Blockchain technology, in particular, its most famous application Bitcoin, has captured many people’s attention in 2017.
Having started the year worth around USD 1,000, the cost of buying one Bitcoin soared from USD 17,000 per coin last week to more than USD 19,000 only to drop to USD 15,000, all within 20 minutes — demonstrating the volatility of the virtual currency.
Although some, particularly in the financial and business sectors, say the underlining blockchain technology behind cryptocurrencies like Bitcoin are revolutionary, there is healthy scepticism within the technical community.
One sceptic is Internet Hall of Famer, Radia Perlman, who gave the keynote presentation on the subject at last month’s Asia Internet Engineering Conference — AINTEC 2017 — held in Bangkok, Thailand.
Now in its 13th year, AINTEC provides an international technical forum for experts from industry and academia to discuss issues relevant to the Asia Pacific region.
Known for inventing the spanning-tree protocol (STP), which is fundamental to the operation of network bridges and the Internet, Radia has, in recent years, taken an interest in understanding what blockchain technology really is, its security and scalability properties, and how it compares to other traditional technologies.
For all that she has learned, Radia is first to confess that she is by no means an expert in the technology — admitting that she cannot distinguish exactly what makes something blockchain technology, a point that she highlights is the basis for a lot of misinformation as to its characteristics.
A survey of over 200 board-level UK executives recently found that while over half of businesses sampled are planning blockchain initiatives, more than 40% of non-IT/data senior executives admit to not fully understanding blockchain technology. This lack of understanding, Radia says, is leading many to invest in variant blockchain applications that don’t adhere to the original concept of blockchain technology – to verify the order in which entries are made to a ledger, without any centralized authority.
For Radia, blockchain is currently undergoing a ‘honeymoon’ phase that many new technologies before it have experienced; one where hype and FOMO (fear of missing out) are clouding people’s perception of what the technology actually is, and how it compares to other things.
“I see lots of talks that treat blockchain as a black box that has magic properties. These people talk about all the applications it can be used for, assuming these magic properties,” said Radia.
“But just because you can do something with it doesn’t mean it couldn’t have been done before using an already tested method. And it doesn’t mean it’s the best solution.”
How do you know if blockchain is the right application?
Before you even consider blockchain as a potential technology for your next application, Radia suggested that you first ask the following questions: “What problem am I solving?”, and “What are the solutions and how do they compare?”
“Don’t say ‘Can we apply blockchain for this application?’ or ‘We have blockchain, what sort of things can we use it for’. Instead, start from the other end with the problem you’re trying to solve and consider the best ways to solve it,” said Radia.
Here are some points to consider as to whether blockchain is appropriate for your application:
- Data on blockchains is by default, unencrypted, especially data that needs to be validated by the nodes.
- Blockchains do not have inherent security against read access. You can control read access to some degree by encrypting certain elements on your blockchain but this can be compromised.
- Not all information on the blockchain is true; data still needs to be checked and uploaded correctly and as such is open to human error.
- No amount of time guarantees something will stay in the ledger. It is also difficult to remove data if required by law.
- It’s not secure because it depends on the assumption that the blockchain community has more compute than the rest of the world.
- It’s absurdly expensive to mine blocks to store data indefinitely.
- Lack of government regulations for blockchain could impede growth.
The views expressed by the authors of this blog are their own and do not necessarily reflect the views of APNIC. Please note a Code of Conduct applies to this blog.