Five stones in the blockchain garden

    Approximately such a picture can now describe the mood of many people in the industry, when since the beginning of the year the courses of cryptocurrency began to plummet. Inflated bubble made a powerful advertising technology blockchain, which threatened to apply at every corner. Just over a year ago, she flew to the top of the Gartner curve, but at the moment, according to my feelings, we are at the very bottom.

    What prevents the blockchain in our country (and in the world), and is it really necessary?

    1. The bottom line

    If we discard ICO, mining farms and exchangers, there is still little news from corporations or large state-owned companies in Russia:

    • M.Video has been using smart contracts for factoring operations since the beginning of 2017, and more than 65% of factoring transactions are carried out on the blockchain. Over the past year, the number of transactions using this technology has increased 4.7 times, the volume of payments - 4.4 times [1].
    • ANKO “LEKSAN” creates a single infrastructure for the development and implementation of industry-specific digital systems (as usual, with the strange and resounding name of the RSFCA), whose functions include the possibility of conducting a fully official ICO protecting the rights of participants. The system is being negotiated with the Central Bank and the Ministry of Finance [2].
    • In September, Rostec and the Vostok project signed an agreement on cooperation and joint implementation of the blockchain in the infrastructure of the digital economy. They will create a project office for cooperation and invest about two million dollars in it [3].
    • In July of this year, the center of blockchain competencies and digital transformations of VEB, together with the mayor’s office in Grozny, launched two pilot projects on the blockchain related to the management of housing and communal services and rental municipal property [4].
    • In March, a group of companies LANIT announced the creation of an integrator of digital ecosystems Digital Transformation Group: its task is to form new business models, including based on the blockchain technology [5].
    • The National Technology Initiative has a FinNet direction. [6] It deals with decentralized financial systems and personalized network financial services: it is obvious that here the blockchain is considered as the basis for creating cryptocurrencies and exchanges similar to the already existing Coinbase, Bitfinex, Binance, Poloniex and others.

    There are other examples of this kind. However, the final realization is still small, and it is more and more about intentions.

    In addition, the blockchain still has a reputation as being difficult to implement the technology and, in fact, none of the Russian companies use it on an ongoing basis. Even if we take the whole market, in fact, there are still only two working and demanded projects - Bitcoin and Ethereum.

    And then the question arises, what prevents these hundreds and even thousands of projects from developing? Therefore, we will further discuss the barriers to the adoption of this technology. And, in my opinion, in this case there are still more barriers than advantages. At least now.

    2. Houston, we have problems

    2.1. Low stability and scalability

    In blockchain projects, this feature is often referred to as “the number of transactions processed per second.” The number varies greatly, from units in Bitcoin to thousands (according to statements) in new projects like IOTA or EOS. We are still looking for a balance between slow but reliable PoW and fast but centralized (D) PoS, as well as many other consensus algorithms.

    Nevertheless, in the two largest projects to date - Bitcoin and Ethereum - the problems of stability and scalability have not yet been resolved. In moments of sharply increasing interest in them from the public (ICO, cryptotocics, speculation on the course), transactions can be confirmed for hours, or even not at all.

    2.2. High entry threshold for end user

    Admittedly, the blockchain is still the lot of geeks and crypto-anarchists. For ordinary people, it is still an unknown beast, about which something is written in the news. It took me weeks to explain the blockchain using my Bitcoin as an example to my mom.

    Although it may seem that there is a lot of information on the Internet, it rather has the opposite effect, and finding a really useful and understandable article or video is not easy. How can a person with a near-zero level of knowledge start using Ethereum? How can I understand what useful dapps I can use now? There is still no such information. All this is now similar to the early stages of the development of the World Wide Web, when there were many disparate websites, but how to work with all this is not yet clear.

    2.3. Transaction Irreversibility

    Yes, the characteristic, which is usually claimed as an advantage of technology, has become its barrier. No one cancels the human factor and the probability of an error when entering an address and forming a transaction. Even if it was not caused by the user, it could be the fault of the malicious hacker, who will substitute the address on one of the levels. One such mistake can be very expensive.

    With a bank transfer, you can dispute a transaction, but there is nothing like this here. It scares many. To use the blockchain at this stage, you need to clearly understand what you are doing, what can happen, and how to protect yourself from it.

