Why people will (hopefully) not be talking about blockchains any more in five years…


Blockchain image by Davidstankiewicz is licensed under CC SA 4.0
Blockchain image by Davidstankiewicz is licensed under CC SA 4.0
 / 2. August. 2017

Blockchains are hype. This becomes clear at the latest when you encounter companies who are actively looking for a blockchain application. You could also say: A problem is being sought for the solution. This is obviously the wrong approach: Either you have problems, challenges or requirements that cannot be solved or cannot be solved well with existing technologies or that at least could be solved better by using blockchains – or you do not have these problems, challenges or requirements.

There’s no doubt about it that certain challenges can be solved better with blockchains than with conventional technologies. The sequential storage of transactions, the ability to assign time stamps, the strong protection against subsequent modifications and the distributed structure of blockchains as well as new concepts, such as smart contracts, are attractive for many applications. The concept of the “distributed ledger” as an umbrella term makes this particularly clear: Applications where there must be a secure instance of information that is centrally maintained are the obvious applications for blockchains. Whether it’s the handling of international trade, the adjustment or first-time procurement of land registers in countries or digital currencies: In all cases, such a “distributed ledger” in electronic form helps, which can best be realized via blockchains.

However, you also have to understand that there is not just one blockchain, but rather a considerable number of design versions that, for example, differ due to the consensus mechanism used, such as “proof of work” with Bitcoin or “proof of stake” with Ethereum, but that also differ with respect to the identification of the participants, their authentication or the authorized participants. While Bitcoin is anonymous, other blockchains work with identified participants, because anonymity is often not desired or is not required. Blockchains that do not work anonymously and are even authenticated can work with simpler consensus mechanisms. Without being able or wanting to go into the details in this post: There are many existing and even more conceivable versions of blockchains. An important step for the successful implementation is understanding what is appropriate for the business problem.

But why will we and should we no longer talk about blockchains in the not-too-distant future if they do indeed have a general benefit? I must return to the situation I mentioned at the outset here where a problem is sought for a solution. Blockchains are only a means to an end. At the moment, however, people are talking far too much about the technical details and a very specific approach (“we make a blockchain”). However, it’s a matter of finding the right solutions for business applications. We also do not begin matters here with “we are looking for a solution that runs on Red Hat Linux,” or “we want to use a relational database” or “we want to program in C#” and look for an application for this. Instead, it’s about understanding what is to be achieved. If the requirements from business are adapted to the specific characteristics of blockchains, i.e. the distributed structure, the sequential storage of information, etc., then blockchains should become part of the solution.

However, this is a question that, just like that of the programming language, is not at the level of business requirements, but rather is at the technical level of implementation. And as you should not worry about what database is to be worked with or how the data model is normalized in a relational database, we should not say at the technical level: “Now we want to solve a problem with a blockchain, whether it makes sense or not.”

I therefore hope that in a couple of years we will use blockchains quite as a matter of course through standardized APIs and protocols. Just as there is SQL for relational databases, we also need standards for blockchains.

Nevertheless, it is important that business understands the basic idea of blockchains. For in this way many applications can be implemented in business that have previously failed when it came to the technology available. There is a large potential for innovation here. However, this is about the question of what can and wants to be changed in business and where the business benefits lie if international trade and its financing can be handled more efficiently and favorably or if the settlement of securities transactions can be optimized. If it then turns out though that we are better off without blockchains, then everything is OK too. It’s not about blockchains per se. The starting point must always be the business application. How to solve the business application in an ideal way is a technical question that business will hopefully no longer have to deal with at some point. However, blockchains must of course still be discussed at the technical level and they must also be used where they offer added value.

Über den Autor / die Autorin:

Martin Kuppinger is Founder of the independent Analyst Company KuppingerCole and as Principal Analyst responsible for the KuppingerCole research. In his 25 years of IT experience he has already written more than 50 IT-related books and is known as a widely-read columnist and author of technical articles as well as reviews and is also a well-established speaker and moderator at seminars and congresses. His interest in Identity Management dates back to the 80s, when he also gained considerable experience in software architecture development. Over the years, he added several other fields of research, including virtualization, cloud computing, overall IT security, and others. Having studied economies, he combines in-depth IT knowledge with a strong business perspective.