{"id":8596,"date":"2018-07-17T09:47:41","date_gmt":"2018-07-17T09:47:41","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=8596"},"modified":"2020-05-05T21:04:40","modified_gmt":"2020-05-05T21:04:40","slug":"city-a-m-approach-blockchain-with-caution-as-text","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2018\/07\/17\/city-a-m-approach-blockchain-with-caution-as-text\/","title":{"rendered":"City A.M.: “Approach Blockchain with Caution” \u2014 as text"},"content":{"rendered":"

Here’s the\u00a0published text<\/a> of my article “Approach Blockchain with Caution,”<\/a> from last week’s City A.M. Crypto Insider<\/a> section.<\/p>\n

 <\/p>\n

\"\"<\/a><\/p>\n

 <\/p>\n

Approach Blockchain with caution<\/h3>\n

There\u2019s tremendous excitement around \u201cblockchain.\u201d But what\u2019s the substance?<\/h4>\n

\u201cBlockchain\u201d is a hugely popular buzzword. There\u2019s all manner of promises being made \u2014 how good would it be if your business could get some or all of those!<\/p>\n

Beware the realities, though \u2014 there are good and useful parts of blockchain, but there\u2019s a lot of hype.<\/p>\n

The promises<\/h3>\n

Blockchain originated in Bitcoin, the first cryptocurrency, in 2009. Bitcoin made a series of promises \u2014 decentralised, secured against bad actors, immutable and incorruptible, fast and free.<\/p>\n

By about 2015, most of these had failed \u2014 mining (Bitcoin creation) is centralised, the blockchain is secure but the ecosystem is prey to the ill-intentioned, transactions are clogged.<\/p>\n

But that list of promises will look familiar \u2014 because the consultants selling \u201cblockchain\u201d took that list of promises, and claimed their new thing would do all of them \u2026 whether it could or not.<\/p>\n

Remember: if it sounds too good to be true \u2014 it is.<\/p>\n

The good bit: The ledger<\/h3>\n

The useful part is the append-only ledger. This is just like a paper account book that you can only add new lines to \u2014 you can\u2019t cross out old ones. This is a \u201cMerkle tree,\u201d invented in 1979. It\u2019s a ledger you can only add to, and if you try to alter the past it\u2019s immediately evident.<\/p>\n

The Merkle tree has been widely used since \u2014 but it\u2019s got a new lease of life being promoted under the name \u201cblockchain.\u201d<\/p>\n

The new part of Bitcoin was a consensus mechanism \u2014 to decide who was allowed to add new lines to the ledger. Bitcoin\u2019s inventor, Satoshi Nakamoto, wanted a completely automatic mechanism, with no central controller. So mining works by a lottery \u2014 computers guess numbers trillions of times a second, and one winning number comes up every ten minutes. The more computers you run, the more lottery tickets you can print. So bitcoin mining uses more and more electricity all the time, to stay in the same place.<\/p>\n

For business use, this would be ridiculously wasteful. You would also usually not want to put your back-office onto the Internet. So business blockchains are set up with known participants, and the consensus mechanism is some variant on just taking turns.<\/p>\n

So practical business blockchains are a variety of distributed database. It\u2019s often slower, but highly robust and redundant.<\/p>\n

Smart contracts<\/h3>\n

A \u201csmart contract\u201d is not a contract \u2014 it\u2019s a jargon term for \u201ccomputer program\u201d \u2014 one designed to trigger when certain conditions are met on its blockchain.<\/p>\n

Blockchain pitches often include a diagram of the system, where the hard bit is done by a box marked \u201csmart contract.\u201d They\u2019re just saying \u201cwe do it with computers,\u201d but more impressively.<\/p>\n

Smart contracts are hard to program and hard to debug \u2014 the idea is that they are immutable, which means that bugs are much more difficult to fix.<\/p>\n

This is very trepidatious when you\u2019re dealing with money. Some people have lost hundreds of millions of dollars on Ethereum to smart contract bugs \u2014 including Dr. Gavin Wood, who wrote the Ethereum protocol design, when his startup Parity had a minor bug in their Ethereum wallet software last November. Even he couldn\u2019t do smart contracts well enough not to lose millions.<\/p>\n

Smart contracts are also slow \u2014 the price of being highly distributed. Vitalik Buterin, the inventor of Ethereum compares a smart contract\u2019s computing power to \u201ca smartphone from 1999.\u201d It won\u2019t replace your back-office systems.<\/p>\n

GDPR<\/h3>\n

The GDPR is anathema to blockchains. Never put Personal Data into a blockchain! You\u2019ll have a very painful time performing redaction.<\/p>\n

Any blockchain use case that involves Personal Data on the blockchain is asking for trouble \u2014 avoid.<\/p>\n

But where\u2019s the magic?<\/h3>\n

You might think \u2014 but where are the magical promises in that? What will automatically give me trustless perfection? What will process my data for free?<\/p>\n

The answer is, of course \u2014 magic doesn\u2019t happen. But business reality can. Many claimed blockchain use cases have no working examples \u2014 there\u2019s furious confusion of \u201ccould\u201d and \u201cis.\u201d There\u2019s no smoke without fire \u2014 but there\u2019s a lot of fog machines.<\/p>\n

Ask your blockchain salesman to produce working examples of every single promise. Not a pilot programme he heard of \u2014 but checkable examples, that do in fact check out.<\/p>\n

Do they sound pie-in-the-sky? Or does this sound like an ordinary, mundane IT project? That second one\u2019s what you want \u2014 someone reality-based, and matter-of-fact.<\/p>\n

If they say \u201cbut imagine predicting Facebook in 1993!\u201d then show them the door.<\/p>\n

But a system based on the append-only ledger can do good work. If it\u2019s marketed as \u201cblockchain,\u201d that\u2019s an outcome we can work with.<\/p>\n

David Gerard is the author of the book Attack of the 50 Foot Blockchain \u2014 Bitcoin, Blockchain, Ethereum and Smart Contracts, and the news blog of the same name. https:\/\/davidgerard.co.uk\/blockchain\/<\/em><\/p>\n

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The text of of my article “Approach Blockchain with Caution,” from last week’s City A.M.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[74,771],"class_list":["post-8596","post","type-post","status-publish","format-standard","hentry","category-uncategorised","tag-blockchain","tag-city-am"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/8596","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/comments?post=8596"}],"version-history":[{"count":4,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/8596\/revisions"}],"predecessor-version":[{"id":16229,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/8596\/revisions\/16229"}],"wp:attachment":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media?parent=8596"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/categories?post=8596"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/tags?post=8596"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}