Decoding Blockchain (1/3) — The trust engine and disintermediation fallacies
Some marketers, salesmen, “evangelists” and journalists push hard the “blockchain will revolutionize X” narrative. When it is not backed up with a detailed cost / benefit analysis, such claim should be ignored because it is an unfalsifiable argument similar to “Bigfoot exists”. One sentence at the end of the article often states that there are still some challenges or that the technology is not mature yet. This is as useful as saying “colonizing planets outside the solar system will change the world, but technology is not available yet”. In theory many things are possible, it does not mean that they are practically feasible or even desirable. “Thanks to bio-technologies we could create a living unicorn in the future” is a plausible assertion, but what would be the associated effort in cost and time to get there? And is there a demand for it?
To help elevate the honesty level of the debate, I offer to clear three misconceptions about blockchain technology and to provide a framework to assess when it is desirable:
In this article I use the term “a blockchain” in the broad sense of “a distributed system of records that leverage cryptography to provide a decentralized control of the read/write access to independent participants”. This concept includes two main categories: strong public POW blockchains (anyone can join the network and participate in the consensus) and pseudo-blockchains (centrally governed public systems, permissioned systems or any other variant). Most of the examples are taken from the finance industry and can be generalized to other industries.
Blockchain technology does not “solve” trust. It helps address some trust issues at a technical level, but any system requires some level of human trust. More specifically:
In a centralized environment, the consumers must trust the service provider or the third party managing the distribution of the services. This is fundamentally the same in a distributed environment where users must trust that the network of servers running the software will function according to the publicized specifications. The issue is that most people can’t read and understand the code, so the only option is to trust the robustness of the code review and the testing process performed by others.
This is no different than using any other online service. By using Amazon platform, consumers trust that they will receive the product or service in exchange for their money. Do you have faith that Amazon will “execute the code exactly as written”? Of course, you do! Amazon has a big incentive to do so: its reputation, which drives revenues. Do you believe that your wealth is safer with Bitcoin or with Chase? In theory, a blockchain might be more secure than other systems. In the real world, it does not make any difference for the average user: it is only a matter of reputation and faith. No system can be fullytrusted, but they can be trusted enoughto be adopted.
Even if you believe a blockchain will behave as expected, this trust is broken as soon as:
a) Humans are added in the process.
