In French there is a wonderful expression, ‘l’esprit de l’escalier.’ Imagine, you just left a society dinner where a subject dear to your heart was discussed at length. You felt you had something very important to say but could not quite formulate the bon mot. As you go down the stairs, your repartee comes to you - but too late! The opportunity to shine has gone. Happily, this is not a problem for the editorialist who is in the enviable position of meeting you all on a regular basis. So, at the risk of boring you, this is what I wish I has thought of last time.
It was not exactly the last time, but it was last year in issue N° 238 where I was skeptical about blockchain. But not perhaps skeptical enough. Some of you may see me as rather outspoken. Actually, I often regret not having put stuff more forcefully. I rely too much on understatement that I think is lost, especially on non-English speaking readers. So just to make things perfectly clear, blockchain is bullshit*!
Let’s unpick a couple of proposed use cases for blockchain. First, blockchain has been proposed to stop forgery in the high-end art world. The idea is that an auction house or gallery would record each sale in a blockchain ledger that was sharable worldwide and available to all subsequent buyers and sellers to check the art work’s lineage and provenance across the years. So far so good (although the notion that the system will operate worldwide for all time may stretch the imagination). I allow that the system as described will faithfully record all transactions.
The problem arises when you try to equate a ‘transaction’ with a physical object – the work of art in question. What happens if one dishonest owner decides to sell a forgery at some future date and keep the original work on the wall of his dacha? All is fine as far as the blockchain goes. All subsequent buyers get a forgery that checks out according to the blockchain. The cheater gets to keep the original and his money. The blockchain may stop him selling it again in the immediate term, although it could go on the black market for a substantial amount, especially once folks have read and digested this editorial. In a few hundred years, with perhaps several re-forgeries ‘verified by blockchain’ and sold-on, nobody will have a clue where the original piece is or who have been cheating along the way. The work may even later be ‘rediscovered’ by an expert, sans provenance and might reacquire great value.
I can hear you object that the digital transaction could be tied to the physical work of art by some sort of RFID chip or other smart device embedded in the work of art. But this is just going back to ‘technology’ which is much like the artist signing his oeuvre. The debate as to whether a signature or RFID chip can be falsified is orthogonal to the blockchain issue. It is no longer the blockchain that provides the mechanism of trust.
Another example, blockchain in green energy trading. The idea is that ‘green-certified’ electricity can be bought and sold on an exchange with blockchain ‘guaranteeing’ greenness. This seems even more far-fetched. At least an art work is unique. But electricity? Why can’t an unscrupulous owner of say a coal mine and a wind farm pass off electricity from the former in a blockchain-certified transaction? This is a question I put to Evan Caron, the founding partner and MD of a blockchain-based green energy trading system, Swytch. Caron offered the following, ‘The verification layer and asset system registration will verify the energy quantity and validate it against the type of technology used. Machine learning and artificial intelligence are used to determine if the energy source or source data is corrupted or had levels of irregularities.’ In other words, trust again comes from stuff that is external to the blockchain.
Blockchain has also been proposed for the exchange of contracts. In this issue we report on one such initiative from SAP and IBM to develop a blockchain-based joint venture accounting solution. One approach to this is the Ethereum Smart Contract,which has a mechanism for registering a contract alongside a blockchain. Maybe this is a less bullshit use case than some, I'm not sure. What I do know from my days as a consultant in an earlier digital transformation is that legal was the last department in the company to join the corporate network. I suspect that they will be similarly reluctant to turn their contracts over to some ‘open yet secure’ environment. Already, the Smart Contract world has seen some of its technology retired for security issues. The Smart Contract has been touted as having the potential to ‘cut lawyers out of the process altogether.’ That, as they say, is not going to happen.
Blockchain is a means of assuring the trustworthy exchange of a ‘token,’ bits and bytes if you like. The problem is the relationship between this token and anything else in the real world. This is also true for bitcoin whose relationship with real money is tenuous. You can’t use a bitcoin to buy stuff in a shop. I also understand that it can be much easier to exchange real money for bitcoins than the other way around as exchanges may have more or less liquidity. Again, the connection between the digital token and real cash is not guaranteed by the technology but by the local exchange.
So why all the fuss about blockchain? I think that it is the promise of a connection between the digital and the real world. This is an IT obsession, as witnessed too by the romance of 3D printing. Blockchain is touted as tying all and any non-digital assets into the computer. But it doesn’t. It needs some external agency such as a ‘permissioning’ authority to do this. Once that is in place, you don’t need blockchain at all!
* For a best in class example of blockchain bullshit read the World Economic Forum’s effusive post on, the Fourth Industrial Revolution and how blockchain is going to ‘upgrade society’s operating system.’
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