It has been ten years since the emergence of blockchain. Over the years, blockchain has never been looked upon favorably. Now everyone is involved in the research and development of blockchain technology. Many people believe that blockchain will completely subvert everything. After such a long period of development, what are the real blockchain applications?
From payment methods to legal documents, from custody services to voting systems… every existing blockchain application case is trying to integrate distributed, encrypted, and anonymous features. But, have you ever thought about what if distributed ledgers have no value? Ten years after the invention of the technology, there are still no large-scale application cases. Is it because no one actually needs it?
1. Can blockchain really subvert traditional banks?
Blockchain technology was born to give digital currencies such as Bitcoin more functions, so that they can be used for storage, payment, and circulation like traditional currencies, and at the same time solve problems that are difficult to overcome in the legal currency system, such as avoiding large-scale financial crises.
Everyone also claims that Visa and MasterCard are like “dinosaurs” with high intermediate costs in payments. They believe that blockchain will provide a way to instantaneously exchange value (transfers, etc.) by eliminating intermediate links and significantly reducing costs. The revolution in banking has just begun. By then, citizens will be able to trade freely in any cryptocurrency system outside the national system, and the government will take a back seat and will no longer be able to control the “throughput” of funds in the entire financial market by issuing legal currency.
First of all, the low-cost transaction method it envisions to “exchange value without a middleman” already exists – cash payment. If Bitcoin wants to replace the US dollar, what are its advantages in competing with current Visa and MasterCard?
Visa and MasterCard are U.S. dollar-based banking transaction systems that provide banks with “value-added” services such as fraud dispute tracking, home purchase and seller identity verification. When choosing to use a new payment system, the payer’s primary concern is that consumers will be protected and get their money back if the goods/services are not as described; the payee’s primary concern is that its consumers (or potential Consumers) already exist in this payment system and are willing to pay via this payment method.
For example, adding mileage points on United flights, increasing credit limit, giving free checked baggage, etc. are all products/services that consumers and merchants accept and will use. But for Bitcoin as a payment method, no one really needs it, which is one of the reasons why it has not developed rapidly.
Furthermore, Visa can process 60,000 transactions per second, while Bitcoin’s transaction processing speed is 7 transactions per second. At present, Bitcoin is not actually a better payment system. Of course, Bitcoin is also undergoing technical improvements to improve its performance and efficiency, but currently it only has 0.01% of its processing power in clearing transactions. It should be noted that the energy consumption of Bitcoin with a transaction processing speed of 7 transactions per second is 35 times that of Visa. This means that when the transaction processing speed of Bitcoin increases to the level of Visa, it consumes less electricity. Almost equivalent to the electricity consumed by the entire planet.
It would take 5,000 nuclear reactors to run Visa on the blockchain
2. Is free trade without government supervision really feasible?
First, in many countries, there are things that the government keeps secret that would make society a better place. In Cuba, Venezuela and other places, many people like to use US dollars for transactions. In theory, Bitcoin can also play such a role, but in fact, Bitcoin lacks government control, that is, in the legal currency payment system, the government controls individuals and responsibility of society as a whole.
When transactions go wrong, the government-backed banking system can provide FDIC guarantees (Federal Deposit Insurance Corporation), ACH reversibility (Automatic Clearing House), identity verification, auditing standards and investigation system support. wait. But the Bitcoin system does not have these.
There have been cases where customer emails were hacked, resulting in the theft of Bitcoin account passwords and user assets being wiped out overnight. In 2014, Mt. Gox, the largest Bitcoin exchange, was hacked and investors lost US$400 million. Subsequently, Bitcoin and the exchange Bitfinex also announced their closure after being hacked.
Mt Gox loses all customers’ money
BitFinex loses all customer funds
Imagine what the world would be like if there were many banks that could not guarantee the safety of customer funds?
Bitcoin is a lot like the banks of the Middle Ages, proclaiming, “Here is your freedom, have a nice day.” However, if groups such as the elderly put their money into the bank/Bitcoin system, they need it the most The system can ensure the security of funds. If the security of their funds cannot be guaranteed or stolen by hackers, who will help them at that time? I’m afraid blockchain technology can’t solve it.
Second, the government policy is to prevent the occurrence of terrorist financing and large-scale crimes, and to crack down on illegal industries such as credit card stealing groups and child pornography.
Most people prefer to have the privacy of transactions, but in a guaranteed and discoverable (regulated) state. For example, when asked “Does the government have the right to obtain detailed billing information for each transaction of each person?”, the majority of people disagreed; when asked “Does the government have the right to obtain detailed billing information for each transaction of child pornography collectors?” ”, the majority held a positive attitude.
