Even in 2017 blockchain technology was considered overhyped. Everybody and their cousin began to believe that blockchain was going to disrupt every industry, change the face of the earth, and make obscure ICO investors millions in the process.
This hype and excitement around cryptocurrencies led people to believe some crazy things about blockchain technology and what it can actually do.
Many people now have the wrong impression about the potential of this technology, and believe it’s something that it isn’t.
As I’ve discussed before, a blockchain is just a database structure with some distinctive features.
It allows multiple parties to record and share information on a database in real time, and not need to trust each other, as they are incentivised to do the right thing through tokens/coins.
These features are clearly highly specific, and are therefore only really useful under a certain set of circumstances.
For instance, they’re brilliant when used for cryptocurrencies such as Bitcoin, since the blockchain behind Bitcoin allows people to send money to anyone else, anywhere in the world cheaply, and without the need for a bank or other intermediary.
However, blockchains aren’t actually suitable for every kind of data storage, and certainly shouldn’t be used as the solution to a problem nobody had.
In this article I’ll break down 10 things blockchain and its applications (like Bitcoin) aren’t, from both the haters as well as the over-enthusiastic (in no particular order):
1. Bitcoin isn’t the biggest scam in history, it isn’t rat poison, and it isn’t dead.
Bitcoin and the blockchain it is based on — like every early-stage technology — has its flaws.
But saying the technology will fail purely because of these flaws is kind of like saying in 1995 that the internet won’t work because it’s clunky and unorganised.
Bitcoin has been going strong for 10 years despite being pronounced deadhundreds of times over.
It might seem dodgy on the surface, but in the words of Naval Ravikant:
“Bitcoin is a tool for freeing humanity from oligarchs and tyrants, dressed up as a get-rich-quick scheme.”
– Naval Ravikant on
Focusing on the negatives of this technology and calling Bitcoin a fraud is to be completely ignorant of what it actually enables us to do.
2. Blockchain isn’t a way to increase your company’s stock price
3. Blockchain isn’t a ponzi scheme
Unless you bought into PonziCoin, which was literally a ponzi scheme.
And don’t even get me started on Bitconnect.
4. Cryptocurrency isn’t just for scammers
As I’ve discussed before, the anonymity afforded by blockchain tech is what enables these scammers and hackers.
But it’s an unfortunate side effect of the technology, not the point of it.
Terrorist groups like ISIS use social media to find new recruits, that doesn’t mean we have to give up Facebook and Twitter.
Pablo Escobar made so many American Dollars that he would burn them just to keep his daughter warm. The whole drug industry is run on cash. Does that make cash bad?
5. Blockchain isn’t a way for your non-blockchain startup to raise money
Just because you saw a no-name company ICO and raise millions off an idea alone doesn’t mean you can or should too.
The point of an ICO is to distribute tokens to potential users that incentivise them to use your blockchain. The tokens are eventually supposed to do something. If your startup has nothing to do with blockchain, then you have no need for tokens, so don’t even think about using it to raise money.
6. Blockchain isn’t going to revolutionise your business
Unless your business needs all of the benefits that a blockchain provides, you will be no better off storing your data on one.
7. Blockchain isn’t going to disrupt every industry
Ever heard the saying “it’s like Uber for (X industry)”. Well that has made its way into the blockchain sphere, with companies literally trying to create Uber for blockchain among other things.
The small problem with this approach is that not every industry needs blockchain.
So you don’t like Uber’s business practices, and think the solution — rather than just using Lyft — is the blockchain?
A decentralised, peer-to-peer ridesharing network does sound pretty sexy.
But that completely overlooks all the reasons why blockchain is a terrible way to organise ride sharing.
By definition, there is no central authority governing a public blockchain, so who makes decisions in this distributed company?
What about dispute resolution? Once data has been uploaded and verified, it’s not going anywhere. Got charged for a ride you didn’t take? Driver did something really bad that you need to report? Well too bad because nobody is listening.
What about development? How is a distributed company with nobody in charge supposed to compete with one of the most highly-funded startups in history with a well-established market?
Even if a decentralised Uber could overcome everything stacked against it and create a working service, how much better than Uber would it really be?
Uber (and other centralised ride sharing apps) work pretty well right now. The alternative just isn’t that much better.
The potential benefit of putting many existing industries on the blockchain just isn’t high enough to make users change their behaviour.
8. Blockchain isn’t a way to make sacrifices to Cthulhu
The less said about this the better.
9. Blockchain isn’t a platform for memes
10. Blockchain isn’t useless.
Unless your token is literally useless.
So what is it then?
Even though I’ve outlined all the things blockchains shouldn’t be used for, there are still cases where blockchain is the perfect application.
Let’s take a look at the conditions that call for a blockchain:
- A shared, ‘add-only’ database
- Multipe writers
- Absence of trust
- The need to remove an intermediary
- Consensus & validation
As it happens, money fits perfectly into this category. Applications like Bitcoin fulfill all of these criteria, and are therefore a fantastic application of blockchain tech.
Unfortunately, as of 2018, there haven’t really been many other proven, mass-market applications for blockchains.
That isn’t to say there never will be, we just haven’t found them yet.
And that’s the point of this article: blockchain isn’t a useless technology, but neither is it the saviour of your business, the economy and humanity as a whole.
We need to all be aware of the true potential of this technology and plan for what it can realistically achieve.