Note. transl.: This defiant article about blockchain was written and published about two years ago in Dutch. The other day it was translated into English, which caused a new surge of interest from an even larger IT community. Despite the fact that some figures have become outdated during this time, the essence that the author tried to convey has remained the same.
Blockchain will change everything: the transportation industry, the financial system, the government… in fact, it is perhaps easier to list the areas of our lives that it will not affect. At the same time, enthusiasm for it is often based on a lack of knowledge and understanding. Blockchain is a solution in search of a problem.
Sjoerd Knibbeler created this image for The Correspondent; the rest of the images in this article are part of the 'Current Studies' series (2013-2016), which you can read more about at the end of the article.
Imagine: a crowd of programmers in a huge hall. They sit on folding chairs, laptops on folding tables in front of them. A man appears on the scene illuminated with blue-violet light.
“Seven hundred blockchainers! he shouts to his listeners. Points to the people in the room: - Machine learning ... - and then at the top of his voice: - Energy turn! Healthcare! Public safety and law enforcement! The future of the pension system!”
Congratulations, we are at the Blockchainers Hackathon 2018 in Groningen, the Netherlands (). According to the speakers, history is being made here. A little earlier, a voice from the accompanying video asks the audience: Can they imagine that right here, right now, in this room, they will find a solution that will change “billions of lives”? And with these words, the Earth explodes on the screen with a beam of light rays.
Then the Minister of the Interior of the Netherlands, Raymond Knops, appears, dressed in the latest tech geek fashion, a black sweatshirt. He is here in the role of "super-accelerator" (whatever that means). “Everyone feels that blockchain will revolutionize governance,” says Knops.
In recent years, I hear about blockchain all the time. However, like all of us. Because he is everywhere.
And I'm clearly not the only one wondering: will someone explain to me what it is all about? And what is his "revolutionary"? What problem does it solve?
Actually, that's why I decided to write this article. I can say right away: this is a strange journey to nowhere. I have never in my life encountered such an abundance of jargon that describes so little. I've never seen so much pomposity that deflates so quickly on closer inspection. And I have never seen so many people looking for a problem for their "solution".
"Agents of change" in a provincial Dutch town
Residents of Zuidhorn, a town of just under 8000 people in the northeast of the Netherlands, had no idea what a blockchain was.
“All we knew was that blockchain is coming and global changes are waiting for us,” one of the city officials said in . "We had a choice: sit back or act."
The people of Zuidhorn decided to act. It was decided to “transfer to the blockchain” the municipal program to help children from low-income families. To do this, the municipality attracted student and blockchain enthusiast Maarten Veldhuijs for an internship.
His first task was to explain what a blockchain is. When I asked him a similar question, he said that it was "a kind of system that can't be stopped","Power of nature", if you like, or rather, "decentralized consensus algorithm". "Okay, it's hard to explainhe finally admitted. — I told the authorities: “I’d better make an application for you, and then everything will become clear”».
No sooner said than done.
The assistance program allows low-income families to rent a bicycle, go to the theater or cinema at the expense of the city, etc. In the past, they had to collect a bunch of papers and receipts. But Velthuijs' app has changed everything: now it's enough to scan the code - you get a bike, and the business owner gets money.
Suddenly, the tiny town has become one of the “centers of the global blockchain revolution.” Media attention and even awards followed: the city won an award for “innovation in municipal work” and was nominated for best IT project and best civil service.
The local administration became more and more enthusiastic. Velthuijs and his team of "disciples" were shaping a new reality. However, this term was not too suitable for the excitement that swept the city. Some residents directly called them "change agents" (this is a set expression in English about people who - approx. transl.).
How does he work?
Okay, agents of change, revolution, everything is changing… But what is blockchain?
At its core, blockchain is the much-lauded spreadsheet (think Excel with a single spreadsheet). In other words, it's a new way to store data. In traditional databases, there is usually one user responsible for it. It is he who decides who has access to the data and who can enter, edit and delete it. With blockchain, it's different. No one is responsible for anything, and no one can change or delete data. They can only enter и browse.
Bitcoin is the first, most famous, and arguably the only use of the blockchain. This digital currency allows you to transfer money from point A to point B without the participation of a bank.
How does he work? Imagine that you need to transfer some money from Jesse to James. Banks are great at this. For example, I ask the bank to send money to James. The bank starts the necessary checks: is there enough money in the account? Is there an account with the specified number? And he writes something like “transfer money from Jesse to James” in his own database.
In the case of Bitcoin, things are a little more complicated. You publicly declare in some kind of giant chat: “Transfer one bitcoin from Jesse to James!” Then there are users (miners) who collect transactions into small blocks.
