December 2, 2023

Blockchain needs a reboot

Blockchain was created about a decade ago as a public distributed ledger for cryptocurrencyBitcoin Most people believe that its architecture is excellent, as it is based on a large-scale cryptographic study of a decade ago, distributed data, distributed computing, game theory and other advanced technologies. Initially, the only purpose of the blockchain was to support Bitcoin. But soon the blockchain expanded its scope, as happened with the Internet and the World Wide Web.


In 2016, blockchain made the list of ten bestnew technologies of the World Economic Forum. The WEF report compares the blockchain with the Internet: “Like the Internet, blockchain is an open global infrastructure on the basis of which other technologies and applications can be created. Like the Internet, the blockchain allows people to bypass traditional intermediaries to interact with each other, which means to reduce or even eliminate transaction costs. ”

In the same year, blockchain entered Gartner's annual "hype cycle" for the first time and has remained there for the past three years.In 2017, Gartner noted that "blockchain is about to createHowever, most of the initiatives are still in the alpha or beta stage... Gartner believes that in the long term, this technology will lead toto a revolution in entire industries."

In a recent MIT Technology Review article, Associate Editor Mike Orcuttsummed up the current state of blockchain: "In 2017, blockchain revolutionized the global financial system.In 2018, blockchain became a disappointment.Given the great bull run in 2017 and the incredible crash in 2018, in 2019 blockchain will not be able toBut it will become more useful."

Most potentially revolutionary technologiesgo through adoption cycles that Orcatt metaphorically squeezed into three years. Was there too much hype around the blockchain? Sure. Part of this excitement turned into disappointment or even the collapse of illusions, as people realized that the blockchain was still at an early stage of adoption. There is still much to be done to successfully transition from early adopters to leading markets.

The key question is whether experts still believe that the blockchain has the potential to become a true revolutionary technology. With a few exceptions, the answer remains positive.

Decades ago, the great science fiction ArthurC.Clark wrote thatany sufficiently advanced technology is indistinguishable from magicI remember that feeling of magic when, in the mid-1990s,The Internet entered the leading markets for the first time.Internet economics.ClicksAndInternet userswere supposed to replace old-fashioned business models based on revenue, profit, and cash.It was said that even cities would become less popular, as people could live, work and shop online from freer and more accessible suburbs or small towns.As the dot-com turmoil has grown, all kinds of startups have popped up on the market.Some of them were really innovative, others were just plain stupid, but most of all startups didn't survive the dot-com crash.

And indeed, over the past fewdecades, a new digital economy based on the Internet has emerged. But, as it usually happens, it took a lot more time and investment than it seemed at the beginning. Large additional innovations have also appeared, including smartphones, the Internet of things, big data and cloud computing. The same story was with electricity, an internal combustion engine, and now it is happening with artificial intelligence.

What about blockchain? In his article, Orkatt calls three reasons why the blockchain is ready to leave the hype behind and go to the stage of a more familiar and useful technology.

Pilot projects will go into development. The article cites Walmart's example, whichlaunches a two-year pilot project with IBM using a blockchain to manage food supply chains from farms to store shelves. A few months ago, Walmart announced that by September 2019, all suppliers of greens to Sam and Walmart stores would be required to participate in a huge distribution network to provide fresh produce on the shelves. More than 100 Walmart farm suppliers will participate in this program.

Today, tracking source of production ismanual labor-intensive process. During the experiment, Walmart employees tracked the source of the mango slices for seven days and determined the farm in Mexico where they were grown. Thanks to the blockchain, the source of the mango could be tracked for several seconds.

New technology will help Walmart “identifysources of food-related diseases are much faster than today, which can save more lives and save more money. According to the Centers for Disease Control and Prevention, five people died during a recent outbreak of E. coli in an Romen salad. Walmart had to throw away all the salad packages until a source was discovered. ”

The article also talks about two platforms.on the blockchain, which will soon be launched to manage and trade digital assets. In August 2018, the Intercontinental Exchange, the parent company of the New York Stock Exchange, announced its intention to create a new company, Bakkt, which will allow customers and institutions to safely buy, sell, store and spend digital assets. A few months later, Fidelity announced the creation of Fidelity Digital Assets, a full-service, enterprise-level platform: storing, trading, and servicing digital assets.

The true application of smart contracts. Blockchain platforms are developed not only formanaging distributed registries and digital assets, but also to support distributed applications based on smart contracts. Smart contracts are executed automatically when predefined conditions are met. After signing and sending such a contract to the blockchain, it cannot be canceled. Smart contracts provide a digital guarantee of fulfillment of obligations of two or more parties, which eliminates the need for intermediaries.

However, in his second article, Orcatt writesThe following: “Before smart contracts get really useful use, they must become a reliable way to communicate with real-world events.” An example is the flight insurance policy, in which the client automatically receives a payment in case of flight cancellation. However, such an application requires a reliable source of flight data, otherwise hackers will be able to send fraudulent data and receive payments. Companies like Chainlink are currently working on this issue. This startup is developing a hacking-resistant system that safely transfers the necessary data to smart contracts on the blockchain.

Smart contracts can also be effective.involved in the legal field. A number of companies, including Open Law, are looking for ways to reduce the costs and other costs of creating and implementing legally binding agreements through smart contracts. Experienced companies and startups are conducting serious research on how to use smart contracts and other blockchain technologies in their legal practice.

Government-backed digital currencies.Bitcoin appeared as a project of techno-anarchists withThe goal is to empower and protect those who seriously doubt governments and large companies. It was supposed to become a universal currency and an alternative global financial system without the participation of governments and banks. Some active proponents of the idea hoped that over time, Bitcoin would replace traditional fiat currencies and become the main world currency.

However, so far this has not happened.

A number of central banks are seriously considering the possibility of using some technologies based on Bitcoin and creating their own digital currencies.

This trend is based on several reasonsincluding the declining role of cash in a growing digital economy, the ability to reduce the cost of managing and replacing physical bills, increase the level of security, privacy and customer protection, as well as the ability to serve hundreds of millions more customers around the world who do not have a bank account or access to financial services.

Orcatt draws the following conclusion: “This is the flip side of the revolution that the early proponents of cryptocurrencies foresaw. However, revolutions do not always happen as planned. ”