Bitcoin, Blockchain, and Distributed Ledgers
What questions should we be asking?
This distributed ledgers report takes a deeper look at the business, regulatory and practical implications of the technologies that underpin them.
Bitcoin and blockchain have triggered a new technological gold rush. If we're to believe the hype, there's no problem that can't be solved by putting it ‘on the blockchain’. Proposals are flooding the market: from blockchain-enabled payments, through to identity management solutions, and Amazon and Uber killers – all powered by blockchain. It all sounds too good to be true, much like cloud computing did in its early days.
Bitcoin, Blockchain & distributed ledgers: Caught between promise and reality builds on the foundations laid down in the last report, The Future of Exchanging Value: Cryptocurrencies and the trust economy (FoEV) published in January. Where FoEV focused on the emergence of cryptocurrencies, this report takes as deeper look at the business, regulatory and practical implications of the technologies that underpin them.
The challenge is that blockchain is a limited technology. Bitcoin – the genesis of the technology – can only process a few transactions a second and is already struggling with performance limitations. It also relies on a community of anonymous miners to process all transactions. Replacing the miners with a consortium could help solve the problem but makes the solution look like a private platform, and then you have to ask what you’ve actually gained. This problem is compounded by enthusiastic marketing where the term ‘blockchain’ is being stretched so thin it has become nebulous.
We believe that, like cloud, the emergence of blockchain does signal something new. However, the challenge is to cut through the noise and understand what new capabilities are implied, what new solutions are enabled, and what solutions are beyond the reach of the new technology. To put it more succinctly, we need to realise what blockchain can and cannot be.