Everyone said that Bitcoin's underlying technology - blockchain will completely subvert everything. However, after years of development and billions of dollars in inflows, no one has come up with a real blockchain solution other than cryptocurrency speculation and illegal transactions.
From payment instruments to legal documents, from hosting services to voting systems... Every existing blockchain application case is trying to bring together distributed, encrypted, and anonymous features. However, have you ever wondered if distributed ledgers are worthless? Ten years after the invention of technology, no large-scale application cases have been born. Is it because nobody actually needs it?
1. Can blockchain really subvert traditional banks?
The blockchain technology was born to give bitcoin and other digital currencies more functions so that it can be used to store, pay, and circulate the same currency as traditional currencies, while at the same time solving problems that the legal currency system cannot overcome, for example, avoiding large-scale financial crisis.
Everyone also claimed that Visa and MasterCard are just like "dinosaurs" and that the intermediate costs are high. They believe that the blockchain will provide an instant value exchange (transfer, etc.) that removes intermediate links and drastically cuts costs. The banking revolution has just begun. By then, citizens will be able to trade freely in a cryptocurrency system outside of any national system. The government will relegate to a secondary position, and it will no longer be able to "pick up" the funds that control the entire financial market through the issuance of legal currency.
However, this ideal may not be long enough to be disillusioned.
First, the low-cost trading mode that it envisages “value exchange without intermediaries” already exists—cash payments. Bitcoin wants to replace the U.S. dollar. What is its advantage in competing with Visa and MasterCard?
Visa and MasterCard are dollar-based banking transaction systems that provide banks with "value added" services such as fraud tracking, home buying and seller authentication. When choosing to use the new payment system, the payer's primary concern is that if the goods/services are not as described, the consumer can be guaranteed to take back their own money; the payee is most concerned with its consumers (or potential The consumer) already exists in this payment system and is willing to pay by this payment method.
For example, mileage credits added to a joint flight, increased credit limits, free baggage check-in, etc., are products/services that consumers and merchants accept and use. But for the payment method of Bitcoin, no one really needs it. This is one reason why it has not developed rapidly.
Furthermore, Visa can process 60,000 transactions per second, and bitcoin transactions are processed at 7 times per second. Currently, Bitcoin is not a better payment system. Of course, Bitcoin is also making technical improvements to improve its performance and efficiency, but currently it has only 0.01% processing capacity in clearing transactions. It should be noted that Bitcoin, which has 7 transaction processing speeds per second, is 35 times more energy-consuming than Visa, which means that when bitcoin transaction processing speed is increased to Visa level, it consumes power. It is almost equivalent to the electricity consumed by the entire earth.
2. Is it really feasible to remove government-supervised free trade?
First, in many countries, there are things that keep the government secret and make society better. In Cuba, Venezuela and other places, many people like to trade in US dollars. In theory, Bitcoin can also play such a role, but in fact, Bitcoin lacks the government's check, that is, the government-to-individual in the legal currency payment system. The responsibility of the entire society.
When there is a problem with a transaction, a government-backed banking system can provide FDIC (Federal Deposit Insurance Corporation), ACH's Automatic Clearing House, authentication, auditing standards, and survey system support. Wait. And these, the Bitcoin system does not.
A case in which the password of the Bitcoin account was stolen due to the hacking of the customer's e-mail, and the case where the user's assets were cleared overnight has occurred. In 2014, Mt. Gox, the largest bitcoin exchange, was hacked and investors lost $400 million in funds; Bitcoin and the exchange Bitfinex were also closed after hacking.
Imagine if there were many banks that couldn't guarantee the safety of their customers' funds. What would the world look like?
Bitcoin is similar to the banks of the Middle Ages and declares, “Here is your free paradise and wish you a nice day.” However, if elderly people and other groups deposit money into the bank/bitcoin system, they need it most. The system can guarantee the safety of funds. If their funds cannot be guaranteed, if they are hacked, who will help them? I am afraid blockchain technology cannot solve it.
Second, the government policy is to prevent terrorist financing and the occurrence of crimes of a large scale, and to crack down on illegal industries such as credit card fraud groups and child pornography.
Most people tend to have the privacy of the transaction, but they are guaranteed and discoverable (supervised). For example, when asked "whether the government has the right to obtain detailed billing information for each individual transaction", most people object; when asked "is the government entitled to obtain detailed bills for each transaction of child porn collectors? At the time, most of them were positive.
Bitcoin enthusiasts said that no one wants to see that the commodities and transactions that the government has designated as illegal activities are "being popular" on Bitcoin. The consequences are terrible. He also said, "If you invented cash, it would be illegal."
3. Micro-payment and cross-bank transfer advantages?
Micropayments and interbank transfers are two exciting scenarios for cryptocurrency.
