I originally wrote this text in German, published by my then-employer on 13.8.2019, you can find the original version here. Now that I feel like I was kind of right, I decided to translate and republish this piece.
Leafs are slowly starting to turn brown. The wind is getting stronger and the air is getting colder. Blockchain’s summer is over. Winter is coming.
Without a doubt, Bitcoin is disruptive. Even if prices drop to zero right now: Bitcoin and the ideas that power it, have changed the world. It is one of these technologies so good that everyone who realized it’s potential early on, got rich. That was Blockchain’s spring, when a laptop was enough to mine Bitcoin.
As soon as an idea like Bitcoin makes it through it’s first crises and disabuses it’s skeptics, more and more people will understandably take note and develop an interest for this “new thing”. The idea sprouts shoots, with investors thoroughly pouring money, hoping for a plentiful harvest. Ethereum, IOTA and Monero for example have discovered specific problems and potentials of the original Bitcoin-Blockchain an built upon those discoveries (and introduce their own problems in return).
At the time summer comes around, most shoots have already put down respectable roots and some even already yield fruit. During this time, the technological midsummer, when the sun in brightest and everything blossoms and flourishes, dark clouds tend to form, first harbingers of winter. They are clouds of the type cumulus coenum tauri, which translates to: Bullshit clouds.
Those are thunderclouds. They bring dry thunderstorms of false promises, unjustified, euphoric hysteria and unqualified logorrhoea. Or as people say in the blockchain ecosystem: “ICO”.
“Unlimited use cases”
In the world of modern technology – or at least in it’s media coverage – over-promising is the order of the day. Be it artificial intelligence or quantum computing or the hype around chat bots who have long been knocked out of the skies: as soon as new innovation gets some recognition from the right people, a weird automatism kicks in, where the innovation at hand gets compared to the early internet and proclaimed to be the future of human kind. The Blockchain especially is an outstanding example of how a brilliant idea can be disfigured on the rack of technological sciolism, for example (and most notably) by proclaiming “unlimited use cases”.
Blockchain’s use cases are by no means unlimited. They are not even many. In fact they are pretty limited. Bitcoin aspired to solve a very specific set of problems. It has solved some of these problems really well and other not so well. Bitcoin for example is way less anonymous than it set out to be and it’s main application is also not everyday spending, as originally intended.
The real Blockchain use cases
Levelheadedly assessed, the Blockchain is but a method to store data (about interactions). It’s a database. It’s a database with three key characteristics: Immutability, decentralization and trustlessness. These characteristics are not the actual revolutionary trait of the blockchain though. The revolutionary thing about the blockchain is that it translates the economical principal of scarcity – as we know it from the real world – to the digital world (this is where you’re supposed to say “double-spending problem” to sound smart).
So what are these use cases for a database, where scarce goods and their owners are being immutably stored in a decentralized system, where I do not need to trust any of the parties involved? With such a concrete specification, there can’t be a lot of use cases, and in fact there aren’t.
Applying the exclusion principle
First of all, considering trustlessness, all applications of the Blockchain, in which haptic goods are traded, drop out by default. As soon as I have to trust, that the right amount (and quality, etc.) of goods is being represented on the blockchain, all trustlessness of the actual blockchain transaction system is rendered useless.
A lot of Blockchains solve problems which have already been solved digitally (multiple times), again, but with a Blockchain. This might be motivated by relatable and noble reasons, but whether or not a power supplier is using a MySQL database or a blockchain to bill it’s customers, will be of no significance to those very same customers, who have no clue what either of those things are or mean. It’s important that it works, and it does so even without a Blockchain.
The immutability characteristic is nothing desirable per se. There are areas in the analogue and digital world, where it is important or even essential to be able to mutate data. If a mistake was made for example, or imagine you have been wrongfully convicted and this was saved in an official government blockchain. Imagine someone would manage to register themselves as your legal custodian even though you’re of sound mind. Even if all of this would be revised, it would remain on the blockchain forever. A somewhat unsettling idea.
Bitcoin. Maybe not literally and exclusively Bitcoin, but as collective term for “digital units of value”. Blockchain’s use cases are much less and rarer than many are able to see in the midst of the current bullshit-thunderstorm. At some point – on the other hand – the wrong promises will collapse and the tokens, that at some point were in high demand and are already kind of useless will disappear into the realms of technological irrelevance. At this point the wells of investor funds will freeze up and the circle comes to a halt. There will be winter.
Winter will be long, until a new shoot fights it’s way through snow and ice. Something new, something actually innovative. In the field of artificial intelligence this shoots was the rediscovery of the Deep Learning algorithms in 2012. It was thawing. Ever since the small streams of funding have mutated to raging currents. That could also happen to the Blockchain, but first, it has to make it through the winter.
Notes from May 2019
As mentioned I have written the above text in mid-August of 2018 and translated it in the last week. Truthfully, I have expected the described “winter” to be much harsher and longer than it turned out to be. It seems to me that Bitcoin and other legitimate projects have successfully avoided being too closely associated with fraudulent (and/or deluded) ICOs and blockchain projects, which I find to be very good news.