Applying blockchain technology in global data infrastructure report by the ODI
Disclaimer: This 800 word summary of the 8000 word ODI document Applying blockchain technology in global data infrastructure was created to provide an overview and some commentary on what this author believes to be the most significant points in the report. It is the personal view of the author shared here for those too lazy to read the whole document and come to their own informed opinion.
Most Promising Applications
The report identifies that Bitcoin and cryptocurrency applications dominate the blockchain space and advise against “being swept up by ‘blockchain hype’ and to remember to focus on solid user needs……Whilst there are promising applications, a great many of the ideas out there are ‘vapourware’, with no viable implementation or model. There are also many instances of old ideas that failed for good reasons and the addition of a blockchain will not change those reasons.”
Concentrating on “non-financial use cases” the authors identified four promising application areas for blockchain technology:
1. Document and intellectual property verification,
2. Monitoring supply chains (prev post: strengthening the food chain)
3. Building a peer-to-peer economy
Principal Draw Backs
They also note that in “an append-only system” data, once added to a blockchain, can never be removed. This as the authors highlight has consequences for privacy and scale. However the indelibility of the data, the fact that it is permanent and cannot be altered is equally one of if not the main selling point of the concept.
The authors argue that there are “drivers for having a few blockchains maintained by a large number of nodes, and drivers for having many blockchains maintained by a small number of nodes. It is likely it will end up somewhere in the middle.”
However based on the examples of Bitcoin and Ethereum, there is currently only one driver. Nodes are maintained by mining rigs specifically employed to generate reward for creating blocks. A situation that has spawned voracious mining pools that gobble up huge amounts of energy in the process. If and when mining ceases or the energy costs exceed the value of the reward, the nodes will stop maintaining the blockchain. So there must be other benefits to encourage the nodes to continue.
More Paper Clips!
Similarly a Blockchain that stores a lot of data for multiple applications will also store a lot of data that is irrelevant to most nodes. Irrelevant data that will cause the blockchain to bloat in size and raise the difficulty. Nodes will just use up large amounts of computational power to maintain a blockchain that is, from their perspective, full of ‘irrelevant’ data. Both the mining reward and the one chain for everything model are thus flawed. One encouraging nodes composed of server banks fed by a pool of specialist mining rigs, the other populated with nodes hashing out blocks filled with data they (and possibly no one else) has any use for. Both behemoths churning out nonsense and relying on the energy output of a medium sized country in order to do so.
Reward systems as do blockchains that carry too much data for too many applications just encourage higher levels of difficulty in hashing blocks to be reached sooner rather than later. The immutability of blockchain data is in this respect both it’s purpose and it’s obstacle, it is forever doomed to trip over it’s own shoe laces. Thus a suite of smaller specialized blockchains that rely on providing cost efficient services to the nodes that maintain them can thrive as long as those services remain cost effective. If they are not the nodes will simply discard the blockchain in favour of and without impact on ones that are.
Waiting on Superman
Much of this promise however relies on, as the authors point out, “a technology stack that has not yet fully emerged”. As the field evolves the authors anticipate a common technology stack, one similar to the LAMP web stack will similarly evolve. The authors also posed the following questions with respect to data compatibility.
- How do we standardise storage in systems so that we get a single network of data, as opposed to having to use a different storage system every time we want a new type of information?
- What are the data protocols for distributed storage?
- How do we talk about, and perhaps enforce, ownership and licensing?
It’s Life Jim…
The authors conclude that distributed ledgers are “potentially important for enabling a shared data infrastructure” that could see “Blockchains used to build confidence in [private and] government services.” There was similarly “great potential for blockchains in collaborative maintenance of data for applications such as supply-chain information”. Smart contracts were also seen as having promise, however the authors “uncovered many cases that were little more than attempts to bolt failed ideas onto the technology or reinvent things that work perfectly well” without blockchain technology.
Perhaps when it’s all said and done, there is only so much one can do with a ledger, distributed or not…