Where’s The Blockchain Killer App? Maybe It’s Buried Underneath All the Hype!

Photo credit: University of Agder

“Our approach, as it turns out, echoes others in the field who question whether the benefits of Blockchain add value above and beyond existing technologies, or accrue to stakeholders beyond the donors that fund them.”

This article on ICTworks really brought all the feelings I’ve been having about Blockchain and distributed ledger technologies (DLTs) to the fore.

In recent times, I’ve been struggling to determine where blockchain has demonstrated its immensely promised value, delivered true market or stakeholder value, or disrupted an existing ecosystem. And thus far, what I keep coming up with is that “blockchain is truly a solution searching for a problem.” Most of all, many of its enthusiasts and proponents are generally conceptual thinkers and snake oil salespersons who have little to no experience delivering secure, integrated, complex systems.

My confidence in blockchain is not low because Initial Coin Offerings (ICOs) started with so much promise as an innovative way to secure capital for startups, but quickly morphed into get rich quick scams that relieved thousands of ill-informed crypto enthusiasts of their collective wealth. I am not a blockchain skeptic because Bitcoin seems like nothing more than a vastly inferior way to consume massive amounts of electricity in pursuit of an energy-wasting, climate changing, speculative investment commodity (and one which fails spectacularly as a payment system). I am actually willing to concede that the combination of immense capital and technical effort being channelled towards Blockchain projects will ultimately yield results. At present, the space is just really noisy and most approaches are deeply flawed.

Interestingly enough, the founder of Ethereum, Vitalik Butelin, believes that Blockchain will never have a killer app. In ‘The Value of Blockchain Technology’, he maintained:

“There will be no ‘killer app’ for Blockchain technology. The reason for this is simple: the doctrine of low-hanging fruit. If there existed some particular application for which blockchain technology is massively superior to anything else … then people would be loudly talking about it already. … And so far, there has been no single application that anyone has come up with that has seriously stood out to dominate everything else on the horizon.”

Then why are we focusing so much resources on the technology I am forced to ask? Experts and pseudo-experts have touted several ‘revolutionary’ use cases for Blockchain: digital gold, micro-payments, smart contracts, digital identity, medical records, digital currencies, tokenized securities, intellectual property, IoT, online gaming, and the list goes on and on. Cryptocurrencies, once thought to be the surefire, can’t-miss application for Blockchain, have been tanking in the marketplace for obvious reasons such as scaling challenges, regulatory pressures, security pressures and general accessibility. This insanity around ICOs and use of Blockchain has seen companies formulating such a huge catchall for what the technology can achieve that they’ve regularly ventured into the realm where secure, clustered databases would be a more effective solution. Sigh!

But let’s circle back to security for a brief moment. While the blockchain itself is pretty secure if properly executed, this doesn’t mean that it has no vulnerabilities. One of the key issues is that the technology is relative new, and there are not sufficiently experienced developers who know how to properly secure blockchain solutions. Issues with scaling also have to be considered (i.e. transaction complexity and volumes can easily compromise an improperly designed blockchain). Additionally, in the absence of adequate IT governance, risk and control, third-party interfaces (e.g. exchanges, wallets, fintech partners, payment processors, smart contracts, etc.) are easily the weakest links in the Blockchain ecosystem. We have seen more than enough instances where poorly hardened systems connected to the blockchain have resulted in theft of financial assets. The decentralized nature of blockchain platforms makes it even more challenging to respond to security deficiencies, given that consensus (time and energy) needs to be achieved to fork a particular implementation of the blockchain. This is not always achieved in a timely manner.

I am not saying that blockchain doesn’t potentially have real, valuable use cases. As previously stated, there are some extremely bright individuals working on developing blockchain systems and platforms, and oodles of capital funding their work. Hopefully while I still have breath in my lungs, I will see a Blockchain product or service that is truly life-altering. But so far, there’s enough evidence to state with confidence that blockchain has been mostly bluster and little benefit. More specifically, 10 years in there is no industry where this technology has rendered its competitors obsolete. There have been thousands of great ideas (and thousands more that have been not so great), but where the rubber hits the road, execution has been incredibly poor. Maybe, just maybe, blockchain’s killer app is already here and we just haven’t realized. Or it’s simply never coming.

Why Bitcoin Will Not Solve the Caribbean’s Financial Inclusion Woes

What is Bitcoin? Is it electronic money?

There’s a deluge of hype around Bitcoin and blockchain technologies right now, and policymakers and regulators in the Caribbean are doing their best to wrap their heads around the advantages and disadvantages of this virtual currency. Similar questions are being contemplated in the ICTs for development (ICT4D) community, taking into account that electronic money (e-money) platforms such as Safaricom’s M-PESA have essentially solved the financial inclusion quandary for millions of people in Kenya. The service has now even expanded to Eastern Europe, Afghanistan, and India.

Besides sharing the characteristic of being digital, how do Bitcoin and e-money compare, especially with regards to reaching individuals who have previously been unable to access traditional financial services? Presently, there appear to be more differences than similarities between the two, and it’s critical not to confuse virtual currency with e-money.

Blockchain, in brief, is a record of digital events, distributed across multiple participants. It can only be updated by consensus between participants in the system, and when new data is entered, it can never be erased. The blockchain contains a true and verifiable record of each and every transaction ever made in the system. Launched in 2009, Bitcoin is a virtual, private currency that uses blockchain as an underlying, immutable public ledger. Bitcoins are ‘mined’ using distributed processing power across a global network of volunteer software enthusiasts. The supply mechanism is designed to grow slowly and has an upper limit of 21 million units as determined by a built-in algorithm. There is no central authority that controls blockchain or Bitcoin. There are no central banks that can be politically manipulated; and no way to inflate the value of a national currency by simply printing more money. Economic libertarians are ecstatic at the very thought of this. However, competing virtual currencies can be created that could have the net effect of devaluing the original.

Contrastingly, e-money is not a separate currency and is overseen by the same national regulatory authority that governs the printing of fiat money – as is the case with M-PESA and the Central Bank of Kenya. It’s an extension of a national currency like Jamaican dollars or Netherland Antilles guilders for use over digital networks to reduce the costs associated with handling physical cash. More specifically, it’s a one-to-one electronic store of value pegged to the cash receipt of the equivalent amount. To mitigate against risks like money laundering, terrorist financing, consumer protection, etc., the cash against which e-money is issued most often has to be deposited with fully regulated financial institutions.

The issue of financial exclusion

The issue of financial exclusion can be summarized into 2 categories: unbanked and underbanked. Unbanked individuals do not have an account at a regulated financial institution, while underbanked individuals have accounts, but frequently use alternative or unregulated financial services.

Before elaborating on the key factors behind financial exclusion, it is important to detail the effects of being unbanked to illustrate the severity of the problem. Unbanked individuals are faced with a heavy economic burden […]

The full article can be found on the CircleID website at: https://goo.gl/zn7Yg9