Blockchain is presented as one of the most revolutionary inventions of our time. Cryptocurrencies, smart contracts, NFTs: the technology appears able to solve every question of ownership, security and trust in the digital world. But is it really that extraordinary? I want to look closely at some of the claims one hears most often.
The first quality attributed to it is immutability: once written, data cannot be altered or deleted. Useful, certainly. But not new. A conventional database, with proper encryption, serious security controls and geographically distributed backups, offers a very similar level of immutability.
The second argument is its decentralised nature. In theory anyone can join the network, which makes it resistant to failure and censorship. Here too, a system of distributed databases with nodes around the world achieves a comparable result. And decentralisation is often more promise than fact: in practice, power stays concentrated in a few nodes.
Cryptocurrencies, smart contracts and NFTs are cited as examples of how blockchain would revolutionise ownership. But how do you prove a digital asset is genuinely yours? Holding the private key to a wallet is not legal title to an asset. It is like having the keys to a friend's house: that does not make the house yours. In the end some form of authentication and a certifying authority will still be needed, which rather defeats the point of decentralisation.
On privacy, blockchain leaves a great deal to be desired. If you want your data unreadable you have to add further layers of encryption, which is curious for a technology that presents itself as secure by construction.
Despite these limits, the word seems to have a magical effect on investors: venture funds have poured billions into projects containing it. Why? Is it truly the panacea it promises to be, or is it a term that attracts capital?
Blockchain is an interesting technology with real potential, but it deserves a critical eye. It offers some particular advantages, and it is not the answer to every problem it claims to solve. In many cases there are simpler, more efficient and less risky routes.
Originally published on LinkedIn. Reviewed by the author.