    2.4. Insufficient knowledge of algorithms

    Since the beginning of testing "in the wild" of the most well-known algorithm of the consensus Proof of Work, more than 9 years have passed. Its performance has been confirmed by practice, but the algorithm itself has many drawbacks. Therefore, the community has already invented several dozen [7] of similar algorithms:

    • Proof of Stake;
    • Delegated Proof-of-Stake;
    • Proof of Authority;
    • Delegated Byzantine Fault Tolerance;
    • Proof of Importance;
    • ...
    • Proof of anything.

    Many of them, it seems, are not even a couple of years old, not to mention some kind of sane testing.

    Another huge layer of potentially vulnerable code are smart contracts in Ethereum. Here mistakes can cost a lot, [8] VERY [9] is expensive. Due to the novelty of the smart contract technology, the code audit was at first conducted very superficially or not at all.

    It is also worth mentioning a completely new technology TCR, which is on Habré [10] translation of the original post with the first more or less detailed description of the algorithm. In the comments to the post you can hear a reasonable remark, but where is it generally used and why is it necessary? Understand whether this is necessary and how useful it will be.

    2.5. Lack of specialists

    According to the study by the IBM Institute for Business Value Building Trust in Government [11], the technological problems of implementing the blockchain in the public sector are the insufficient level of skills in working with technology (consider the lack of competent specialists in the field) and the lack of implemented business cases. We can definitely argue with the last statement - it’s rather a matter of insufficient expertise, since there are already examples of blockchain implementation in the public sector, though not in Russia. For example, in April 2016, Bitfury signed an agreement with the National Agency of Public Registries of Georgia on the launch of a pilot project to transfer the real estate registry to the blockchain using the Exonum framework. This system is working successfully and now [12], the pilot himself in 2017 entered [13] into the Harvard Business School case collection. It is rather an exception.

    However, I will not deny that many bright developers who are tired of the old technologies and want to try something new have come to the blockchain. But as you know, there are never many programmers.

    3. What can play plus

    Investor interest. IDC analytical company predicts [14] about $ 11.7 billion of global investment in the blockchain market by 2022. In the perspective of the next 20 years, these figures may well increase by more than 10 times.

    The absence of accepted standards, the possibility of their open formation. Given the transnational nature of technology, a huge number of conferences and hackathons [15] held in different countries with the participation of speakers from different parts of the world, it is clear that technological standards can be discussed and changed if there is a desire to talk, share experiences and make joint decisions.

    Reduced infrastructure maintenance costs.Already, there are projects that allow us to share the free space or computing resources on your device with other users. Each of us has a smartphone, the processor on which is idle 99% of the time, and all this computing power can be used for good! (No, not on bitcoin mining). I think that the future is economical and equitable use of all these huge computing resources in our pockets and on the desktops.

    New level of stability and availability of information systems . As practice shows, it is easy enough to lose access to a particular site when the point of failure is the only server. In the new decentralized paradigm, access to the system can be obtained from any node of the system, which may be thousands.

    4. Conclusion

    Now we are seeing a huge number of projects that are trying to apply the blockchain. It is foolish to assume that it will pass without a trace. We are still waiting for the new “killer app” (how do you think it can be?), How it once became the Netscape browser, or how Facebook has forever changed the mechanics of social interactions. Perhaps this will be a product of the merger of several new technologies at once - the blockchain, AI and some VR. We may have to rethink the concept of value: some crypto-anarchists have already expressed their hallucinations about the emergence of personal cryptocurrencies. When each person has his own currency, his own equivalent of value, which depends on his social rating (hello to China).

    And although the concept of Web 3.0 is still in the bud of its formation, more and more people have expressed the opinion that the new Internet is an Internet value.

    5. References

    1. M.Video connects new members to Russian commercial blockchain consortium
    2. Telegram: Contact @CH_DGate
    3. Rostec and Vostok project will implement blockchain in digital economy infrastructure
    4. VEB and Grozny City Hall will test the blockchain technology
    5. LANIT goes to blockchain
    6. Finnet
    7. ConsensusPedia: An Encyclopedia of 30 Consensus Algorithms
    8. The DAO and the teaching of the Tao. Emergency exit
    9. About a guy who took down $ 300 million while playing with Ethereum's smart contracts
    10. Token-Managed Registries 1.0
    11. Building trust in government
    12. Bitfury successfully implements Blockchain land-titling registry in the Republic of Georgia
    13. Bitfury: Blockchain for Government
    14. Worldwide Spending Guide to Reach $ 11.7 Billion in 2022, According to the New IDC Spending Guide
    15. CoinMarketCal - Cryptocurrency calendar

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