To add these transaction blocks to the public blockchain ledger, miners have to solve a difficult problem (they have to guess a very large number from a very large list of numbers). It usually takes about 10 minutes to complete this task. If the time to search for an answer steadily decreases (for example, miners switch to more powerful equipment), the complexity of the task automatically increases.
As soon as the answer is found, the miner adds transactions to the latest version of the blockchain - the one that is stored locally. And the message goes to the chat: “I solved the problem, look!”. Anyone can check and make sure the solution is correct. After that, everyone updates their local versions of the blockchain. Voila! The transaction is completed. As a reward for the work, the miner receives bitcoins.
What is this task?
Why is this task needed at all? In fact, if everyone always behaved honestly, she wouldn't be needed. But imagine a situation where someone decides to double spend their bitcoins. For example, I say to James and John at the same time: “Here’s Bitcoin for you.” And someone needs to check that this is possible. In this sense, miners do the job that banks are usually responsible for: they decide which transactions are allowed.
Of course, the miner may try to trick the system by colluding with me. But an attempt to spend the same bitcoins twice will be immediately disclosed, and other miners will refuse to update the blockchain. Thus, an attacker miner will spend resources on solving the problem, but will not receive a reward. Due to the complexity of the problem, the cost of solving it is high enough that it is much more profitable for miners to adhere to the rules.
Alas, this mechanism is very inefficient. And things would be much easier if data management could be entrusted to a third party (for example, a bank). But this is exactly what Satoshi Nakamoto, the notorious inventor of bitcoin, wanted to avoid. He considered banks a universal evil. After all, they can freeze or withdraw money from your account at any time. That is why he invented bitcoin.
And bitcoin works. Cryptocurrency ecosystem is growing and developing: according to the latest count, the number of digital currencies has exceeded 1855 (by as of February 2020, there are already more than 5000 of them - approx. transl.).
But at the same time, it cannot be said that bitcoin is a resounding success. Only a small percentage of stores accept digital currency, and for good reason. First of all, the payments themselves are very (sometimes the payment takes 9 minutes, but there were cases when the transaction lasted 9 days!). The payment mechanism is very expensive (try it yourself - opening a hard blister with scissors is much easier). And finally, the price of bitcoin itself is extremely volatile (rising to €17000, falling to €3000, then jumping back up to €10000…).
But worst of all, we are still far from the decentralized utopia that Nakamoto dreamed of so much, namely, the elimination of unnecessary "trusted" intermediaries. Ironically, there are only three mining pools (a mining pool is a large concentration of mining computers located somewhere in Alaska or elsewhere far beyond the Arctic Circle) that are responsible for generating more than half of the new bitcoins* (and, accordingly, for checking transactions). (At the moment there are 4 of them - approx. transl.)
* Nakamoto believed that anyone could work on a problem on an equal footing with others. However, some companies have taken advantage of exclusive access to specialized equipment and space. Thanks to such unfair competition, they were able to seize a leading role in the ecosystem. What was conceived as an exclusively decentralized project has again become centralized. The current level of decentralization for different cryptocurrencies can be viewed .
In the meantime, bitcoin is much better suited for financial speculation. The lucky person who bought 20 dollars or euros of cryptocurrency at the dawn of its existence now has enough money for several round-the-world trips.
Which brings us to blockchain. Impenetrable technology that brings sudden wealth is a proven formula for hype. Advisors, managers and consultants learn about a mysterious currency that turns ordinary people into newspaper millionaires. “Hmm… we should also have a hand in this,” they think. But with bitcoin, this is no longer possible. On the other hand, there is the blockchain, the technology behind basis bitcoin, which makes it cool.
Blockchain generalizes the idea of bitcoin: let's get rid of not only banks, but land registers, voting machines, insurance companies, Facebook, Uber, Amazon, the Lung Foundation, the porn industry, government and business in general. Thanks to the blockchain, they will all become superfluous. Power to users!
[In 2018] WIRED compiled out of 187 areas that blockchain could improve.
Industry for 600 million euros
Meanwhile, Bloomberg global industry size of approximately USD 700 million or EUR 600 million (this was in 2018; by , the market then was 1,2 billion USD and reached 3 billion in 2020 - approx. transl.). In large companies like IBM, Microsoft and Accenture, entire divisions are dedicated to this technology. The Netherlands has all sorts of subsidies for blockchain innovation.
The only problem is that there is a huge gap between promises and reality. So far, it feels like blockchain looks best on PowerPoint slides. A Bloomberg study showed that most blockchain projects do not go beyond the scope of a press release. The government of Honduras was going to transfer the land registry to the blockchain. This plan was in a long box. Nasdaq was also looking to build a blockchain-based solution. . What about the Dutch Central Bank? And again ! By consulting firm Deloitte, out of 86000+ launched blockchain projects, 92% were abandoned by the end of 2017.