In terms of micropayments, Bitcoin transactions are considered free and instant. But in fact, they need 8 minutes of transaction processing time and a transaction fee of 4 cents. When it comes to the typical application scenarios of encrypted micropayments, people often think that, for example, you can conveniently pay 2 cents to listen to a musician's song on the music platform, or pay 4 cents to read an author's article. .
However, the reality is that if you want to read the articles directly without waiting for the time, then the platform needs to be authorized by the source of the funds in advance, and the platform infrastructure needs to achieve this, and it virtually eliminates the need for Bitcoin. Because the user can fully bind the bank account number to the platform account and provide author/month subscription.
In terms of cross-bank transfers, many people think that Ripple is a good way to transfer funds across the bank. In the past month, Ripple has processed about $2 billion in interbank transfers and interpersonal transfer transactions. But why don't banks like this new technology?
Since the opening of the Ripple interface is not much different from the existing system, it increases the number of passwords and crypto tokens that may be stolen. At present, theft has been frequent but no suitable solution has been found. The current banking system already has ledgers and does not have to be more fragmented, encrypted, anonymous, and irreversible.
4. The so-called "smart" contract
Smart contracts are contracts written in software, not written forms. The developer can code directly on the blockchain, so the "smart contract" can directly transfer the value according to the "contract" agreed by the relevant party, which means that the contract is automatically executed. In addition, the existence of smart contracts means that there is no longer any need for costly legal aspects for contractual guarantees and debates, which will effectively reduce the cost of interpretation.
However, this is only an ideal situation. Real-world cases illustrate that this method is actually problematic.
For example, DAO, the most typical distributed autonomous organization, its members can directly invest in private keys without the need for lawyers, management fees, and the board of directors. It eliminates the impact that directors and fund managers may have on investor funding. However, due to software vulnerabilities, DAO has allocated one-third of their total member funds (approximately 5,000 perfect dollars) to a device controlled by a group of smart programmers who are well aware of recursive issues in the balanced update system. This "smart contract" operation was recognized by some as a hacker attack, resulting in all members coming together to vote and retroactively modify the software contract.
What does this mean? Even the most loyal blockchain enthusiasts actually want a group of people to come together to discuss the underlying intent behind the contract and then make a decision instead of letting the software execute automatically. Perhaps the "stupidest" approach may be "shortcut."
DAO is just a test case, but what happens if such an event occurs at a big company's trade fair?
The default blockchain for investors and startups included in smart contracts can quickly perform operations and complete payment. For example, in the healthcare industry, blockchains can theoretically be processed on-the-fly without having to wait for 90-180 days of waiting time and several hours of mobile payment processes. However, this has been achieved in any software-supported purchase system. For example, Amazon's servers automatically/intelligently charge customers for service fees based on website traffic.
Actually, people confuse the "regular procedure of software implementation (manipulation)" with "encoding the rules themselves." The above-mentioned services provided by Amazon belong to the former and do not belong to smart contracts that can be executed automatically. The same is true for medical insurance bills.
Why is there no software that can automatically enforce rules? Not because the technology itself is not "intelligent". The more fundamental reason is that insurance claims companies are making slow progress. There are two reasons behind this: 1. The accidents happen at any time; 2. They prefer human assessment methods, not machines or intelligence. contract.
In summary, many people, whether it is blockchain enthusiasts or medical insurance companies, want to explore business relationships through human language and interpret them, and then use software to program procedures and payment methods. This is a reciprocating cycle, and such exploration has always existed.
5. Distributed storage, computing, and information transfer
Using blockchain as a distributed storage mechanism is also a bold idea. On the surface, the document is decomposed into "blocks" (which can be understood as a page), each "block" is encrypted, and a large distributed book is formed according to the time stamp. This approach will allow all bills to be backed up in multiple locations, which means that the books are more secure and traceable.
However, there are already good ways to achieve "a variety of media that store, encrypt, and copy files to different locations." For example, Dropbox can encrypt and store files on multiple user hard drives, and the storage cost is not high. In contrast, the blockchain is an inefficient and insecure way.
In addition, there are four obvious problems with the blockchain drive method:
The blockchain relies too much on a one-way encrypted user private key system, which results in the lack of features such as intrusion detection, capacity limitation, firewall, and remote IP tracking in complex systems.
The reliability of the blockchain pricing trade-off is very low. Bitcoin consumes nearly 1 billion U.S. dollars for electricity and only 1/6 for Dropbox, while users only need to pay 10 U.S. dollars per month for Dropbox.
In the long run, systematic selection of data replication methods and storage addresses is more advantageous, and the default distributed data storage in the blockchain is not the direction of development.
Companies such as Dropbox, Box.com, Google, Microsoft, Apple, and Amazon have also proposed many valuable features of the blockchain, but they do not actually want to develop it themselves. Taking Visa as an example, its biggest problem is not to store data, but to include management permission settings, how to obtain easy-to-view document records, how to synchronize on multiple devices, and so on. This is not the emergence of blockchain technology. The problem.
