When Saying We Are “About” to Live in a Blockchain World, Can You Please Give a Date?

by Tim Sloane 0

This article in PC Mag Titled “We’re About to Live in a Blockchain-Based World” has no qualms indicating that blockchain will impact our lives but fails to suggest any timelines. The entire article identifies solutions that presume bitcoin and other blockchain technologies will be rock steady from now until the end of time. I’m a tad more skeptical and would pause before committing assets that need to be instantiated for a hundred years into a distributed software solution that has just barely managed to remain operational for 8 years and continues to face significant challenges to continued operation.

The first example provided by Brian Forde, Director of Digital Currency at the MIT Media Lab, is relatively harmless, maintaining event tickets on the blockchain to eliminate fake event tickets and provide assurances of the tickets provenance. Solutions such as this should have minimal impact of the blockchain of choice stops working:

“Brian Forde, director of Digital Currency at the MIT Media Lab, wants you to imagine the typical ticket-buying experience. You purchase a concert or a sports ticket online, usually on Craigslist, StubHub, Ticketmaster, or from a friend. On the day of the event, you walk up to the gate with your printed ticket. Maybe you’re 95 percent sure the ticket will scan and you’ll see a green “Go” arrow. But there’s that other 5 percent that prompts butterflies in your stomach because you know there’s a chance the ticket might have been duplicated.

Now, if you pulled up an e-ticket on your phone (bought with digital currency transferred directly from your wallet to the seller’s), the ownership history of that ticket would sit right there in the blockchain ledger.Blockchain is most commonly known as the distributed data technology underlying bitcoin. But in a keynote entitled “Business Decentralized” at Singularity University’s Exponential Finance conference this week, Forde stressed that blockchain is a way to take any digital asset—from a ticket or a song to all manner of money and data—and transfer it from one party to another without a centralized intermediary.

Forde uses the ticket analogy to help simplify a concept that can sometimes get bogged down in financial and technological complexity. For businesses considering blockchain, Forde said at a fundamental level it comes down to public or private.”

Forde suggests that blockchain can reinstill trust that has been lost in banking, which is an odd statement when several recent surveys, including Mercator’s own CMSS survey of 3,000 US adults, indicates extremely high trust in the security banks provide. I will be amazed if in five years time more consumers trust any blockchain implementation more than they do the security provided by their banks:

‘ “I think blockchain is an opportunity to reinstill the trust that’s been lost in banking and finance,” Forde said. “Bitcoin was built for people, not for companies.”

On a basic level, public blockchains are cryptocurrencies such as bitcoin or Etherthat enable peer-to-peer transactions and, therefore, a revolution in seamless global payments. Private blockchains (such as those being built by distributed ledger consortium R3) use blockchain-based application development platforms like Ethereum (which also includes the Ether cryptocurrency) hosted on virtual private networks (VPNs) or private clouds. R3 is building a set of technologies for banks and companies for private use in things such as smart contracts.’

The remainder of the article primarily reviews businesses operating on bitcoin or new startups that intend to deploy new business models based on a future blockchain implementation. It is amazing that none of these participants question the robustness of the Proof of Work or Proof of Stake or other algorithm designed to instill confidence in the accuracy of the blockchain. Bitcoins Proof of Work establishes an ecosystem that keeps the ledger trusted, but that ecosystem will go through substantial shakeups well into the future, one such shakeup occurs in roughly one month when the value of rewards miners earn are cut in half. Ethereum, the other major blockchain has updated its algorithm four times and it is not clear that all the bugs have yet been found.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

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