Blockchains: what are they good for? Quite a lot as it turns out, but not yet

Don't believe the hype, says the Open Data Institute's James Smith

Blockchains are at the peak of the hype cycle, resulting in headlines of the "cure for cancer" variety. Most of the projections made for them are wishful thinking, attempts to separate lenders from their cash, or old ideas recycled, said Dr James Smith (pictured), head of labs at the Open Data Institute (ODI), who has put together a technical report on blockchains with the support of Deutsche Bank.

"A blockchain has a set of unique properties, and if you need those unique properties you can do things in it that you couldn't do before, but there's still a lot of hype going on," he said. "Get IoT and blockchain into your proposal you'll have funders knocking at the door, even if you don't really know what you're going to do with them yet."

The unique properties of the blockchain are automated decentralised consensus, in which the system decides automatically whether a requested transaction is valid or not, and the immutability of the data held on it: the Bitcoin blockchain holds a record of every transaction ever carried out in that crypto-currency, and will maintain it - in theory, at least - forever.

These properties, and the fact that crypto-currencies can support an internal market, have led to ideas for new types of business, he said.

"People are using decentralised technology to build decentralised organisations, so they are resulting in a whole new way of looking at business."

However, most of this technology is very new and prone to unforeseen problems: witness the failure of the DAO, an early attempt to create such an organisation which lost millions as a result of an oversight in the way it was programmed. At present it is a technology looking for a use case.

"A lot of it is still very technology-led, rather than application- and user-need led," said Smith. "We haven't seen many use cases that really fit."

There are exceptions to this rule, though. Supply chain management is one area in which blockchains can be genuinely useful.

"We like the use case of supply chains; tracking things through global supply chains which might have millions of organisations, none of which trust each other. At the moment this is being done in a small way for for luxury goods only. It will be hard for food, for example, because how do you create a secure digital record for a pig?"

A solution looking for a problem

The well-documented problems with blockchains - the lack of scalability, slow performance and the enormous energy consumption required by the proof-of-work system of security and consensus - mean that they are simply not suitable for some of the uses proposed for them. For most present-day applications organisations would be better off sticking with a standard database, or looking at changes to the existing web.

"The web itself is a distributed technology. By building open standards and interoperable standards, we can do a lot of that stuff anyway without the complex overheads," said Smith.

Asked about Accenture's recent patenting of an "editable" blockchain, an apparent oxymoron, he said: "It's hard to see why you'd do that; you've just got a fancy database and I don't think you know why."

The draw of decentralised technologies such as blockchain is that they allow for trustless relationships between transacting parties in which no third-party involvement is required. However, this architecture and the principles embedded in it can lead to technical difficulties when it comes to replicating features from current technology stacks into the decentralised world. Take the search engine, for example.

"We put a load of Food Standards Agency data onto a blockchain, then we thought, how do we find this stuff again?" Smith said.

"Unless you've got the whole corpus of data or your own search index - which not everyone wants as it will be very big - then you have to get someone else to index it for you, but then in a decentralised trustless network you're suddenly trusting the search engine."

Some work is being done to build a search engine into a blockchain but it is at a very early stage, he told Computing.

Blockchains: what are they good for? Quite a lot as it turns out, but not yet

Don't believe the hype, says the Open Data Institute's James Smith

This gets us into the area of private blockchains (the sort favoured by institutions such as banks and large corporates in which a trusted party must hold the keys that allow other selected parties to join), and questions as to how such sidechains communicate with the public blockchains and the wider web.

"There is a trade-off between security and size," said Smith. "When is it right to split and merge these chains or merge with the wider web? How do we link these things together?"

Another area of contention is how much personal data you should put into a public blockchain.

"Data on these systems is inherently publicly shared with everyone," Smith told the audience at the dataIQ Future event last week. "I might want to publish some of my personal information but I might want some of it to remain private. Who wants to publish their bank statement online?"

Then there's the double-edged sword of immutability.

"A blockchain cannot be changed so it's very tempting to say 'well, the truth is the truth', but official truth is somewhat more bendy. Real life is a bit more woolly. We have the right to be forgotten. What if some of that information is in a public blockchain? Not all information should be immutable."

Immutability poses another problem in that encryption algorithms typically have a lifetime of about 20 years (and most will be doomed as soon as quantum computing breaks out of the lab), meaning that any information in a blockchain, even if it is encrypted, cannot be assumed to be safe for ever. The fact it cannot be deleted may therefore be problematic.

"It's really important to note that they do not solve privacy issues. They're really only useful for proving authenticity of transactions, authenticity of who's looked at what, but not as a way of protecting sensitive information," Smith said.

The decentralised stack

Which is not to say that new use cases will not emerge, particularly as blockchains become part of a larger stack. The technology is part of a wider movement to wrest control away from the "walled gardens" imposed by the tech giants.

"The advantage of distributed systems are plenty so we'll see more and more of them," Smith told Computing.

"We're of the opinion that any workable distributed solution is going to need multiple technologies. It won't be, like, we'll have a blockchain and we'll put everything on it. We'll have something like IPFS for distributed storage, BigchainDB for distributed databases in the traditional way, a blockchain, perhaps, for audit purposes, and maybe the more complex Ethereum-type stuff for logic. So there's an emerging stack but there's a whole load of distributed technologies.

"Most of the distributed projects are still in their infancy. IPFS is interesting, there's Solid, Tim Berners Lee's venture, but they've yet to find their killer app, as it were."