As we approach Bitcoin’s 10th anniversary at the end of this month, we ask whether blockchain – the technology underpinning the cryptocurrency – is fulfilling its promise, or a tech still looking for a better reason to exist.
There have been some very grandiose claims made about blockchain.
Some say it could help solve the Irish border issue currently bedevilling Brexit negotiations, or enable people to find love, or even end world poverty.
A daily barrage of press releases claim it will “revolutionise” business.
But what’s the reality? Well, let’s start with the basics.
What is blockchain?
At its heart, blockchain is a relatively straightforward concept. It is a ledger of blocks of information, such as transactions or agreements, that are stored across a network of computers.
This information is stored chronologically, can be viewed by a community of users, and is not usually managed by a central authority such as a bank or a government. Once published, the information in a certain block can’t be changed.
If people try to tamper with that information, it becomes obvious.
This is a powerful concept. Ten years ago, blockchain was combined with other technologies to create cryptocurrencies, and the first blockchain-based cryptocurrency was Bitcoin.
So why all the hype?
David Gerard, author of Attack of the 50 Foot Blockchain, blames the hype on the cryptocurrency gold rush that has seen billions flow into the hundreds of digital currencies now on the market.
“The reason people followed this stuff is because of the promise that you can get rich for free. That’s a very powerful promise,” he says.
“This is why we have Bitcoin mining wasting a whole country’s electricity.”
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Tech vendors and consultants have fanned the flames, trying to cash in on the mania, Mr Gerard believes.
“It’s magic beans,” he says. “But it turns out magic doesn’t happen.
“All the people selling magical flying unicorn ponies, and writing in detail about the measurements of the wing feathers, are ignoring that unicorns don’t exist.”
The US National Institute of Standards and Technology (Nist) warned in a recent paper, that: “There is hype around the use of blockchain technology, yet the technology is not well understood.
“It is not magical; it will not solve all problems. As with all new technology, there is a tendency to want to apply it to every sector in every way imaginable.”
How can blockchain be used?
Gartner analyst Rajesh Kandaswamy says that even though speculators mostly see blockchain as “a mechanism to make money, that doesn’t invalidate the technology”.
The ability for two parties to interact without a middleman is a “fascinating concept”.
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Smart contracts – self-executing agreements between buyers and sellers recorded on a blockchain – are “really powerful”, he says, as is the idea of a decentralised digital identity.
It would mean that rather than storing personal details with one firm such as Facebook, users would be able to store their encrypted details over a network.
“There are so many possibilities. We haven’t even scratched the surface yet,” Mr Kandaswamy adds.
Who is using it then?
Few firms have fully embraced blockchain, according to consultancy CapGemini.
In a recent survey of firms looking to use the tech, 3% had large-scale use, 10% were piloting it, while 87% had only tested blockchain proofs of concept.
Perhaps the best-known start-up using it is Ripple, the payment settling system and currency exchange proving popular with financial institutions around the world, including Bank of America and Santander.
And there is a lot of interest among the very biggest companies.