Some Bitcoin enthusiasts said that no one wants to see goods and transactions in areas designated as illegal by the government become “popular” on Bitcoin, and the consequences will be dire. He also said, “If you invented cash, it would be illegal.”
Mongolian banks experience 400% transaction volume and impose new sanctions on Russia. New slogan – “Bitcoin: fewer police than Mongolia”.
3. What are the advantages of micropayment and inter-bank transfer?
Micropayments and inter-bank transfers are two cryptocurrency use cases that people are particularly excited about.
When it comes to micropayments, people think Bitcoin transactions are free and instant. But in fact, they take 8 minutes to process the transaction and charge a 4-cent transaction fee. When talking about typical application scenarios of encrypted micropayments, people usually think that, for example, you can easily pay 2 cents to listen to a musician’s song on a music platform, or pay 4 cents to read an author’s article. .
But the reality is that if you want to read the article directly without waiting time, the platform needs to obtain authorization from the source of funds in advance, and the platform infrastructure to achieve this actually completely eliminates the need for Bitcoin. Because users can completely bind the platform account to their bank card number, author subscription/monthly subscription methods are provided to do this.
In terms of inter-bank transfers, many people think that Ripple is a better way to transfer funds between banks. In the past month, Ripple has processed approximately $2 billion worth of interbank and interpersonal transfers. But why don’t banks like this new technology?
Because after opening the Ripple interface, it is not much different from the existing system. Instead, a lot of passwords and encrypted tokens that may be stolen are added. At present, thefts appear to be frequent, but no suitable solution has been found. The current banking system already has ledgers, and there is no need to make them more decentralized, encrypted, anonymous, irreversible, etc.
4. So-called “smart” contracts
Smart contracts are contracts written in software rather than paper. Developers can code directly on the blockchain, so the “smart contract” can directly transfer value based on the “contract” agreed by the relevant parties, which means that the contract is automatically executed. In addition, the existence of smart contracts means that expensive legal links are no longer needed for contract protection and debate, which will effectively reduce the cost of interpretation.
However, this is only an ideal situation, and real-world cases show that this approach actually has problems.
The DAO lost all customer funds
Take the most typical distributed autonomous organization, DAO, as an example. Its members can directly use private keys to invest without the need for lawyers, management fees, or a board of directors. It eliminates the impact that misdirection by directors and fund managers can have on investor funds. However, due to software vulnerabilities, DAO once invested 1/3 of its total member funds (about 5,000 US dollars) in a device controlled by a group of smart programmers, and this programmer group was well aware of the recursive problems in the balanced update system. This “smart contract” operation was considered by some to be a hacker attack. The result was that all members came together to vote and retroactively modify the software contract.
What does this mean? Even the most committed blockchain enthusiasts actually want a group of people to get together to discuss the underlying intent behind a contract and then make a decision, rather than letting software do it automatically. Perhaps the “silliest” way might be the “shortcut.”
Even crypto enthusiasts want to debate what their contracts mean
The DAO is just a test case, but what would be the consequences if something like this happened to a large company’s transactions?
Investors and startups included in smart contracts rely on the blockchain to quickly perform operations and complete payments. For example, in the healthcare industry, blockchain can theoretically enable instant processing without the need for 90-180 day wait times and hours-long mobile payment processes. However, this is already implemented in any software-supported purchasing system. For example, Amazon’s servers automatically/intelligently charge service fees to customers based on website traffic.
In fact, people confuse “rule programs implemented (controlled) through software” with “encoding the rules themselves on the chain”. The above-mentioned service links provided by Amazon belong to the former, rather than automatically executed smart contracts. The same goes for health insurance bills.
Why is there no software that can automatically enforce rules? It’s not because the technology itself is not “intelligent” enough. The more fundamental reason is that insurance claims companies are making slow progress. There are two reasons behind this: 1. Accidents can happen at any time; 2. They prefer manual assessment methods rather than machines or intelligence. contract.
Can Bitcoin make the process faster?
In summary, whether they are blockchain enthusiasts or medical insurance companies, many people hope to explore and interpret business relationships through human language, and then use software to program processing processes and payment methods. It’s a cycle that goes back and forth, and this exploration continues.
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 broken down into “blocks” (which can be understood as pages), each “block” is encrypted, and then a distributed large ledger is formed according to the timestamp. This approach will allow all bills to be backed up in multiple locations, meaning the ledger is more secure and traceable.
