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Blockchain is an awesome technology, but what, exactly, is it good for?

  • FILE - In this Dec. 21, 2017 file photo, a woman walks past the Bitcoin ATM in Hong Kong. The growth of bitcoin is fueling speculation about the environmental impact of the energy needed to power the cryptocurrency, stemming from the process of "mining," which is central to its existence. (AP Photo/Kin Cheung, File) Kin Cheung

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Monitor staff
Monday, January 01, 2018

The holidays are over and the weather has been weird, which makes people grumpy. So let’s be grumpy, too.

Specifically, let’s be grumpy about one of most intriguing technologies of recent years, about which I have previously been very enthusiastic: blockchain technology, the kind behind digital currency like bitcoin.

“When it came out I was of the mind that, ‘Hey, that’s kind of new and cool,’ said Rob Fleischman, a principal software architect at Akamai Technologies in Manchester. “But after talking with more and more tech people, I’m now almost convinced that blockchain is stupid and useless for almost everything.”

Blockchain is a fascinating software technology created by a still-unidentified hacker a decade ago, which is best known because of bitcoin.

But blockchain can do more than currency. It can be thought of as an old-fashioned ledger of accounts that has been digitized and distributed all over the internet in very clever ways, using peer-to-peer networks. This distribution makes it impossible to finagle the books because they can be compared against a zillion un-finagled copies.

That does away with the need to have a central trusted authority like a bank to guarantee that your books are good, or a government agency to guarantee that your land-registration papers are accurate, or a lawyer to guarantee that your contract hasn’t been altered.

To put it in tech-speak, blockchain is a distributed trustless verification system, something that didn’t previously exist. Very cool, indeed.

In recent years, blockchain has been touted as a way to improve everything from governance in poor nations to the global financial system to getting a dog license at city hall. I’ve written starry-eyed columns about it and hosted a Science Cafe on the topic, and I’m not alone in my enthusiasm.

Press releases citing blockchain flood email inboxes, venture capitalists are flocking to the technology, and in a truly delightful occurrence, a small company called Long Island Iced Tea changed its name to Long Blockchain Corp. and saw its stock price go up 200 percent almost immediately.

So what’s wrong? Well, roughly 10 years after blockchain was created by an unidentified hacker or hackers, many people like Fleischman are beginning to wonder what exactly it can do in the real world.

An article titled “Ten years in, nobody has come up with a use for blockchain” hosted on the tech site HackerNoon, has drawn considerable attention in geeky circles. It delineates a number of fields where advocates say blockchain can be useful or revolutionary such as payments, transactions without government oversight, smart contracts, distributed storage and authenticity verification, and it punches holes in each of them.

Its conclusion is the same as Fleischman’s: Blockchain’s strengths aren’t actually useful.

“This is common in my field: Somebody has come up with a cool solution, but we don’t have a problem that it solves,” said Fleischman, a frequent commenter about tech stuff on New Hampshire Public Radio.

The state of Vermont decided roughly the same thing in 2016 when it studied whether blockchain could be useful in local or state government.

“Basically, the benefits of implementing a blockchain for Vermont public records doesn’t cover the cost,” Oliver Goodenough, director of the Center for Legal Innovation at the Vermont Law School and part of the study group, told me at the time.

To take one commonly cited example: paying for things. Credit card systems like Visa already do what blockchain does but do it much, much faster – blockchain has an inherent limit on the number of transactions per second that Fleischman argued will always lag behind demand.

Of course, Visa requires a central authority and blockchain doesn’t, which is cool. But in reality, Fleischman said, this is not useful and may even be counterproductive.

“You want Visa to be able to say this transaction happened ... so if there’s a problem you can come back to Visa and say, ‘They messed with me,’ and Visa will say, ‘I will undo it; I know who you are,’ ” he argued. “People don’t need a distributed anonymous ledger.”

And this may be the key to understand why blockchain has underwhelmed: It was created as a neat thing rather than as a useful thing.

“In conversations with bitcoin entrepreneurs and investors and consultants, there was often a lack of knowledge or even interest in how the jobs were being done today or what the value to the end user was,” argues Kai Stinchcombe, a tech entrepreneur, in his blockchain-bashing Hackernoon article.

That’s how Fleischman sees it, too, drawing parallels to his experience as a team leader of programmers.

“They’ll say, ‘Check out this new algorithm I came up with, it’s great!’ I say, ‘What problem are you solving?’ and they go, ‘I dunno, maybe they’ll come up with something,’ ” Fleischman said.

There’s a potential parallel: Bitcoin.

Bitcoin was touted as a new sort of currency for the connected world, a replacement for stodgy old dollars and euros and yen that are controlled by Big Brother and (shudder) people in suits. Yet a decade in, it is little more than a geeky toy, a bizarre investment product, and a way to pay for questionable and illegal stuff online.

In normal life, it seems, bitcoin’s technical benefits don’t come close to compensating for its complications and costs.

Just like blockchain.

Despite his doubts, Fleischman admitted that nobody is writing blockchain off. He said Akamai, which delivers online content and cloud services, is always studying it for possible applications in security or other areas, while many major financial institutions are pondering whether they can use the technology, if for no other reason than they’re afraid some startup will figure it out first.

But those are all potential uses, not actual ones, existing somewhere in the vague future.

“Is someone going to find some problem that requires this? Maybe. Is someone going to rewrite it, come up with pseudo-blockchain that is useful? Maybe,” Fleischman said. “Am I waiting for it? No.”

(David Brooks can be reached at 369-3313 or dbrooks@cmonitor.com or on Twitter @GraniteGeek.)