Here's Why Blockchain Hasn't Taken Over the World Yet
Blockchain’s Four Biggest Challenges, and Real-World Analogies You’ll Understand
By Kadan Stadelmann, Komodo Platform CTO
Few technologies have attracted more buzz and more controversy than blockchain. To some, it’s the transformative technology of the future; to others it’s a scam, a fraud, or a ponzi scheme.
Blockchain isn’t a scam any more than it’s a universal solution to all tech problems, but the tech’s critics do have their points.
I’ve outlined the four problems that the technology faces along its journey to every office, and perhaps every home around the world; four challenges that I expect to be conquered soon:
Climbing From the Unknown to the A-List
Kim Kardashian began her career in tabloid notoriety as the subject of adult videos and the assistant to debauched heiress Paris Hilton, but she has parlayed that career to superfame as a fashion icon, business mogul, and idol to millions. Kardashian didn’t change who she was or what she represented during her 12 year journey to the top, aside from appearing on more television sets, magazine covers, and social media feeds — we as a society simply became more tolerant, and then invested, in the Kardashian clan’s billion-dollar empire.
The same will happen for blockchain: For much of its first 10 years, blockchain has had a reputation problem. Even though the technology’s harshest critics in the business and technology sectors acknowledge that the code behind blockchain is sound and the ideas that underlie it are provocative, the general public too often associates blockchain with one thing and one thing only: bad behavior.
It’s true that blockchain in general and bitcoin in particular first came to general public consciousness as part of the Silk Road scandal, the public has now begun to understand that blockchains have uses far beyond the unsavory. In countries with rampant inflation and untrustworthy governments, for example, some citizens rely on cryptocurrency for the essentials of daily life.
Similarly, the embrace of cryptocurrency by banks and other highly regulated financial institutions reminds casual observers that blockchain is legitimate and important. Once, blockchain was niche. Today, ads for blockchain firms show up in every other New York subway car.
Translating the Language of Blockchain
For centuries, historians had no way of reading Egyptian hieroglyphics: the glyphs had no relation to any living alphabet, and so their words went unread. When Napoleon’s troops uncovered the Rosetta Stone in 1799, a way forward appeared. A little over two decades later, Jean-Francois Champollion had deciphered the language of the ancients.
Code isn’t the only challenge: the English vocabulary associated with blockchain is also unfamiliar. As corporations begin to implement the technology, the computer-science and tech-heavy vocabulary associated with blockchain will start blend with vernacular used in everyday business, commerce, and society.
At the moment, understanding blockchain means learning an entirely new language. “Block” and “chain” are simple words known to the youngest children, but most adults struggle to understand what the portmanteau means. They know that mining is done with pickaxes and drills and bores, not custom-made computers racked in freezing cold data centers.
On one hand, new terms may take the place of old: some analysts believe that “distributed ledger technology” is an easier term than “blockchain,” but on the other hand, blockchain may become so familiar that its language, oddities included, will become second nature.
Words like “decentralization” and “trustless” and “consensus” are important to understanding blockchain’s philosophy and working, while slang terms like “lambo” and “hodl” and “ICO” mainly refer to ways investors hope to get rich. But how is the layperson supposed to know the difference? The blockchain community must make education, clarification, and familiarization primary goals.
Clearing Congestion on the Highway to the Future
When Bruce Willis and Milla Jovovich burst onto the silver screen in The Fifth Element, we were enraptured by the flying hovercars they used to make the most of vertical space, reduce traffic congestion, and enable wonderful action sequences.
Blockchain has the same ability to use space in extremely efficient ways and ease congestion, especially as it applies to terabytes of information and billions upon billions of simultaneous transactions. We aren’t there yet, but blockchain has the capability to act as those rails and those hovercars.
So far, only some steel frames are built, and the hovercars are only a few feet off the ground. Because blockchain systems rely on distributed ledgers, the completion of a particular transaction or process on the blockchain must be verified by the network as a whole. This distributed verification ensures that blockchain processes are secure; there is no single failure point that bad actors like hackers can compromise.
Decentralization makes the blockchain safe, but that security comes at the cost of speed. At present, most blockchains can only handle a few dozen transactions per second. Visa, by contrast, processes roughly 24,000 transactions in the same timeframe. Very few live blockchains approaches Visa speed - although our internal tests exceed their transactions per second - the technology grows faster everyday and scalability becomes more and more feasible.
Bitcoin, the oldest blockchain, has grown more efficient thanks to the “fork” upgrades that miners have agreed to; though the record on the blockchain is immutable, its speed can increase. Other blockchains, like Ethereum, run even faster, and there are several promising new avenues of research that will increase the technology’s viability at scale.
To give just one example, “multi-chain” systems, which increase transaction volume by splitting processes of parallel blockchains, may provide an exponential increase in speed with no corresponding decrease in security.
Waiting for Blockchain’s ‘Big Break’
Following its launch in 2006, Twitter was merely a fun social media website, frequented primarily by the likes of Ashton Kutcher and founder Jack Dorsey. But the 2008 election cycle changed the platform’s significance entirely, following early adoption and frequent grassroots organizing efforts by a politician on the rise: Barack Obama.
The Obama campaign’s use of Twitter, and, after his inauguration, creation of the official White House Twitter handle, skyrocketed the platform’s membership, making, for better or for worse, it a staple for corporate and personal communications from there on out.
Today, Twitter plays a core function in journalism, reputation management, and brand communication — with the president of the United States managing his own personal Twitter account. Just as Obama made Twitter mainstream, successful application of blockchain by institutions will fast-track mainstream and consumer audiences’ acceptance of the technology.
Many innovators in the fintech, business, and medical worlds understand the appeal of blockchain and recognize the potential for transformation that it allows, but they struggle to make the case to superiors attached to old ways of doing business. In 2019, however, the C-suite is paying attention to blockchain’s promises.
Facebook, which now claims to be pro-privacy, has begun aggressively hiring blockchain developers. And although J.P. Morgan Chase CEO Jamie Dimon was for years a harsh critic of bitcoin and cryptocurrency, his firm recently announced that they would create a JPM Coin. J.P. Morgan is clearly taking the prospect of a blockchain future seriously: Though they’re not the only Wall Street firm looking for experts in the field, the bank is hiring more quickly than any of its competitors. Major firms outside finance also believe that blockchain is fast-maturing and demands investment: Accenture, Deloitte, EY, and KPMG are all on the market for engineers and other specialists too.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.