Tuesday, December 11, 2018

Why blockchain will not work as expected

I want to explain why I think that blockchain will not take off.

It was built on the concept of avoiding a trusted third party. This was necessary when one is creating a cryptocurrency. But it will not work well in other situations. In fact, it will be costly and troublesome to manage.

Why is there a need to avoid a trusted third party anyway?

When I use GMail, I have to trust Google. When I use Facebook, I have to trust Facebook (Mr. Zukerberg).

If I don't trust Google, I can go to Yahoo, Microsoft or other e-mail platforms.

My point is that it is better to select a trusted party.

There will be situations where a new platform has to be developed for a specific need and to cater to a defined group of users. For example, a logistic platform for a defined community of shippers and ship owners.

This community can form a cooperative (which they jointly own and control) to be the trusted party to manage the platform.

Apart from owning the trusted party, there is also the need to ensure that the trusted party manage the platform properly. This can be achieved by transparency and audit. All the users should have the means to satisfy themselves that the platform is operating properly. They can look at the audit reports to ensure that the control totals are matched every day.

There is also technology available that allows the transactions to be stored in a duplicate database, to be used to verify the transactions, in case of fraudulent alterations.

There are effective ways under the current technology to ensure transparency and audit. There is no need to go through the blockchain technology, which I consider to be cumbersome and costly.

In the year 1999, there was a lot of hype about the Y2K issue. Many governments around the world, including our own govt, fell for the hype and invested hundred of million dollars to prevent this Y2K issue. The consultants made a lot of money by providing their services for an imaginary and over-hyped problem.

I think blockchain could also be a similar situation.

Let me put in a caveat. There will be situations where the blockchain technology make sense, e.g. cyptocurrency. But these situations will be limited. It will not be extensive.

In case some blockchain enthusiasts think that I am talking nonsense, without understanding what blockchain is, I must declare that my knowledge is limited to watching this video. It is enough for me to form an opinion.

Click here.

Let us wait and see.

Tan Kin Lian




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