Even though the decentralized ledger appeared much earlier than that, the true craze about its potential happened in 2018. This was also the year that investors started asking the question, “What is Bitcoin?” Companies from various industries used this momentum to explore the opportunities for blockchain to improve or replace their current imperfect systems.
However, time passed, and the blockchain craze died down, though not entirely. Cryptocurrency has turned into a regularly traded asset, and the internet is still rife with alleged new ways for the blockchain to change everything we do. We dug deep for the truth hidden under all the bold claims, and the results may surprise you – they certainly surprised us. Read on!
Replacing simple solutions with complex ones
The blockchain is a distributed ledger run by a network of computers that add new entries to it or check existing ones by performing complex cryptographic functions. There is no central system entering new entries in a ledger for a fee, and every networked computer (a.k.a. node) has access to it, allowing for total transparency. All users in the blockchain share the records and see new entries.
Compared to the centralized ledgers that banks use, blockchain is a game-changer. It revolutionizes how we think about logs and how it can make them faster and more compatible with emerging technologies. Therefore, it made sense that the blockchain hype drove many companies and investors to attempt to implement this revolutionary technology in the service of improving already established systems.
One example of this was aimed at recording property transactions. In 2017, startup Propy got in touch with South Burlington city clerks to try out a pilot project for storing land records more reliably and safely.
Propy started small by using blockchain to store the city’s historical data. After a year of work, the company showed the results to the city clerk, Donna Kinville, and received a cold reception. While the data was logged as well as they could have been, there was not much else blockchain could improve compared to the system Kinville and her colleagues were currently using. What’s more, there were many features this type of solution lacked, for example the capacity to link documents from the same database. If any issues occurred, there would be no easy way to bypass them as there is with technical support from established business solution companies.
Unfortunately, the blockchain tech was too complex for such quality-of-life improvements. While it did get notes on its solution, one thing became crystal clear to Propy’s founder: Blockchain tech was not a good solution for a government system.
The problem is that blockchain has great potential as a foundational base for innovation, but it’s not the sort of technology that can just easily replace established systems. Completely new business plans might start with blockchain-based systems and have better results than the previous attempts at integration, but we will have to wait quite a while to see that. Many early adopters of the blockchain hype missed this note and got burned.
Playing to the tech’s strength
Some implementation attempts have been moderately successful, however. Investors are still very much interested in investing in cryptocurrencies, which allows a part of the blockchain hype to live on and evangelize about the benefits of blockchain technology.
For starters, this type of ledger is open to everyone, and no one can control it. No one can remove an account from the blockchain, and all new entries are entirely transparent. It eliminates ledger entry manipulation, to which centralized ledgers are susceptible. Similarly, blockchains are highly resistant to any cyberattacks. Thanks to their decentralized nature, hacking them is nearly impossible. Bad actors would have to hack over 51 percent of the blockchain’s nodes and tamper with the transaction history. So far, this has happened only twice, and the lost money was secured or restored both times.
Just as blockchain removes third parties from an exchange, companies could use this technology to oust intermediaries from their transactions. In theory, using blockchain could significantly boost productivity and simplify business bureaucracy.
A match between blockchain and artificial intelligence offers even more potential. AI could provide the data-mining boost many companies need by locating and archiving blockchain entries incredibly quickly.
Blockchain technology has survived its initial wave of hype, although with mixed results. While it holds undeniable potential for a new way of doing business and dealing with data in general, in its current form, it is not compatible with the needs of most users. We have to take many steps before we can actually use blockchain to solve the issues for which it seemed like a magical remedy in 2018. Until then, the hype will continue to disappoint some and surprise others.