Blockchain — hype vs reality

I was at a Fintech conference last week where (not surprisingly) there was a lot of talk about blockchains and their potential impact in the banking and insurance sectors. There seem to me to be two issues that don’t get enough attention (although wiser heads than mine have written about both):

  1. The current implementations are much too heavy-weight to survive. I’ve seen numbers like 0.2% of the entire world’s energy is already going to drive blockchains, the response times are too slow for many (?most) real applications, and the data sizes that can be preserved on a blockchain are too small. This seems like a situation where being the second or third mover is a huge advantage. For example the Algorand approach seems to have substantial advantages over current blockchain implementations.
  2. The requirement to trust an intermediary (disintermediation) changes to a requirement to trust the software developers who implement the interfaces to the blockchain. There are known examples where deposits to a cryptocurrency have permanently disappeared as the result of software bugs in the deposit code (video of a talk by Brendan Cordy); and this will surely get worse as blockchains are used for more complex things. The fundamental issue is that using a blockchain requires atomic commit operations, and software engineering is not really up for the challenge (although this is an interesting area where formal methods might make a difference).

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