By Thomas J Ackermann – Serial Entrepreneur, CyberDefense & Blockchain Architect
In the current edition of CAPITAL magazine Germany is a short article on “Digitalization” in Germany (above) – it uses a “blockchain driven” company to show governments how to use technology to make paperwork-based processes faster and more convenient for all involved.
The company chosen to be used in the article is CarTrust – a Christoph Kroschke GmbH company (maker of license plates), one of many start-ups developing applications to run on any ominous “blockchain”. CarTrust has a one-page website full of promises, and zero substance or information on how they actually plan to deliver those promises. More on that later.
I am using this article and this company to illustrate why Blockchain has not “hit the masses” yet – and what it takes to make that happen.
I think it is generally accepted by all those who look forward in technology and its future use, blockchain is the next major ‘revolution’ (big disruptive step forward), exceeding the impact the Internet had, and which it continues to have.
Reminder: when the Internet emerged as an easy-to-use global standard for communication, email, and resource pointers (the ‘web’), all proprietary solutions in this technology field disappeared (who remembers Novell, IBM’s Token Ring, Microsoft’s LANmanager, etc anymore?). The Internet also changed a lot of business models, as its technology did not ‘belong’ to anyone, and everyone could freely ‘plug-in’ their solutions on top of an universal and global infrastructure. From skepticism by “the masses” in 1995 it has become so ubiquitous, that today in 2020 a life without Internet is hardly imaginable anymore.
Blockchain technology offers even more potential than the Internet. It builds on the same open communication infrastructure and protocols (i.e. Internet), and adds a whole new layer of standards on top of it. From Smart Contracts to Value Exchange (currencies or digital twins), from Identity to Machine-Based Decision-Making, from enabling Machine-to-Machine interactions to Universal Transaction standards, and from Trust Base to Instant Audits, it covers a broad range of parts in our lives for standardization, which currently only exist in singe-entity-managed proprietary solutions.
And: it is also the safest thing we have ever had in computing, proven over 10 years with the very best hackers trying, offering the most financial incentive for a successful breach: it has withstood all efforts to break or manipulate it.
As all this does not only sound great, but can be seen in action since 2009 …
… what is keeping this great stuff from the inevitable success?
The Internet was already widely used in he 1980s, but it took until 1995 for it to really take off. And then something happened with the universal, open, and shared Internet technology, human greed set in, and corporations tried to apply their existing business models to it, by making a proprietary technology which they own, calling it “internet” and pushing it hard to consumers and businesses alike. The goal was to tie all those customers to that specific company, and distract from the open, universal, long-established Internet infrastructure and the open services already running on it. The largest example of this proprietary approach was AOL, spending a fortune on marketing their proprietary island — eventually their customers realized they were in a “walled garden” and not at all on the actual Internet. In fact, AOL made it really difficult to AOL users to get out of the AOL system onto the open Internet. But as their customers wised up, the company eventually fizzled away, but had made enough money from this approach to invest it into other business areas (see what they do now, financed by those who were blindsided) — many disgruntled customers left behind who wished they had spent their cash on different services to get on the ‘real’ Internet. The Internet overcame all this – any technology so great is bound to succeed, eventually, as it is too useful and too universal not to succeed; even against obstacles. You are using it right now to read this blog post – where and how else would you have access to it?
That very same approach has happened to Blockchain technology. Originally gaining attention as the ‘Bitcoin’ currency, it quickly became clear the underlying technology (“Blockchain”) is the actual invention, offering so much potential to disrupt technologies, business models, and societies to a never-before-seen extent. While the standards it offers will make life for all of us much easier, it also brings decentralization and an open-algorithm-based decision process massively into the world, meaning the elimination of “middle men”. This aspect alone threatens the vast majority of businesses and how we handle trade today, and partially even governments, as the way we conduct commerce, logistics, and transactions today (‘as we have always done it’) is replaced by a completely different model with more equality, transparency, and efficiency — marrying and embedding digital technologies closer into our lives, while eventually taking control away from (all) the established single-point-of-failure middle men. Of course a foreseeable impact like this meets with a lot of resistance from those most effected, but it also equally shows the great (business) potential it offers to all who embrace it.
Of course, the human factor is persistent here, too. Just as with the AOL example on the Internet before, many (appromiately 1,500 entities) have created the same kind of proprietary solutions, which they own, and market as “blockchain”. This goes from technology models resembling at least ‘some’ blockchain technologies, to the extent of IBM, which made a software to run on their old mainframes, contains zero blockchain technologies, but is marketed as “blockchain” under the name ‘Fabric’ with the credibility boost from the umbrella of HyperLedger, the respected effort of the Linux Foundation to get all players on the market to one table. All of these efforts follow the same goal, to tie the users of all of these technologies to their owner / vendor, so that just like in the old world, those customers use a proprietary solution from just one provider, making it very hard and expensive to switch technologies or vendors. Obviously, this is the opposite use of what the Blockchain technology is made for, and meant to distract from the actual technology. By the way, none of these ‘alternate’ technologies have been successfully proven, but many have already been hacked for millions of dollars – as a result, about half of them have disappeared as quickly as they popped up.