Why do so many projects fail? Enlightened—and therefore former—blockchain developer Mark van Cuijk says, “You can use a forklift to lift a pack of beer onto the kitchen table. It's just not very effective."
I will list a few problems. First of all, this technology is contrary to EU privacy law, in particular the right to digital oblivion. Once information enters the blockchain, it cannot be deleted. For example, in the bitcoin blockchain there are links to child pornography. And they cannot be removed from there *.
* The miner, if desired, can add any text to the bitcoin blockchain. Alas, it can also be links to child pornography and naked photos of the former. Read more: «" by Matzutt et al (2018).
Plus, the blockchain is not anonymous, but “pseudonymous”: each user is tied to a specific number, and anyone who can match the username with this number will be able to trace the entire history of his transactions. After all, the actions of each user in the blockchain are open to everyone.
For example, Hillary Clinton's alleged email hackers were caught by matching their identities to bitcoin transactions. Researchers from the University of Qatar were able to quite accurately the identities of tens of thousands of bitcoin users using social networking sites. Other researchers have shown how easy it is using trackers on the websites of online stores.
The fact that no one is responsible for anything and all information on the blockchain is immutable also means that any errors remain there forever. The bank can cancel the money transfer. In the case of Bitcoin and other cryptocurrencies, this is not possible. So whatever was stolen will remain stolen. A huge number of hackers are constantly attacking cryptocurrency exchanges and users, and scammers are launching "investment tools", which in fact turn out to be . According to some estimates, almost 15% of all bitcoins were . And he's not even 10 years old yet!
Bitcoin and Ethereum use the same amount of energy as the whole of Austria
Plus, there is the issue of ecology. “An environmental issue? Are we not talking about digital coins?” - you will be surprised. It is about them that makes the situation quite strange. Solving all these complex mathematical problems requires a huge amount of electricity. So much so that the two largest blockchains in the world, Bitcoin and Ethereum, are currently consuming . Payment through the Visa system requires about 0,002 kWh; the same bitcoin payment consumes up to 906 kWh of electricity - more than half a million times more. This amount of electricity is consumed by a family of two in about three months.
And over time, the problem of ecology will become more acute. Miners will use more and more power (that is, they will build additional mining farms somewhere in Alaska), the complexity will automatically increase, requiring more and more computing power. This endless, pointless arms race results in more and more electricity being required for the same number of transactions.
And for what? This is actually the key question: what problem does blockchain solve? Okay, thanks to bitcoin, banks can't just withdraw money from your account on their own. But how often does this happen? I have never heard of a bank just taking money from someone's account. If a bank did something like that, it would be immediately sued and lose its license. It's technically possible; Legally, it's a death sentence.
Of course, scammers are not asleep. People lie and cheat. But the main problem lies ("someone secretly registers a piece of horsemeat as beef"), not administrators ("the bank makes the money disappear").
Someone suggested transferring the land cadastre to the blockchain. In their opinion, this would solve all the problems in countries with corrupt governments. Take Greece, for example, where one in five houses is unregistered. Why are these houses not registered? Because the Greeks just build without asking anyone for permission, and the result is an unregistered house.
But blockchain can't do anything about it. Blockchain is just a database, not a self-regulating system that checks all data for correctness (not to mention stopping all illegal construction projects). The same rules apply to a blockchain as to any other database: garbage in = garbage out.
Or, as Bloomberg columnist Matt Levine writes: “My immutable, cryptographically secure record on the blockchain that I have 10 pounds of aluminum in stock is not going to help the bank much if I then sneak all that aluminum out the back door.” .
Data should reflect reality, but sometimes reality changes and data stays the same. That is why we have notaries, supervisors, lawyers – in fact, all those boring people that the blockchain supposedly can do without.
Traces of the blockchain "under the hood"
So what about that pioneering city of Zuidhorn? Didn't the blockchain experiment succeed there?
Well, not quite. I studied to help underprivileged children on GitHub, and there was little like blockchain or anything like that. In any case, it implemented one single miner for internal research, running on a server not connected to the Internet. The final application was a very simple program, with simple code running on regular databases.
I called Maarten Velthuijs:
— Hey, I noticed that your application does not need a blockchain at all.
- Yes it is.
“But isn’t it strange that you received all these awards, although your application does not actually use the blockchain?
— Yes, strange.
— How did it happen?
- I don't know. We have repeatedly tried to explain this to people, but they do not listen. So you call me for the same reason...
So where is the blockchain?
Zuidhorn is no exception. If you look closely, you can find a bunch of all sorts of experimental blockchain projects in which the blockchain is still only on paper.
