The Blockchain Is Not The Solution To Every Problem

The hype around blockchain technology is real. Every man, woman and child are talking about the amazing benefits of the blockchain and how it is going to revolutionise the world. What was once big data and cloud, is now blockchain.

While technologically impressive, what if I told you that the blockchain isn't the solution to every problem?

Before we continue, we need to do a refresher course on what a blockchain actually is (and no, it's not a metal chain of links and it's not just cryptocurrency).

Blockchain 101

A blockchain is a ledger of records (called blocks) which are linked and secured using cryptography. Each block validates the previous block and uses that as the basis for continuing the chain on and ensuring its integrity and validity.

Each block contains a hash (unique ID) of the previous block, its timestamp and some metadata. Once written into the blockchain, a record or block cannot be changed and becomes immutable meaning it cannot be edited or deleted, once an entry is added in the blockchain it is permanent.

While Bitcoin was the first to utilise and publicise the blockchain concept thanks to Satoshi Nakamoto, papers going back as far as 1991 detail the concept of a cryptographically secure blockchain.

What is blockchain good for?

We've already seen one of its best uses: transactional data. As shown in Bitcoin first and then subsequent other cryptocurrencies, a blockchain is a great way to store transactional data, a pure record of an event distributed across a publicly shared ledger.

Blockchains are also great for storing important things like; medical records, identity management, transaction processing, voting, contracts, preventing counterfeiting and more.

Technically speaking blockchain has the power to revolutionise industries, especially where data integrity is of the utmost importance. This is why there are so many proponents of implementing the blockchain into voting systems around the world because it means once a vote is cast it cannot be altered.

Another use-case you are going to see emerge in the next couple of years is ticketing, more specifically stopping scalping (buying up tickets and then reselling for exorbitant amounts of money). When you buy a ticket from Ticketmaster or Ticketek, a transaction is recorded into the blockchain.

This would allow ticket vendors to set constraints on tickets, how much they could be resold for, who owns them and whether or not they are legitimate tickets.

For instances where speed isn't important, but data integrity and security is, a blockchain is a great solution.

Blockchain all the things

But something I have seen happening more and more is people (many who don't know what a blockchain is), putting blockchain up on a pedestal and proclaiming that it is the solution to all of the world's problems including curing world hunger.

By design the blockchain is slow, because to secure the network either PoW (Proof of Work) or PoS (Proof of Stake) approaches are applied to cryptographically secure the blockchain and reward participants who are playing their role in securing the network by validating blocks by performing complex mathematical equations (PoW) or by holding coins and earning from network fees (PoS).

Scaling blockchain

Now here is where things get interesting, it is a universally acknowledged fact that blockchain technology in its current form is slow because it trades trust for time. Transactions take time because the blockchain by design needs to make sure the transactions are valid in a validation process.

They don't let you just walk through an airport without first checking your boarding pass and your luggage. And then when you queue up for the plane, they scan your boarding pass to see if it is in their system and valid, or you don't get on the plane.

Now imagine one-thousand people trying to fit through a narrow doorway, a queue is going to develop. The doorway can only fit eight people at a time, so the other 992 people have to wait to go through the doorway. This is the issue currently facing blockchain technology, it can't handle many transactions at once (as witnessed with Bitcoin).

Now picture someone comes along and builds an app on top of the blockchain that allows you to trade and buy cryptographic representations of cats called CryptoKitties (this really happened). This results in 100,000 more people trying to fit through the doorway. Now you have to wait twice as long to get through.

Now imagine you were given a way to get through the doorway quicker by paying a fee which moved you up the line, a network fee which makes a miner more likely to process your transaction first above everyone else.

But what if CryptoKitties (or other non-important apps) could still leverage the blockchain and network, but not jam up the main blockchain with non-monetary transactions?

This is where sidechain comes into the equation.

A sidechain is a blockchain that runs beside the main blockchain, this allows for blocks to be moved between the two chains. A transaction can be moved to a sidechain but moved back to the main blockchain if and when needed.

This is one such way to reduce the scaling issues that come with blockchain, by moving transactions into separate chains that are still compatible with the main chain, it allows specific purpose sidechains to be built for different use cases.

Ethereum is leading with a sidechain solution of its own called DappChains which aims to prevent scaling issues as the result of large-scale applications like Crypto Kitties which at its height severely impacted the Ethereum network because of the number of transactions and raised the Gas price to all-time highs.

Sidechains allow you to scale horizontally by having multiple chains all linked and connected to the main blockchain, as opposed to other solutions that propose making the block size bigger (vertical scaling) or sharding.

This is a concept that works similarly in the land of RDBMS (relational database management systems) you scale out to multiple databases to better handle more traffic.

But, the real MVP is offchain.

While sidechains can help with the scaling issues, they're more designed to take the load off of the main blockchain, allowing for example Bitcoin to handle just transactions related to the currency itself and the side chain to do specific niche use-case stuff.

The concept of offchain is simple, perform an action outside of the main blockchain (or sidechain) and then notify the main chain once the work has been done.

You might have heard of the much-hyped scaling solution for Bitcoin currently being tested and rolled out called Lightning Network, this is a great example of an offchain solution. And as you can see from initial test results, the fees are low and transactions almost instant.

Worth noting that offchain doesn't mean the main chain isn't needed, the transaction still needs to be initiated and concluded on the main chain, but the action itself is performed on the offchain.

The scaling issues are one of the biggest factors holding back widespread adoption of blockchain technology. And even so, the solutions involve non-blockchain fixes to the point where you have to wonder if it's worth using the blockchain.

Existing solutions can already do this

We are so hell-bent on making everything use blockchain, we lose sight of the fact that existing solutions for many of the use-cases blockchain are being applied to already exist.

Banks already employ robust and scalable solutions for dealing with transactional data, and also retaining an audit log in the case of error or fraud. As do other sites like online games with in-game currencies and services like Uber.

Mastercard and Visa have been processing millions of transactions per month long before Bitcoin came along, or blockchain was even a word in the modern business lexicon. We have lost sight of the fact that in the world of high volume transactional data, this is a problem that has been solved.

I understand that blockchain is this decentralised concept, and it's great how data is transparent and secure, the ultimate redundancy. But at the end of the day, there is nothing blockchain can do that a database and existing system solutions cannot already or have not already done.

The benefit has a blockchain has is its strong data integrity, protection and democratisation of the data itself as seen primarily in cryptocurrencies for now.

Blockchain !== Cryptocurrency

While Bitcoin and other cryptocurrencies have popularised blockchain, the blockchain is more than money. It's about securely storing encrypted data in a distributed ledger that has no single point of failure, cannot be hacked and (with exception of a 51% attack for PoW based blockchains) is one of the safest ways to securely store records of data.

I see it time and time again, people lump blockchain and cryptocurrency into the same category. For cryptocurrencies like Bitcoin they leverage the blockchain to make it almost impossible someone to print their own money or steal money from others because of its strong data integrity and encryption features.

Conclusion

I see value in the blockchain, it's a technologically sound concept that has a real-world use. But it has very specific use-cases and is not the silver bullet for every problem in the world.

Blockchain has become a buzzword that businesses throw around to sound ahead of the curve, people love to tell you how great the blockchain is, but that's because they've never tried using it.

Do you really need a blockchain?