Thesis: What blockchain is for

Blockchain_LogoLast night I went to a blockchain meetup. Some presenter in particular enthused about applying blockchain to a problem where using it has no advantage whatsoever. Like almost everybody else these days I’m tempted to say. No wonder many dismiss blockchain as a complete fad. That got me thinking.

What is the general pattern where blockchain (of some kind) has compelling advantages? Is there such a pattern?

For example, consider the smartphone. While there are many applications, the general pattern for its use is the need for information access and exchange while on the go.

Here is my take on blockchain:

Blockchain is for weakly connected communities preventing someone from cooking the books.

Let me unpack this:

  • The books: there’s got to be a need for a record of something that a set of people need to agree on, like monetary transactions or contracts.
  • Cooking the books: Whenever “books” of some kind exist, somebody will be tempted to alter the record after the fact: no, I don’t still owe you 1000, only 100. Or, no I never entered into this contract. Etc.
  • Communities: simply all the people that are interested in the subject matter.
  • Weakly connected: imagine a strongly connected community: everybody interacts with each other all the time, and intensely at that. It’s not easy for somebody in that community to cook the books without anybody else noticing, because many people are proactively working with the prospective crook. In a weakly connected community — say, all people who own bitcoin — cooking the books is much easier, and preventing it much harder.

How does blockchain prevent that? Well, every member of the community has a current, and always-updating copy of the blockchain. As soon as somebody is trying to alter the record aka cooking the books, either the attempted alteration is ignored, or alarm bells go off everywhere. Problem solved.

There is only one alternative to blockchain, which is for the community members to trust somebody when they say “we audited the books and they are fine”. As we know from many examples in the past, that is often not true.

Which immediately brings some use cases to mind that at least I had not thought of before:

  • (Local) government finances and contracts. Afraid of corruption? If your town’s government had to transact all of its transactions by recording them in real-time on a blockchain (rather than some government-administered data), and that blockchain was replicated to the computers of its citizens, citizens’ computers would immediately flag an altered transaction (and let the citizens see, in real-time, what the government is up to. Not a bad idea in itself.)
  • Non-profit transparency. Not sure if your favorite non-profit actually spends its money on where it says it does, and does not hire certain subcontractors as it promised it wouldn’t? If it did it all on a blockchain, they could prove that by transacting on a block chain shared with their members.

Comments are closed.