Many people have dismissed blockchain as a short-term fad, but could the technology live on once the hype has died down?
Every so often, something comes along in the tech world that immediately gets hyped up as the 'next big thing'. Sometimes this pans out; after all, it's not so many years ago that the idea of using a phone for anything other than making voice calls seemed doubtful. But more often that not, eventually the hype dies down, the world moves on and what was once promised to be the future ends up as little more than a footnote in the history books.
This may be especially true with some of the huge range of new ideas and innovations around at the moment boasting of being a 'disrupter' to the established way of doing things. Often, these are solutions in search of a problem, but sometimes there is the potential for something truly revolutionary.
Which brings us to blockchain, perhaps one of the most-hyped buzzwords of the last couple of years. This technology is essentially a distributed, decentralized database that verified and records transactions, and it's at the heart of some of the biggest tech industry trends of recent times.
But is its future really as promising as its backers would have you believe, or is it destined to fade away into history like so many other bright ideas?
In recent years, blockchain has been all the rage. In fact, in 2018 alone, some $1.3 billion in venture capital funding was pumped into the technology, a huge increase on the previous year.
But investor hype alone does not make for a successful tech. Indeed, the back alleys of Wall Street are littered with the remains of tech ideas that were all set to be the next big thing, but crashed and burned, either through overpromising their capabilities, misplaced optimism about consumer interest, or simply being overtaken by something new and better. Remember the Dotcom bubble, or the MiniDisc?
That's led some to suggest that blockchain will be the next big tech hype train to come off the rails. Among the arguments against blockchain are that its lack of control makes it inherently unreliable in the long term, and the ever-increasing interest is unsustainable.
But is this really the case? And even if it is, what sort of legacy will it leave behind?
The boom and bust of cryptocurrencies
Perhaps one reason why skepticism of blockchain is on the rise is that for many people, the term is inextricably linked with the cryptocurrency market, and in particular Bitcoin, its most visible form of virtual currency.
There can be no doubt that cryptocurrency itself has been a passing fad that's now facing a much more uncertain future. Bitcoin may be the poster child for the fast boom and bust cycle of the technology; at one point, the value of a single Bitcoin exploded from under $1,000 to almost $20,000 in under a year, but the drop-off was just as dramatic. Today, the currency is priced at around $3,500, though who knows where it could be this time next week.
Indeed, at the height of the craze, things were really getting out of hand. Take Dogecoin, for instance, a cryptocurrency named after an internet meme that started as a joke and reached a market cap of $650 million by the end of 2017. Even Kodak had one for some reason.
Of course, once the dust had settled and the excited investors had either sensibly cashed out or gone broke, most cryptocurrencies vanished as quickly as they'd arrived. Most people associate them with shady dark web deals and ransomware, and blockchain, by association, has attracted some skepticism as well.
Taking the technology further
But is this fair? While blockchain certainly gained from its use in Bitcoin, cryptocurrency infrastructure is far from the only use for the technology. In fact, it has been gaining traction in a wide range of different sectors over the past year or so - long after the Bitcoin craze hit its slump - so maybe all it needs is a bit of rebranding.
Indeed, one term that's increasingly used in some industries is distributed ledger technology (DLT). This isn't exactly the same thing as a blockchain, even if the two are sometimes used interchangeably. Rather, blockchain is a subset of DLT, which differentiates itself by the use of cryptographic signing and linking groups of records in the ledger, rather than simply maintaining any form of decentralized database.
Still, for some, the two terms are very linked. Some organizations, such as the Bank of England, use both blockchain and DLT technology, but favor the latter to try and distance themselves from the hype that surrounds blockchain. Financial services firms in particular often take this approach. On the other hand, some firms are keen to take advantage of the name recognition of blockchain, even if the DLT they uses doesn't strictly meet the definition.
Either way, whether it is specifically blockchain itself, or the wider concept of distributed ledgers, there is still life in the technology yet. And it may well be the case that, in the coming years, as concerns about privacy and data breaches become more prevalent, the supposed inherent security of blockchain will be of particular interest.
Is blockchain as secure as it's claimed?
In principle, blockchain should be highly secure. As there is no centralized database, there's no way to manipulate or change the ledger in order to trick it or disguise activity. So whenever a transaction is made, each node of the blockchain is checked to make sure it's valid, then the transaction itself is recorded across the network with a verifiable, unique fingerprint, creating a clear, untamperable record of whatever has occurred.
But there are some who argue that while this is great in theory, in the real world it can be bypassed with a bit of creative thinking. Certainly when it comes to the blockchains that underpin cryptocurrencies, hackers have found ways around what should be an unbreakable system, either by tricking the ledger into accepting fake data or breaking into touch points such as 'hot wallets', which is how hackers made off with $500 million worth of cryptocurrency from the Japan-based exchange Coincheck last year.
Other potential issues are that, if something does go wrong, it can be very hard to fix due to the decentralized nature of the ledger. When hackers exploited a weakness in Ethereum in 2016 to steal funds, the community had to roll out a controversial software upgrade called a 'hard fork' to fix the issue; essentially creating a new version of history in which the money was never stolen and, in many people's opinion, going against the very unchangeable nature of the blockchain.
Here to stay?
Certainly when it comes to the future of money, blockchain's days appear to be numbered. But even once cryptocurrencies have faded into the history books, the underlying technology will find its uses. Financial services providers and other industries where the need for clear, secure recordkeeping is paramount will keep the technology alive long after the last Bitcoin is sold for pennies.
Some have suggested that potential weaknesses can be overcome by restricting access to blockchain networks to only those with specific invitations. While again, this goes against the fundamental principles of openness at the heart of the technology, it could give organizations, such as banks, more confidence in the system, though it does in turn open up new questions about who should be in charge of permissions and how much control they should have.
These efforts show that enterprises are keen to adapt the blockchain for their own purposes, suggesting they see it as more than just a fad. While this may mean changes to the technology that move it away from its original purpose, the foundational principles will remain.
So while you may not hear as much about it in the coming years as it becomes more embedded in the backend of systems, as long as its security can be proven in real-world environments, there can be no doubt that it won't fade away altogether.
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