Block Chain Burdens
Blockchain buzz is everywhere. Yet, do you know that Gartner estimates about 90% of enterprise blockchain projects launched will fail within 18 to 24 months. The white elephant in the room is, most enterprise blockchain projects do not require this technology. In fact, these projects would do better if they did not utilize blockchain. If you look at the Gartner’s hype cycle, blockchain is at the peak inflated expectation. This is an indication that a trough of pessimism is still widespread and technologists must steer thoughtfully.
The current generation of blockchain technology has significant limitations in various areas. Leaders funding them or architects designing them should be aware of its limitations. Often, enterprises that are on board with blockchain are vulnerable to a freefall towards failure. The following are some issues that teams sometime overlook or take for granted. Ironing out these ahead of time can curtail this free fall.
Never assume that current technology is production capable: Despite the market being flooded with 50+ blockchain platforms today, it is only the Bitcoin and Ethereum blockchain stacks that are proven in par with production capabilities and scaling. As per Gartner, it will take +/-24 months for any stack to mature, provided considerable amount of effort is invested on the POCs. Experimentation and learning is critical.
Purpose vs. Fad - Failure in grasping the core purpose of Blockchain technology: Blockchain technology at its core is all about providing/adding trust to an untrusted environment and then gaining the benefit of the distributed ledger mechanism. This core doctrine is nullified when private blockchain deployments relax the security by favoring a centralized identity management mechanism that obviates the trustless assumptions. A better method would be to choose solutions for areas where untrusted actors are prevalent.
Confusing future with present. The current blockchain technology has limited capabilities, and will not meet all the requirements to enable the programmable economy. When considering long term investments, leaders must consider its evolving capabilities including the legal, accounting and regulatory maturity. For example, after investing considerable amounts of money and resources towards blockchain, what if there is a legal legislation on privacy act changes that goes and curtails the idea? The effort sinks.
It is a limited technology with foundation-level protocol and comparing it with matured business solutions gives false hopes: The blockchain technology is at the foundational level. However, the hype surrounding it is so high and often used in combination with innovative and mature solutions such as supply chain or medical information management systems. This can create a false hope for leaders to assume the current state is enough to complete a full application solution. The reality here is, blockchain has a lot of evolving to do before fulfilling any matured solutions. You should view blockchain portions to be less than 5% of the effort when considering “ambitious” blockchain projects.
Blockchain is not a database or a storage mechanism. The idea of distributed ledger makes it look like a data persistent or distributed data management system. Blockchain offers a sequential, append-only record of significant events. Blockchain has limited data management capabilities in exchange for a decentralized service to avoid trusting a single central organization. This trade off should be understood clearly when designing a comprehensive enterprise solution.
Interoperability myth– Most blockchain platforms lack Interoperability. Integration with other enterprise systems are extremely limited or non-existent in most cases. There are no standards governing blockchains. Do not expect interoperability across different blockchain platforms anywhere in the near future. It will take many years for the blockchain technology to mature around interoperability.
Risky Transient Vendors/Platforms: The market is bursting with 50 or more vendors and their budding platforms. With low platform maturity, investing on a vendor is risky. The vendor might not last long. Do not assume the blockchain platform selected will offer longevity. Use the lessons learnt from the e-commerce bubble, enterprises should consider blockchain options for short-term projects only.
Assumption over the programable economy: A smart contract is a set of programable polices in which the blockchain operates. In simple terms, they are like macros on a spreadsheet. Smart contracts at its current state lacks scalability, veracity, manageability and audit capabilities. There is no legislative governance or any legal framework for their application. It will take many years for any legalities to materialize and mature. Decision makers should be very cautious when developing smart contracts and considering blockchain offerings. A legal counsel must be part of the process.
“Utopia” of costing less: Blockchain is made up of multiparty peer-to-peer systems working in tandem. The hypothesis is that blockchain platforms will cost less than current systems. For this “utopia” to realize (become reality, come true, happen, occur?), all existing applications should be completely migrated to blockchain technology or retired, which is practically impossible.
Who will fund, govern, manage the peer-to-peer distributed networks.?
Who will pay for the infrastructure when multiple parties are involved? This question is completely unknown for now. Additionally, when the systems scales, so will the cost. Multiparty systems are complex to govern. They require innovative approaches to govern, secure and manage cost economics. This raises many unanswered technical, political, societal and organizational questions.
Thanks, some important considerations before launching into a blockchain program.
stats that i read recently - The Bitcoin (blockchain) miners attempt 400 to 450 thousand trillion solutions per second in efforts to validate transactions, this is some substantial computing power that draws a lot of energy. - too costly and resource redundancy.
Nice article Srikanth. I couldn't agree more on the core of the technology: the democratization of trust. It is all about disintermediation. However, I often hear vendors offering solutions to issues that are mistakenly labeled as blockchains. Just like you said, these private blockchains "relax security". I would say they practically eliminate it. The security of the Bitcoin network has proven, over 8 years, to be flawless. Private blockchains, in their majority, are NOT decentralized and the few players that participate are KNOWN. As a result, there is no true reward for security. The beauty about bitcoin is that you can spread security so thin across millions of unknown participants making it practically impossible to cheat the system. IMO, Bitcoin is still the only true blockchain in production, but tx speed is still an issue that hampers its ability to be "production capable". Bitcoin can process an average of about 5 tx/sec. Ethereum can process about 20. Hyperledger claims about 100, but not sure what flavor they are referring to (fabric perhaps?). This is not yet enough to capitalize on its potential, hence not really production ready to hit the masses. Compare the above to Visa's >1800 tx/sec or even Paypal's 200 tx/sec. While speed is still an issue for Blockchain technology, solutions are in the make. For instance, Segwit2x is meant to help Bitcoin's tx capacity (some estimating about 5k-8k tx/sec, though not sure I follow the math behind this) since it has doubled its block size, but it will take time until it happens since for all txs to be considered Segwit txs, all wallets, exchanges, etc...basically all software used to validate txs in the bitcoin network will have to be upgraded. That will take months... if not longer. Perhaps then we may see other blockchains, even permissioned based ones pegging back to the bitcoin network to leverage its security. In terms of interoperability, the lack of standards is certainly an issue. The internet took off thanks to TCP/IP and SMTP. However, take a look at interledger.org, an open standard in the make for Blockchain. Curious what your thoughts are
This is a very cogent article on some blockchain limitations from the business model to the technical levels I'm convinced that many are missing the point of the key innovation - maintaining the provenance of a digital object through consensus -- without a single trust agent. As well shown, blockchain does not solve identity management, outsource your database, or make coffee.
. I wrote about it last year too - https://www.garudax.id/pulse/blockchain-srikanth-devarajan