However, there are already good ways to distribute files, encrypt them, and copy them to multiple media in different locations. Dropbox, for example, can encrypt and store files on multiple users’ hard drives without expensive storage fees. In contrast, blockchain is an inefficient and insecure method.
Furthermore, there are four obvious problems with the blockchain-driven approach:
1. The blockchain relies too much on the one-way encrypted user private key system, resulting in the lack of intrusion detection, capacity limitation, firewall, remote IP tracking and other functions in complex systems.
2. The credibility of the price trade-off system of the blockchain is very low. Bitcoin consumes nearly 1 billion US dollars in electricity to obtain only 1/6 of the storage space of Dropbox, and users only need to pay 10 US dollars per month to use Dropbox.
3. In the long run, systematic selection of data replication methods and storage addresses will be more advantageous, and the default distributed data storage of blockchain is not the development direction.
4. Dropbox, Box.com, Google, Microsoft, Apple, Amazon and other companies have also proposed many valuable features of blockchain, but they do not actually want to develop them themselves. Take Visa as an example. Its biggest problem is not storing data, but including management permission settings, how to obtain easy-to-view document records, how to synchronize on multiple devices, etc. These problems cannot be solved with the emergence of blockchain technology. The problem.
In addition to distributed storage, distributed computing and information transfer security are also controversial. Encrypting files, permanently storing them, and replicating them across the blockchain is a lot of unnecessary expense for what users actually have to do. There are already better solutions for information storage, calculation and transmission than blockchain technology on the market. They can meet users’ needs for information encryption and copying, and also include many additional functions.
6. Stock issuance
Nasdaq caused a stir when it announced the launch of its first in-house blockchain-powered exchange. But if you think about it carefully, like Nasdaq and DTCC (United States Trust and Clearing Corporation), their entire purpose is actually to have a “general ledger” that records everyone’s shareholding information. So, if blockchain technology is not used, Will they worry about being unable to track investors’ stock information? the answer is negative.
The blockchain ledger is distributed and can solve the trust problem in the absence of a trusted intermediary. But Nasdaq, trade transfer managers, clearinghouses and exchanges are all trusted intermediaries and provide value-added services.
Nasdaq has a deep industry accumulation in the compliance and security of trading stocks, so it is natural for it to get involved in blockchain. However, in new exchanges that remove intermediate links such as exchanges and governments, users can ultimately only choose closed-loop operating companies that comply with the laws, contracts, and tracking systems of the mainstream market. Unlisted stock traders all know that this situation is actually the “best plan” to “steal users’ money”.
Many people have noticed this. Many start-up companies have begun to develop blockchain and launch ICO fundraising methods. What is interesting is the time when this fundraising method has grown wildly. Tokens are issued as securities and the SEC regulates ICOs. has arrived. The development of tokens will either become a low-security “electronic certificate” that lacks the legal protection of the stock exchange, or it will become an attempt on a long journey to explore and provide a “final solution to legal enforcement.”
Why do I need to file securities instruments when issuing securities?
7. Authenticity confirmation
Another promising application of blockchain is the production of a public, immutable joint statement that users can publish on the blockchain, a distributed ledger. Theoretically, we can record voting results, conduct product traceability, verify user identities, solve domain name ownership issues, host items, conduct patent certification, document notarization, etc.
However, these cases do not fully consider the specific implementation details.
For voting, for example, the current situation is that voters put paper ballots into a box, and reporters and observers from both parties are always nearby to record the vote totals. There are two difficulties in this. One is to ensure the anonymity of voting, and the other is that voters and voting are corresponding, one person, one vote. These two points are currently not achieved by blockchain.
‘One vote per person’, hard to calculate for Bitcoin wallets
In addition, for the traceability and authenticity verification of goods such as diamonds, traditional companies have launched certificates that can verify the authenticity of goods, and users can check them online. However, distributed encryption blockchain technology does not have much added value. In terms of custody, although smart contracts can automatically complete payment for goods without third-party confirmation, a trusted institution is still required to supervise whether the goods are delivered as scheduled.
Finally, some may say that blockchain can irrefutably prove that you knew X thing at Y time without revealing the details of X event, as long as you encrypt X information and send it to yourself by email, Hotmail, or publish it on bitbucket class. But how big is the need/industry for “irrefutable proof that you knew X thing at Y time”? Can you think of any big companies that offer this kind of service?
Some people also say that blockchain’s smart contracts and fully digital recording methods can replace traditional domain name hosting services. However, in reality, after the adoption of blockchain technology, domain name theft and impersonation occur frequently. When DAO or other smart contracts are hacked and domain name accounts are stolen, we need a method that can “override” blockchain distribution. way above the record.