And this is the crux we are facing at this moment, and brings me back to the example above:
the car registration use case.
The original Blockchain (‘Bitcoin’) has two major hurdles which prevent it from being used as the universal engine. There is the ‘hodling’ issue (keeping the digital currency for speculation in a vault, thus not using it), and scalability — for its original purpose of a digital currency, it was designed for a fairly low number of transactions per second (and not to compete with today’s hundreds of thousands of transactions per second, and not for an even higher number in the future with intelligent IoT machines, autonomous driving, and many more data services).
It also occasionally keeps frightening people with the enormous use of additional miners and related power costs. This is only a consequence of the ‘hodling’ phenomenon, as all those miners are not necessary to run the Blockchain (a much smaller number is more than enough), and just want to participate in the competing efforts to win the next block’s reward (the idea is not unlike a lottery, held every 10 minutes) – this blew up the size of the one public Blockchain to this enormous measure, now exceeding 130 ExaHash/second. For the technology side, it proves it can work even at that network capacity; but to use a more gripping example, it is as if you need 50 computers in your local network to do your tasks at perfectly reasonable costs, but then add 1 million computers more to your network “just for kicks” – they are absolutely not necessary, but they will cost you a lot to buy, and give you a very large power bill every month.
When those two issues (hodling & hyperscaling) are solved,
… there is nothing that can keep “the” tested and proven Blockchain from succeeding.
(Disclaimer: this is exactly what we are working on at Blockchain Industries. This article leaves open if we will succeed with it first, or others may do – it is not a promotional piece.)
CarTrust, the company mentioned in this example (like ALL other companies experimenting with Blockchain applications and solutions), cannot reasonably use the original Blockchain for those two reasons – yet. Seeing its potential, they – as a long-established brick & mortar enterprise – do want to build and offer digital technologies designed for the future. It is very laudable and shows great insight they plan Blockchain applications specifically, and their solution for a secure digital process to register vehicles with the government, involving all other players in the process (insurance companies, car manufacturers and dealers, financing banks, etc) demonstrates how far-reaching Blockchain technology can and will go.
But if they cannot (yet) use the actual Blockchain technology, how else can they build and deliver those solutions today?
They do what everyone else and all “Proof of Concept” projects are forced to do, take a little bit of old technology (databases; CarTrust calls it “off-chain architecture”) and mix it with bits and pieces of various blockchain alternatives (such as a little tech from either of the two Ethereums; maybe some obscure protocol, be that Ocean, IOTA, or any of these others whose names you may have heard of before; decide between Proof-of-Work or dozens of Proof-of-Stake foundations; and so forth), and put most of their focus on the front, customer-facing end to built the actual applications running on such an engine. All that hoping any of the technology bits they pick here and there, does not fizzle away, as so many have done already, and hoping to keep it running until they can replace the underlying infrastructure with the original, open, transparent, secure, and proven universal engine.
And while pushing “Blockchain” solutions, they are staying away from disclosing any technical details – they are in good company with this approach, as none other mentions which pieces of technology they are putting together, either. In essence, the customer gets a varying degree of the “IBM/Fabric/Mainframe Blockchain Ghost” (it being the boldest of the lot), at best with some re-usable components, but all customers not actually getting what they believe they buy or invest in.
Logically, all those efforts are doomed (analogy: you are still using AOL instead of the Internet). The honest versions of these attempts (I am inclined to believe CarTrust, the company ending up as the prime example here, is one of those) serve as a very laudable effort to make a case for the technology, and (hopefully) build a great front-end and integration in the various players’ systems, while leaving the connections to the backend flexible for a hopefully-not-too-hard-too-expensive switch of the entire infastructure. The less honest versions of the exercises will simply keep milking customers the old way – and may I say, as this is so obvious, it is their own fault to fall for it. Continue to use the old stuff you are already on the hook with for a lot of money (be that IBM, SAP, Microsoft, Oracle, and all the others, not even mentioning GAFA in this context) — but if you want to look forward, don’t be blindsided by another proprietary approach, and plan for the real thing.
You will want the universal engine, on top of which you can ‘plug in’ all your offerings with the same interface, the same technology, unlimited scalability (similar to, but exceeding today’s proprietary and ‘middle-man-controlled’ cloud services such as Amazon AWS, Google, Microsoft, Alibaba), complete transparency, in which you can have complete trust, and from which you get all your accounting and bookkeeping information instantly with 100% accuracy (the latter eliminating your expensive need of ‘the big four’ to collect those numbers today, which you then cannot even trust – as shown by WorldCom, Enron, WireCard, and many more).
And when the “real thing”, the universal Blockchain engine, is available, there is nothing to stop it — and it will make your life better, just as the Internet started to do 25 years ago; only this time, the impact will be much larger, probably more than you can even imagine today.
© 2020 – Thomas J Ackermann