Blockchain is an idea whose time has come. By which I mean it’s still mostly an idea, and is currently the only thing tech people want to talk about. But it’s in danger of getting hyped out of control, which in the end will damage it.
So what actually is a blockchain? Very broadly speaking, a blockchain is a way to store information. Boring, yet possibly revolutionary. A copy of every transaction between people is stored on a chronologically ordered, secure database, and identical copies of that database are hosted on multiple computers. New transactions can only be added once they have been verified by other computers, and it’s not possible to edit, change or delete old entries. It’s like a massive, public, tamperproof spreadsheet that everyone can view or add to but no-one is in charge of. It’s possibly revolutionary because it changes the way information is stored (multiple databases simultaneously), verified (by everyone) and controlled (records can be viewed, but not copied). The first blockchain was bitcoin, but there are now lots of others.
Blockchain has become the must-have word for thought-leaders, on their business cards, presentations, Twitter profiles. I understand why – thought-leaders need thoughts, and those thoughts need to be cutting edge. ‘It’s not bitcoin that’s truly revolutionary’ says almost every fresh thinker these days, ‘it’s the underlying tech, blockchain’. Cue knowing nods, more consulting gigs, more Ted-style talks.
It’s ideal for thought-leader hype because, being general purpose, newish and well-resourced, the possibilities of what it might do are endless. The crypto-currency website Coinbase recently put together a list of things people are promising. Get ready to be blown away. Blockchains can, among other things, decapitate banks, underpin our smart cities, run our energy consumption, and become the new internet backbone. They will completely transform all businesses, industries, the justice system, healthcare and solve voter fraud. In fact, they will end hunger and poverty. And maybe war. And gun death, climate change, and financial crises. There’s nothing they can’t do, no questions for which the answer is not ‘stick it on a blockchain.’
A new cryptocoin which claims to be a blockchain solution for the dental industry is valued at $1bn (£760m). Initial Coin Offerings (where money is raised for new blockchains, sometimes questionably) for ideas without any discernible business model are raising millions. A crypto-currency with a dog’s face for a logo, quite literally set up as a parody, has a market cap approaching $2bn (£1.5bn). Even Guardian columnist Will Hutton is in on it, calling it all transformative.
Here’s the problem: there are problems. Blockchain technology is undoubtedly brilliant – some reckon it is as important as the internet itself – but it also presents a lot of difficulties that need plenty of time and work. Some are technical, like the cost of mining and the tendency toward centralisation (irony klaxon). The growing environment cost of mining bitcoin is another. Others are practical but extremely important: building tech is one thing, working out the boring applications to an existing business model is quite another. Some of what blockchainers promise could probably be done by shared Excel spreadsheets – you don't need distributed ledgers and proof of consensus for everything, no matter how new it sounds. There’s more: advocates on the block scene often say that blockchains ‘prove’ a state of affairs, as if it’s some magical truth finder. It doesn’t do that, of course, it just proves that a piece of information or transaction was added to a database at the time recorded. That means that inaccurate and illegal information could also be stored on an immutable public ledger, never to be corrected. And then there is the question of how this all bumps up against real world power. I’ve heard some of its more enthusiastic fans claim that blockchain land registries will make it impossible for corrupt governments to seize land from poor people, since they’ll have an immutable proof of ownership. This is not how guns or power or corrupt governments work.
I’m not saying that blockchain isn’t important or exciting, because it is. I’ve been writing about it since 2013, which is why you might detect a hint of jealousy. In the prehistoric year of 2015, I wrote a feature on Ethereum (the most famous blockchain after bitcoin) for the Spectator, and another for the Observer, where I suggested it might change payment systems in the music industry. In 2016, I interviewed Ethereum founder Vitalik Buterin for BBC Click, and examined how it might change governments in my recent book Radicals. There are lots of applications, especially in financial services, proof of ownership, supply chain information, and more besides.
The risk is that we expect too much of this extremely clever new tech, fuelling a hype-investment-disappointment cycle. I worry that a lot of organisations will rush toward blockchain solutions, and grow disillusioned two years later when they realise it wasn’t quite as easy as our dear thought-leaders made out. The current volume of investment, conferences, talks, meet-up groups, consultancies and Twitter experts far exceed what it’s actually achieved. Even bitcoin, the undisputed and highly-priced blockchain prince isn’t getting picked up all that quickly as an actual functioning currency. This sort of thing happened twice already in the field of AI research. In the early 1970s, and then again in the late 1980s, periods of irrational excitement about the prospects for artificial intelligence led to companies founded, money invested, and promises made about how everything was about to change. When expectations for major advance were not met, there were dramatic cuts in research funding and corporate investment. These become known as the ‘AI winters’ – and set the whole field back several years. A blockchain winter would do the same, and the potential of this new technology would be lost to a sad collection of wild hype, windy promise, overpaid consultants and utopian dreams.