Innovation

Why big vendors could ruin Blockchain by making it a centralized service

Blockchain has huge potential, but the way it's rolling out may be limiting that potential. Curtailing the use of middlemen is key to Blockchain's success.


Blockchain is the next big thing, or will be if mere mortals don't keep screwing it up. Blockchain promises "nearly friction-free cooperation between members of complex networks that can add value to each other by enabling collaboration without central authorities and middle men," declared Vinay Gupta in a Harvard Business Review article. Yet, vendors are already building faux Blockchain-as-a-Service offerings that promise Blockchain while removing its central component: The lack of middlemen.

Danny Bradbury offers the most complete dismantling of this new trend in Blockchain, and it's worth digging into his arguments.

The promise of Blockchain...undermined

With promises of improved confidentiality of transactions and security, Blockchain has hit the world like a new messiah. By removing middlemen, and thereby streamlining transactions, Blockchain may also allow for the "formation of more complex value networks," as Gupta posited:

Normally, transaction costs and other sources of friction associated with having more vendors keeps the number of partners in a value network small. But if locating and locking in partners becomes easier, more comprehensive value networks can become profitable, even for quite small transactions.

If this all sounds fantastic, it's because it is. Or would be, if people didn't keep getting in the way.

SEE: Video: How blockchain works just like gossip (TechRepublic)

Take, for example, recent attempts by IBM and Microsoft to turn Blockchain into centralized services, thereby destroying the very premise behind Blockchain's value. As Bradbury noted:

Decentralization was an important characteristic of the original blockchain, but Microsoft's Project Bletchley runs blockchain middleware and application marketplaces in Azure. IBM does something similar on its Bluemix cloud platform. All this stuff will be cryptographically protected, of course, but it's still facilitated by a single trusted party, and in effect turns the blockchain into something else. Marketing types at Microsoft are already playing with the inevitable, depressing moniker "Blockchain as a Service", which pretty much negates the whole idea of a decentralized, independent network.

In other words, the big IT giants want to deliver the full benefits of Blockchain without the full promise (or any of the promise) of Blockchain. What could possibly go wrong?

Making a good thing bad

For one thing, Bradbury said, all these corporate efforts will create different Blockchain implementations, with the need to standardize. And once standardized, implementations won't necessarily be secure.

SEE: How it works: Blockchain explained in 500 words (TechRepublic)

Ironically, we may never quite get to this point. The financial institutions most interested in Blockchain are the same ones barred from embracing it, due to rules against running on decentralized networks. As Xero CEO Rod Drury has pointed out, such efforts will come to resemble the SQL databases they're meant to replace, thereby fostering all the same ills that Blockchain is meant to resolve.

Which leaves us, Bradbury concluded, where the Web was back in 1994. Early and still small enough to fit in a "Yellow Pages" you could buy at Barnes and Noble. Not to worry, however, as things get better: "Two decades later, the web is the Justin Bieber of tech—recently come of age, hugely successful, but addled and tarnished by its runaway success. It is a beautiful but insane place let down by a dystopic mixture of dodgy Javascript and rampant cybercrime, and ruled by privacy-eating monoliths."

If this is what we have to look forward to in 23 years from Blockchain, we should probably enjoy the promise of today's Blockchain, knowing that it's going to get both a heck of a lot better...and worse.

Also see

blockchain.jpg
Image: iStockphoto/suphakit73

About Matt Asay

Matt Asay is a veteran technology columnist who has written for CNET, ReadWrite, and other tech media. Asay has also held a variety of executive roles with leading mobile and big data software companies.

Editor's Picks

Free Newsletters, In your Inbox