In the midst of block chain hype, i read an HackerNoon article which reminds us that one (or plenty) dose of healthy skepticism regarding the technology is necessary.

Kai Stinchombe elaborates many points on why blockchain characteristics (distributed, encrypted and anonymous ledger) might not be best suited to “revolutionize” many of the hypothethical use cases of this technology.

Blockchain.jpg

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Really enjoy this article. I share some of the pessimism regarding this technology. One of my team mate is really excited to research block-chain on one of our business problem, but i still havent convinced yet because i felt like that is merely a ledger problem which will be overkill to solve it using distributed ledger.

Read the full article here, do make sure to read the comment discussion as well since there are many contrarian points which adressed nicely by Kai.

Here are some of the highlights :

On payments and banking :

– For processing payments, Visa currently can handle 60k transactions per second while blockchain-enabled Bitcoin current maximum is 7

– With 0.01% performance, Bitcoin estimated to use 35 more electricity than VISA

On Anonymity and freedom from government overreach

– Government-backed banking system provide guarantee, reversibility, identity verification, audit standards and investigation system. Bitcoin on the other hand has none hence Bitcoin is akin to banking institution in the middle-age

On Smart-contracts

– Smart-contracts are self-executing contracts which can be encoded in block-chains

– Theoretically, Smart Contracts are more cost effective than “dumb contract” because they will execute the clause automatically with no ambiguous interpretation

– Dumb contract are better and safer because of their “slow” nature. it makes it possible for human intervention and leave room for debate from both-sides of contract

On blockchain as distributed storage, computing and messaging

– Blockchain as distributed storage seems make sense : break document up into “blocks”, encrypt, and put them in a distributed ledger

– However current common solution for this (Dropbox, GDrive) is better in many ways : multiple factor authorization instead of private keys, price and features

On blockchain as stock issuance (ICO)

– Primary role of government-backed stock exchange (e.g Nasdaq) is compliance and security provider. Taking these factor out of stock-issuance is a recipe for daylight robbery

On blockchain as authenticity verification

– Other usecase for blockchain is to make public, unalterable, undeletable statement published publicly

– However, in blockchain, there are no way to delete the records or override the transaction

– Adopting block chain technology makes theft or impersonation more likely rather than less

 Conclusion

– Advantage of existing existing human and software systems surrounding transactions outweigh promised benefits of blockchain as well as hidden costs, of irrevocable, automated execution

– With all the hype, nobody currently asking questions whether current user of existing system (payments, credit card holder) are seeing the benefit of blockchain

Posted by Kiki Ahmadi

Product and Strategy guy in Indonesia startup ecosystem | Graduated from ITS Surabaya and University of Manchester | Listen to music all day every day

2 Comments

  1. Hi Kiki, nice extract.

    There are many things I want to address pertaining this tho, but here are the most fundamental ones:

    About Visa comparison:
    In the future,with LN, BTC can provide millions trx/s. Or even now, XRP, XLM, CS, TAU, etc already surpassed what current financial system can provide. With zero, literally no transaction cost. Don’t think Visa can get even close to being this.

    About anonymity and third party involvement:
    Feeding third party and centralized system will create corruption and conflict of interest among powerholders.
    Furthermore, operational costs and expensive fees will make the whole system inefficient, making us as end-customer bear ridiculous amount of money to cover it all up (doesn’t stop there; third parties and powerholders even generate profit from the system, and guess where does it come from? Our own hard-earned money as well). They get richer and yes, we get poorer.
    That’s the exact reason why people in governments are filthy rich, and banking is arguably the most high-paid industry.

    About smart contract:
    Why would someone prefer dumb, slow contract? So inefficient and leave so much room for ambiguity. Every single businessman who wants to build an honest and working business system will pick the most robust one. A no brainer.

    In a nutshell, blockchain offers a much cheaper, faster, efficient and effective system. No denying that there are things that have to get sorted out first in order to be ready for mass adoption, but the foundation and the idea of eliminating third party is such a powerful one. It gets those unnecessary expenditures and friction eliminated.

    And after laying out those things, I want to remind you one single unique truth about human and society:
    Learning from thousands of years of history of mankind, we all know people will always, I repeat, always end up choosing the most efficient one. Customer fancies frictionless system.

    Thanks for bringing this up! I enjoyed reading it. Anyway I am not an expert as well, not even a CS major. just casually interested in it :p

    Just hit me up if eager to discuss even further!

    Reply

    1. Woa, cool counterpoints Yoseph. Im still learning this tech as well, but im more on a skeptic side right now. Were evaluating blockchain in our company as well, as you can read in the subsequent post.

      thanks for reading and contributing into the discussion Yoseph!

      Reply

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