digital peer to peer cash without relying on a central authority). Consequently, it is a logical error to jump to a blockchain as the solution to the provenance issue. As a matter of fact, digital proofs can be stored securely using a regular centralized system, and a blockchain cannot do anything regarding the validity of the proofs themselves (A blockchain does not know if your meat is beef or horse meat. You have to trust cheating and lying humans to certify that).

2/ People don’t know the history of technology. They think that some pieces of technology were invented with Bitcoin in 2009 when in fact they have existed for decades:

>Immutable databases can be implemented centrally
>Transparency is easy to achieve: simply expose the data on the internet
>Resiliency is achieved through backups, disaster recovery, etc.
>Digital signatures & verifiable timestamps were used long before Bitcoin (Merkle’s patent from 1979)

This is a summary of when the technological components utilized by Bitcoin were developed:

Bitcoin was built with decades-old pieces of technology

By not knowing the history of technology, people think that blockchains are a breakthrough for the wrong reasons. They don’t realize that 95% of the use cases advertised in the media could be done with technology components that have existed for decades.

4. Logical reasoning errors

People often make the following logical reasoning mistakes:

1/ People mix up the properties of a system with its requirements. Practical immutability is not a magical “property” of blockchains. It was a “requirement” for the Bitcoin system. The level of immutability totally depends on the design of the system: the more permissioned/private a blockchain is, and the less immutable it is. And as we have seen earlier, practical immutability can be achieved with regular systems.

2/ People make terrible analogies. No, Internet cannot be compared with blockchains. Internet was indeed a new general-purpose technology (computer systems networking); whereas decade-old pieces of technology were purposely brought together to build the Bitcoin system, for a very specific and unique need. It’s like comparing the steam engine with a model of car. Quantum computing is a new technology. Cloud computing was not a new technology. It’s not complicated.

3/ People reason as if there was no trade off in this world, as if it was possible to have a cheap risk-free consistent scalable general purpose technology to decentralize all the things. In fantasy land it may be possible, but unfortunately for the dreamers, there are constraints in the real world. Until it is proven that the blockchain trilemma can be broken, people will have to make design choices between cost, security, speed, consistency and scalability.

The Bitcoin blockchain is slow and costly ON PURPOSE. It’s a feature and not a bug.

4/ It is obvious that distributed systems are more expensive and less efficient than centralized systems because it is always cheaper to broadcast the data once, verify the data once and store the data once rather than hundreds of time. In any other area, people know that centralization brings economies of scale. But when dealing with blockchains, “evangelists” tend to reverse this basic logic. It’s mind boggling.

5. Confusing terminology

You can’t reason about something that you can’t define. The terminology does not help in understanding blockchains because no one agrees on the definition of “blockchain”. Also “smart contracts” are not smart and not contracts. People don’t understand either what “trust” and “decentralization” mean, because those are complex human constructs. The terms are so confusing that many think that anything using asymmetric cryptography or using a replicated database is a blockchain, and any piece of code executing some business logic is a smart contract. I won’t expand too much on this, because Nic Carter explains it brilliantly in his piece “Blockchain Is a Semantic Wasteland“.

And finally…

6. There is no such thing as “blockchain technology”

The biggest misunderstanding is that “Blockchain” does not exist as a technology. Those pieces of technology do exist: cryptographic algorithms (SHA, MD5, AES, etc.), network protocols, data structures & query languages, etc.

When Uber launched, nobody said:

“Uber is crap, but Geodemand technologyTM  will revolutionize the world”

[Note: “Geodemand technology” allows you to offer and book services in a peer to peer fashion, to instantly know where suppliers & consumers of those services are located, with a smart pricing engine and an embedded reputation score. Let me sell you my book “The Geodemand revolution”]

There was indeed some hype about “Uberization” and “Uber for X”. People tried to copy Uber concept (linking unused supply with demand) and Uber design by re-assembling some of its technical components (mobile application, geo-localization, etc.) for other purposes.

What’s interesting is that Uber was copied by Lyft and others but its principles were never replicated for another purpose in another industry. Can you name another on-demand P2P geolocalization-based application linking unused supply with demand? There is none. Also, everybody understands that a “permissioned/private Uber” used within a company or a consortium of companies would not be very powerful. What we do see however is a very broad generalization of mobile platforms.

So, the real thing that’s happening right now is “Bitcoinization” or “Bitcoin for X”

People have realized that Bitcoin concept was innovative (secure P2P transactions without a single validator) and have tried to copy its design by re-assembling some of its technical components for other purposes. The same process will happen as for Uber: Bitcoin will be copied (done already), permissioned/private “Bitcoin for X” won’t be very useful, and we will see a broad generalization of the core technology of Bitcoin: asymmetric cryptography applied to business processes.

“It’s not about blockchain, it’s about cryptography, stupid!”

Think about Bitcoin as a car. You can always change the color of the car or tweak its design, but if you remove the engine or the wheels, it becomes useless even though it is 95% similar to the original functional car. This is exactly what is happening with enterprise blockchainTM: some firms removed the Bitcoin engine, some firms removed Bitcoin wheels, and they sell their blockchain as a car!

Enterprise blockchain: Bitcoin without some of its core components

The bottom line is that 95% of the blockchain news is fake, and now you know why. If you want to understand what blockchains can actually do or cannot do, check my website starting with this blog post.

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