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Communications of the ACM

Economic and business dimensions

Blockchain Revolution Without the Blockchain?

Blockchain Revolution without the Blockchain? illustration

Credit: Zapp2Photo

Blockchain has attracted a lot of attention. Many are excited about this new technology based on a public, permissionless, distributed ledger that cryptographically assures immutability without a need for a trusted third party and allows for smart contracts. Large and small companies want to get on board, as they expect this technology will lower their costs by making transactions quicker, safer, transparent, and decentralized. However, the technology behind the blockchain is for the most part not well understood—there is no consensus on what benefits it may really bring, or on how it may fail.

A more careful look into the technology reveals that most of the proposed benefits of "blockchain technologies" do not really come from blockchain. Smart contracts, encryption, and distributed ledger are separate concepts. The three may be implemented together, but they do not need to be. Most of the proposed benefits come from encryption and smart contracts. But encryption and smart contracts do not need blockchain.


Martin Smith

A very refreshing reality check on the hype around blockchain. So much of the excitement is driven by a mesmerizing combination of crypto-coin get-rich-quick scams, vast over-estimation of the value of eliminating a middleman, and the very muddled idea of trustlessness.

A better grip on what is denoted and connoted by "distributed" is also needed. In some discussions It seems to relate to achieving trust without a trusted third party; in others it seems to imply system resilience against unavailability or data loss or integrity. As the author points out, the former quality is not guaranteed by technology alone, and the latter is a known challenge with known solutions with known trade-offs. And of course most high-value "centralized" systems these days are only logically centralized while very often being physically distributed.

Can't we just dispense with "distributed" and talk about "immutable ledgers?"

And what about "shared?" Again, almost any commercial data service is "shared" in that it is designed to be read and/or changed by multiple parties, whether the general public or some defined set of "permissioned" parties. The real issue is eliminating the cost, delay and errors of ledger reconciliation. And the real obstacle to that has little to do with technology, since any Ledger-as-a-Service offering could achieve that. The obstacle is getting all relevant parties to use the same LaaS service, or, much more feasibly, standardizing ledger transactions so that an arbitrary set of parties can share a record of their transactions while each is subscribed only to the LaaS service of his choice.

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