Blockchain: The Killer App

Blockchain provides a digital but decentralised method for recording transactions like purchases, sales, and transfers of ownership. It also provides the technological basis for Bitcoin and other cryptocurrencies

Apart from the fact that blockchains are (almost) impossible to tamper with or forge, one key selling point of blockchain is that it is decentralised. In other words, it isn’t necessary for a central authority to validate the blockchain, it can be done by a network of peers using the same software. This is part of the appeal of Bitcoin: bitcoin transactions do not need to be recorded by a central authority, like a bank; they can be recorded by updating a network of peers instead, which has big benefits for anonymity and the avoidance of the usual overheads that banks impose on their customers like fees, time delays, and security checks.

The closest that blockchain has come to a “killer app” is cryptocurrency. Other than Bitcoin and other cryptocurrencies, blockchain has been used for:

When researching the potential applications of blockchain, it is possible to find many articles in print and online that describe the exciting possibilities that blockchain could be used for. However, most of them remain just that: possibilities. Although the technology has been put to many uses, it has not revolutionised industries in the way some people speculated it would.There are a few likely reasons for this.

Firstly, the decentralised nature of blockchains may not be seen as a benefit by some organisations. In essence, the information a blockchain holds could just as easily be stored in a spreadsheet or conventional database. It’s true that blockchain is very difficult to corrupt or tamper with, but the same could be said of the highly protected databases used by large companies, which also have other advantages: they allow the owner to maintain control, they allow the owner to make arbitrary changes where necessary, and they can be audited and used as sources of management information in ways that blockchain records cannot. It’s interesting to note that the most successful cryptocurrencies, like Bitcoin, were never truly decentralised, and relied on a selection of large exchanges, like banks, to be effective-negating one of the supposed benefits of the blockchain.

Secondly, the underlying technology of blockchain is not quite as tamper-proof as some people claim. Blockchains are shared and updated on networks, and a hostile takeover of a network can lead to blockchain transactions being re-ordered and even undone, undermining their reputation as tamper-proof. Alternatively, while the blockchain itself may be secured with unbreakable encryption, it may be possible to hack the endpoints for blockchain transactions-the devices, like mobile phones or computers, which are used to interact with the blockchain-and steal the keys used to decrypt and access them. Again, the decentralised nature of blockchain is a disadvantage in this scenario. For example, if an online bank account is hacked, the bank will provide support in tracing the hack, protecting the account holder’s money, and very likely providing cover against loss or theft of money. A decentralised blockchain network may offer no such assurances to users, who are directly exposed to theft and hacking without the support of a big organisation behind them.

Thirdly, there is the simple fact that using blockchain is complicated and requires an ever-increasing amount of computing power to maintain, as the blockchains grow and become more difficult to decrypt. The complexity of blockchain may be overkill for the most common requirements of transactions in modern society-a printed paper receipt is a simple, low-effort way of recording that a purchase has been made in a shop, and probably offers about as much security and reliability as most shoppers need. Most of the requirements to record transactions in modern society are currently well-served by conventional databases. There is little incentive for either private sector companies, or Government organisations, to relinquish control of the data they hold and entrust their systems to a peer-to-peer network.

Decades after its invention, laser technology has permeated a myriad aspects of modern civilisation. Lasers are used to read and write data, scan documents at close range, track the movements of computer peripherals, direct missiles, engrave metal and shape industrial products, or correct people’s eyesight. Blockchain has only been around since 2008, and it maybe twenty or thirty years before its full potential is realised. On the other hand, it is quite possible that the use of blockchain technology has already peaked with Bitcoin, and some elements of NFTs, and it will forever remain as a complicated solution to a problem that doesn’t really exist. Only time will tell.