What is the Relevance of Using a Blockchain?

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What is the Relevance of Using a Blockchain?
What is the Relevance of Using a Blockchain?

Today, even if the wave of ICOs that we saw in 2017 is now behind us, blockchain projects are popular. Behind the use of the blockchain, the promoters of these projects are selling security and decentralization. Fewer costs, faster services or perfect traceability are the main values ​​of the latter. But among these many projects, we quickly realize that most make poor use of or even completely miss the points of interest of this technology. If you want to set up your project or better identify these projects that are sometimes fragile by design, it is interesting to study the real use cases of the blockchain. We are going to take an overview together and learn from the failures of these blockchain projects.

What is a Blockchain, and What it is not

When we look for what a blockchain is and its characteristics, we generally find these different points:

  • The immutability of the data contained.
  • Does not need a controlling body.
  • Allows the transfer of value.
  • Prevents double-spending by users.

But we often forget to present the weak points of the use of a blockchain and what it does not allow us to do. If a project is led by a company with investors and shareholders, is it relevant to use a decentralization tool? How to integrate the withdrawal of the team in the control of the project since it is all the interest to no longer depend on a third party, precisely to no longer have a third party?

Also, not all blockchains are created equal. If you present your project as guaranteeing the immutability of data, you need a strong consensus protocol and a network powerful enough to resist attacks. Just because Bitcoin doesn’t allow string rewriting doesn’t mean your project will too.

What are the Use Cases for Blockchain?

No one can predict what the use of technology will be like. Twenty-five years ago, there was much criticism of the Internet, and few people were able to imagine its current uses. Who would have thought that TCP/IP would allow the creation of cultural revolutions such as Instagram? That it would revolutionize, for better or worse, the way, we inform ourselves, study and entertain ourselves? This is why, in my opinion, we must be flexible about the potential uses of the blockchain and not embark on witch hunts. But if we do not know what will be created after the impetus given by Bitcoin, we can sometimes recognize the impertinent projects.

“If you can do your project the traditional way, do it the traditional way”, Jeff Bezos.

The different use cases of a blockchain revolve around these particularities:

  • First, you need to store data that needs to be shared with several different actors.
  • These actors are not clearly identified and do not have the same common interests.
  • You need to store transaction history between users.
  • There is no central point of system control.

This lays the foundation. These criteria can vary according to the points of view and the particular cases. But even in the context of a private blockchain where the actors are identified, there may not be any centralization around an actor. In these particular cases, it is, in my opinion, even more, important to determine whether or not the blockchain is important in the project.

Before embarking on a project, whether crypto or not, you have to choose the medium and technology on which it is based. If a technical choice does not make the project a success, it may very well make it a failure. The blockchain ecosystem is very young, and many players do not necessarily use the technology wisely, slowing down projects. Blockchain development is often more complex because relatively few developers are currently trained in the stacks of these projects. For example, smart contracts must often be audited by external actors, and these procedures are very costly. Developing traditional software is often more relevant when possible.

The Currency

If it is often said that Bitcoin is the first application to the blockchain, this term is never mentioned in the presentations of its creator. The term blockchain was popularized in 2015, 7 years after the Bitcoin white paper. Debates around “ blockchain, not Bitcoin ” and vice versa are still raging among crypto-enthusiasts, and many are railing against “ blockchain bullshit ”.

While virtual currencies had already been created before Bitcoin, none had succeeded in being used by a large number of players. But what are the characteristics of bitcoin that make it so unique, and how can a blockchain be put to good use as part of the currency? It would take too long to list them in this article, but we realize that Bitcoin is not a technological revolution and that, in the end, perhaps Satoshi would have found other technical means to achieve his ends. In contrast, the primary use of a blockchain is to transfer digitized value without any controlling body. This is the first use case, and today the main one.

Decentralized Finance

After having tested the use of different blockchains to transfer more or less rare funds all over the world quickly, the natural evolution is the creation of a financial ecosystem. And there are many projects that are currently emerging, offering protocols with innovative mechanisms that take advantage of what already exists to go further. It is, therefore, now possible to make loans, obtain interest and exchange cryptocurrencies without a trusted third party. It is no longer simply a question of transferring our funds but now of accessing financial services without any discrimination.

It is the smart contract platforms that most welcome these new protocols, as well as Bitcoin. Even if Ethereum remains the first choice for developing projects of this kind, other platforms specialize in the management of financial products, in particular through the tokenization of goods.

Blockchain is a Deliberately Slow Technology

If solutions aim to accelerate transaction times exist, they can, unfortunately, limit the quality of the network. For example, systems using proof-of-stake instead of proof-of-work are generally faster and more vulnerable to attacks.

To take the example of Bitcoin, the block size and the 10-minute delay between each new block are deliberately restricted. This is for several reasons, such as network nodes being able to transmit new blocks quickly before a new block arrives. But this also makes it possible to limit the requirements in terms of computer hardware to set up a node. This makes the approach more accessible and therefore promotes decentralization. The overlay solutions to the existing chains are there and seem functional and interesting for the moment, which will allow the evolution of the number of transactions.