In addition to distributed storage, distributed computing and information delivery security are also controversial. Encrypting files, storing them permanently, and copying them across the entire blockchain are a lot of unnecessary expenditures for what the user actually does. Currently, there are already better solutions for information storage, calculation, and delivery than blockchain technology on the market. They can satisfy users' needs for information encryption and replication, and also include many additional functions.
6. Stocks issued
When Nasdaq announced the launch of its first internal blockchain-driven exchange, it caused widespread sensation. But think carefully, like Nasdaq and DTCC (US Trust and Settlement Company), their entire purpose is actually to have a "general ledger" that records the ownership information of all people. Then, if you don't use blockchain technology, Will they worry about not being able to track investors' stock information? the answer is negative.
The blockchain book is distributed, it can solve the trust problem in the absence of trusted intermediary. However, Nasdaq, transaction transfer managers, clearing houses, and exchanges are all trusted agents and provide value-added services.
NASDAQ has deep industry accumulation in the compliance and security of trading stocks, and it is of course involved in the blockchain. However, in removing new exchanges in the intermediate sectors such as exchanges and governments, users can only select closed-loop operating companies that meet the laws, contracts, and tracking systems in the mainstream market. Non-listed stock traders all know that this situation is actually the "best plan for stealing user money."
Many people have already noticed this, many start-up companies started to develop blockchains and started ICO fundraising methods. What's interesting is the time when this kind of fundraising method is rampant, and the tokens are issued as securities, and the SEC regulates ICOs. Has arrived. The development of tokens has either become a less secure “e-certification” protected by the legal protection of stock exchanges or an attempt to explore the long-term journey of providing “final solutions for legal implementation”.
7. Authenticity confirmation
Another promising application of the blockchain is to make a public, non-tamperable joint statement that users can post on the distributed ledger of the blockchain. In theory, we can record the voting situation, trace the source of the product, verify the identity of the user, solve the domain ownership problem, escrow the goods, carry out patent certification, document notarization and so on.
However, these cases did not fully take into account the specific implementation details.
For example, for voting, the current situation is that voters put paper ballots into a box, and journalists and observers on both sides are always supervising and recording the total number of votes. There are two difficulties in this, one is to ensure the anonymity of the vote, and the other is that the voter and the vote are corresponding to one person, one vote. For these two things, blockchain is not currently available.
In addition, for the traceability and authenticity verification of products such as diamonds, the traditional company has introduced a certificate that can verify the authenticity of the product, users can query online, and distributed encryption blockchain technology does not have much added value. In the area of custody, although smart contracts can automatically complete merchandise payments without the need for third-party verification, there is still a need for a credible body to monitor the delivery of merchandise on schedule.
In the end, it may be said that the blockchain can prove irrefutably that you know the X thing at Y time without exposing the X event details, as long as you encrypt the X information and send it to you via email, Hotmail, or publish it in Bitbucket is fine. However, "Undoubtedly proves that you know X things at Y time." How large is this demand/industry market? Can you think of any big company that offers this kind of service?
It is also said that smart contract and digital records in blockchain can replace traditional domain hosting services. However, in reality, after the adoption of blockchain technology, domain name theft and impersonation are frequent. When DAO or other smart contracts are hacked and cause domain name accounts to be stolen, we need to be able to “override” distribution in the blockchain. Above the record.
8. Last but not least
Not only that, but now there are many handbags that can find real authentication information such as its ID information on the Internet, and many large companies have invested millions or even millions of dollars in this type of (blockchain item anti-counterfeiting) business. Moreover, smart contracts relying on blockchain technology are also promoting the realization of machine intelligence. For example, by writing a relevant "behavioral-triggered" smart contract on the blockchain behind the washing machine, it can order detergents by itself.
In addition, the existing human and software systems have advantages in such areas as authentication, credible transaction verification, and transaction settlement. Blockchain enthusiasts often overestimate the degree of difficulty in obtaining funds and records from A to B. However, in fact, fund transfer and recording are in fact the most simple and easy to implement links in complex trading systems.
Then, it is now back to the starting point of the problem, encrypting currency speculation and illegal trading. In a recent conversation with Bitcoin entrepreneurs, investors, and industry consultants, I found that they often don't know how to do what they want to do, and it's not clear what value they can bring to users.
Money is going crazy into the cryptocurrency market. However, no one thought that after using the blockchain, credit card users will “hand over” their daily flight miles, and they will also lose their right to complain about trade disputes. Will they be willing?
Indeed, IPO costs are high and the application papers are heavy. The lawyers and accountants in the middle of the group have gained a lot of wealth. As a result, it is envisaged that these intermediate links will be eliminated. We have seen that blockchain entrepreneurs continue to emerge. It seems that a group of smart engineers in their 20s who have no industry experience, and millions of dollars in wind investment, can solve the problems of traditional industries within a few months.
But at least for now, this is not the case.