There is no revolution without misconceptions. Blockchain technology is the latest of the revolutions that begun in the inherently rebel world of technology. And as every emerging technology generate extravagant expectations so was the case for the blockchain enthusiasts.
Here some reasons why we should proceed with caution.
Blockchains offer a more slowly and even more complex way of executing transactions. In fact, blockchains do not simplify the way people cooperate. They just reallocate the complexity. In a centralized system a user is verified once for a lifetime while in blockchains every single transactions demands a separate phase of the parties’ signature verification. In a centralized system, every input is verified by a centralized system in the blink of an eye while in blockchains the verification process is a demanding procedure.
A great advantage that blockchains have is that they render data immutable and irreversible. A great disadvantage that blockchains have is that they indeed render data immutable and irreversible. No human being hasever managed to quit from the possibility of being wrong. Blockchains have also no room for the “Right to be forgotten”.
Apart from the possibility of hacking attacks that are realistic yet enigmatic, there are also some other security obstacles on the road to the mass adoption of this technology. In a blockchain system running under the famous Proof-of-Work protocol for example, truth is told by the majority. Every event or data that enjoys the support of 51% of the system becomes its indelible truth. As a result, a “cartel” that controls 51% of the system becomes the master to rule them all and if they lie, lie becomes truth. Even if there is no lying cartel though, I am sure that we can all recall moments in which majority, fooled by malevolent individuals, stood with the wrong series of events.
In a blockchain, stored data are everyone’s data. Once I buy a chewing gum in a blockchain ecosystem, everyone is given the chance to view my ID (even my pseudonymous one), to track my previous transactions and to count my money. Such a level of openness can generate more problems than solutions. Can you imagine someone tracking the allocation of your wealth resources to define your characteristics as a customer, a borrower, an investor or a future client?
Observed through a Coasian framework, blockchains have been initially thought to minimize transactions costs. In fact the only thing they do is yet again to reallocate transaction costs. More specifically, blockchains actually decrease the cost of trust between the parties but in the same time they increase the cost of drafting a contract or registering data. Simultaneously, the establishment of a blockchain ecosystem demands a certain amount of initial capital cost.
Technology adoption and regulation
A technology is adopted by the people only after they feel the change that it brings to their daily lives. Well, blockchains may face serious trouble in showing their impact. People will not simply choose a slow and irreversible method of executing a transaction just because it is decentralized and transparent. In the meantime, the uncertainty of the regulatory framework may also act as a deterrent. Contrary to the tones of papers that have been used to discuss cryptocurrencies’ and ICOs’ regulation little attention has been drawn to blockchains’ regulation. While it is undeniable that too much regulation stifles innovation, it is also true that “no regulation gives no motivation”.