But race-to-speed marketing propositions are often ominous. Even more, if the proposed improvements do not address known bottlenecks on existing blockchains. Often security is put aside, and let’s remember that a blockchain must be immutable and stand the test of time! Not having a problem over six months, a year does not guarantee it. This does not mean that we should not innovate and keep the technical state of today. But trying to sell performance at all costs is not necessarily the best strategy.

Failures of Using a Blockchain

To fully understand a truth that is difficult to hear, sometimes nothing beats examples. Let’s take a tour of the revolutionary blockchain projects, which ultimately would have done better to use other technologies or understand at their expense that the blockchain was not a magic tool.

Medical Data

With the privatization of medicine mainly in the United States, the management of medical data is a market in need of innovation. There are two major issues: on the one z, the need for patients to be able to access and manage their medical data, and on the other hand, a lack of security in the storage of this data. The sale of stolen data is profitable, and many cases of racketeering from hospitals or other health centers are known, not only in the United States but now in France, where the targets are not sufficiently able to protect themselves. They are also the GAFAwho are embarking on the race to manage this data, strengthening their machine learning algorithms in the process. All these points make many projects want to revolutionize this market through the blockchain, but let’s see together why it does not work.

There are two ways to deal with this problem, storing medical data in centralized databases. It is, therefore, necessary to unify the use of these databases in the country and to make a point of honour to the security of the latter. This already exists in most countries, and using a private blockchain would be counterproductive since, for example, a server standard is regulatory. Most private blockchains would therefore be illegal.

Or propose a public blockchain, where everyone could use and deposit their data. You would therefore have to be in possession of your private keys to access your data, and this poses many problems. The use and storage of these systems are not at all intuitive, and the elderly, in particular, could lose their access to their data.

The medical data sector requires innovation, but the blockchain does not seem to be the long-awaited chosen one. Improving the user experience and IT security does not necessarily require a change in technology. There is no need for tokens to transfer critical data between two services, only to raise funds without a viable project.

Traceability

The use of a blockchain in traceability is a hot topic. Many companies embark on the adventure by promising clear traceability to their customers. The results are good since some of the players claim that their “blockchain-certified” products are popular with their customers, such as Carrefour chickens, for example. But a remark often comes in the context of the use of blockchain technology for traceability issues, and it is that writing on a blockchain does not guarantee the truth of what is said.

Indeed if for the transfer of units of value, the authenticity of the transactions can be checked, it is not the case to follow a kilo of tomatoes. A system of asymmetric keys ensures that it is the grower of these tomatoes who entered the data, but not that the latter are organic! On the other hand, the traceability market requires innovation and modernization in view of the enthusiasm shown by consumers to know better what they are buying. But the solutions will be closer to databases controlled by distributors, who will take responsibility for the information presented to consumers. Interactions along the supply chain could be made public, so third-party players could offer customers apps to easily get this information. There is no need to achieve consensus to know if chicken meat is really chicken. There are no conflicts between the actors, bound by contracts and perfectly-identified.

Online Public Voting

The question of setting up online voting comes up regularly during elections. If the problem of security seems obvious, that an individual can modify the vote of other voters without leaving a trace is critical; it is not the only negative point. Security vulnerabilities can be numerous, and not just IT but social. It could be possible to impersonate a site to give the illusion of participation in a vote and many more examples.

But the use of a blockchain does not solve these problems, and the innovations that could solve them do not need blockchain. To achieve a good voting system, we need these three criteria to be validated:

  • That we cannot make the connection between an individual and his vote.
  • A voter must be able to access their vote and verify that it has been taken into account.
  • That the votes are properly counted.

Since not everyone can vote, it is difficult to verify identity and anonymize the vote at the same time using a blockchain. Finally, the blockchain does not bring us anything relevant in this case. Projects that want to make voting easier using blockchain bring more critical flaws in their operation than simplicity for users. Once again, technological innovations are necessary, but the blockchain is not the magic answer to these problems.

The Underlying Technology Does not Guarantee the Success of a Project

What the culture of unicorns and awesome fundraisers don’t remind us of is that about 9 out of 10 projects fail. Using or registering in the blockchain ecosystem is no exception to the rule, and we are currently observing it. Most of the projects funded during ICO during the period of 2017-2018 no longer exist, or their development has stalled. And that doesn’t just cover scams but also promising projects on paper that unfortunately inherited poor execution. So imagine the statistics when the project is on paper already wobbly due to a technological choice serving the latter.

In these projects, we can find funny situations like that of Enigma, a crypto project based on innovative encryption methods. The funds collected during the ICO were stolen by a hacker while the CEO of the project had not activated the double authentication. But also less funny stories, sometimes scams. Like sales networks similar to Ponzi pyramids, among which we can mention OneCoin. The team of this scam was able to obtain more than 3 billion dollars from investors, despite the warnings of several governments.

The biggest blockchain projects have no or few marketing teams, which is not necessarily a good thing to increase their numbers of users and investors, but it shows that they are there first and foremost to build. If your main goal is to achieve an ICO as quickly as possible with a non-technical white paper and a tasteless website, take the time to revise your strategy. Even if it takes money to move fast, doing it in the wrong direction is not necessarily a good thing.

So much for whether or not to use a blockchain for a project. This does not necessarily cover all the questions, such as using an existing platform or not rewriting anything, for example. I hope this could be useful to better understand what can and cannot be done with blockchain technology