It’s 2020, and we’re still in hype overdrive about blockchain. If the conventional wisdom is to be believed, blockchain is going revolutionise and disrupt every industry known to humankind, but does every industry actually need a blockchain?
Cayle Sharrock is Head of Engineering at Tari Labs
Let’s take an objective look at two of the most aggressively touted use cases for blockchain to see if it’s all it’s cracked up to be.
Before we do this, let’s remind ourselves about the four pillars of blockchain technology and what they give you: tamper-evident logs (the blockchain); cryptographic proof of ownership (digital signatures); public accountability (the distributed public ledger); and corruption resistance (proof of work).
If we use these four features as a checklist, we can evaluate any proposed use case of blockchain technology and decide whether the potential is genuine, or whether it’s just buzzword bingo.
There have been hundreds of headlines over the past four years proclaiming how Bank Y will use blockchain to disrupt the industry. Usually, what they claim is that they can perform interbank settlements at a fraction of the cost of what the incumbent monopoly, SWIFT, provides.
So does blockchain work for the banking sector?
Clearly, tamper detection of the transaction history is a must-have here. What about digital signatures and proof of ownership? Without a doubt. Multiple signatures? The more the merrier.
Bitcoin was conceived as trustless money – and with banks, we have a fairly small community that is heavily regulated, and that do actually trust each other to some degree. Essentially, banks use governments’ big stick instead of proof-of-work to keep everyone honest. This works most of the time. Except when it doesn’t. The 2008 crisis and the 2012 Cypriot haircuts are just two examples.
How about Public Accountability from distributed public records? No, public accountability has never been the banking sector’s strong suit. That means…