Take, for example, My Care Log (“Mijn Zorg Log” in the original), another award-winning experimental project (but this time in the field of motherhood). All Dutch people with newborn babies are entitled to a certain amount of postnatal care. As with the Zuidhorn child benefits, this program was a bureaucratic nightmare. Now you can install an application on your smartphone that will collect statistics on how much services you received and how many of them are left.
The final report shows that My Care Log does not use any of the features that make the blockchain unique. A certain group of persons was pre-selected by the miners. As such, they may veto any registered service data*. The report notes that this is better for the environment and for compliance with the rules for protecting personal data on the Web. But isn't the main purpose of blockchain to do without trusted third parties? So what is really happening?
* This is also true for all next generation blockchain service providers such as IBM. They also grant editing and reading rights to certain people or companies.
If you want to hear my opinion, they build a completely ordinary, even ordinary, database, only they do it extremely inefficiently. If you filter out all the jargon, the report turns into a boring description of the database architecture. They write about a distributed ledger (which is a public database), smart contracts (which are algorithms), and proof of authority (which is the right to filter information that enters a database).
Merkle trees (a way to “decouple” data from their validation) is the only blockchain element that made it into the final product. Yes, this is a cool technology, there is nothing wrong with it. The only problem is that Merkle trees have been around since at least 1979 and have been used for many years (for example, in the Git version control system, which is used by almost all software developers in the world). That is, they are not unique to the blockchain.
There is a demand for magic, and this demand is great.
As I said, this whole story is about a strange journey to nowhere.
In the process of writing it, I decided to chat with one of our developers (yes, real, live developers really walk around our editorial office). And one of them, Tim Strijdhorst, didn't know much about blockchain. But he told me something interesting.
“I work with code, and people around me see a wizard in me,” he proudly declared. This always surprised him. Wizard? Half the time he's yelling at his screen in frustration, trying to come up with "patches" for a long-deprecated PHP script.
What Tim means is that information and communication technology, like the rest of the world, is one big mess.
And this is something that we - outsiders, ordinary people, non-technical geeks - simply refuse to accept. Advisors and consultants believe that problems (no matter how global and fundamental they may be) will evaporate with the wave of a finger thanks to the technology they learned about from a beautiful PowerPoint presentation. How will she work? Who cares! Don't try to understand it, just reap the benefits!*
* According to conducted by the consulting company Deloitte, 70% of company directors said they have a “rich experience” in the field of blockchain. According to them, speed is the main advantage of the blockchain. This raises the question of their intelligence, as even blockchain fanatics find speed to be a problem.
Here it is, the magic market. And this market is big. Be it blockchain, big data, cloud computing, artificial intelligence or other buzzwords.
However, sometimes such "magical" thinking may be necessary. Take, for example, the postpartum care experiment. Yes, it failed. But Hugo de Kaat of insurance company VGZ, which took part in the study, says that "our experiment has mobilized Facet, the largest postpartum care software vendor." They are going to make a similar application, but without any "bells and whistles" - just traditional technology.
What about Maarten Velthuijs? Could he make his amazing app to help kids without the blockchain? No, he admits. But he is not at all dogmatic about technology. “We also didn’t always succeed while humanity was learning to fly,” says Velthuijs. - Look on YouTube - there is a video in which a man jumps from the Eiffel Tower with a homemade parachute! Yes, it certainly crashed. But we also need such people.”
So: if Maarten needed a blockchain to make the application work, great! If the blockchain idea didn’t burn out, that’s also good. At least he would have learned something new about what works and what doesn't. Plus, the city now has a good app to be proud of.
Perhaps this is the main merit of the blockchain: it is an information campaign, albeit an expensive one. “Back office management” is rarely on the agenda of board meetings, but “blockchain” and “innovation” are frequent guests there.
Thanks to the hype around the blockchain, Maarten was able to develop its application to help children, postpartum care providers began to interact with each other, and many companies and local authorities felt the flaws (to put it mildly) in their data management.
Yes, it took wild, unfulfilled promises, but the result was not long in coming: executives are now interested in boring subjects that help make the world a little more efficient: nothing special, just a little better.
As Matt Levine writes, the main advantage of the blockchain is that it made the world “pay attention to back office technology upgrades and believe that these changes can be revolutionary».
About images. in his studio he likes to experiment with various volatile things. All of the photographs for this article (from the Current Studies series) were taken with fans, blowers, and vacuum cleaners. The result is photographs that make visible the invisible: the wind. His mysterious "paintings" are on the border of the real and the unreal, turning an ordinary plastic bag or a plane with smoke into something magical.
PS from translator
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Source: habr.com