Blockchain is a Distraction insights
A computer system without blockchain is like a chocolate cake without mustard.
Introduction
Blockchain is a solution in search of a problem. In every case we've looked at, "technology x with blockchain" is less good than the corresponding "technology x without blockchain". We'll explain why it's all hype, or "an amazing solution for almost nothing".
There are only 3 exceptions to this rule:
- Bitcoin – which has some limited use as a highly volatile, potentially pseudonymised, currency,
- NFTs – which are primarily "useful" for money-laundering, and
- Physical blockchain – a chain, secured to a concrete block, used for preventing bicycle theft!
Why Blockchain isn't a solution
Permissions
All blockchains are either permissioned (i.e. there are rules around access control) or permissionless (i.e. anyone can read and write to them).
But if you are going to control access, you already have to create and administrate an API with central control, and allocate credentials. This means you've lost the key blockchain-benefit of decentralisation, so you might as well just run a real database (such as PostgreSQL)
and take advantage of the far greater versatility, power, efficiency, simplicity and performance.
On the other hand, if you are not controlling access, anyone can read your supply-chain data, and anyone can insert any garbage that they want, even fraudulent or 'adult' material.
Validating the wrong thing
Blockchain applies cryptographic validation to the label, not to the product.
| Situation | Claimed Benefit | Reality |
|---|---|---|
| Counterfeit Parts | Blockchain proves that an expensive item, such as a CPU, or an OEM car part, or a bottle of fine wine, is the genuine article. | The serial number, or label has proven provenance, but there is no way to know that the real label isn't affixed to a fake part, or the contents has been replaced. |
| Organic Strawberries | Blockchain lets the end-consumer scan the label in a supermarket, to find out that their strawberries really were organic. | This proves that the supply-chain, all the way back to the farmer, is claimed organic - but it doesn't actually prove that the farmer physically used organic products and methods, merely that he signed paperwork to say so. |
| Supply Chain Auditing | Blockchain helps operations to retrospectively audit their flow of parts through the supply-chain, with multiple vendors and logistics partners. | This validates a cargo manifest. But it doesn't stop someone taking the boxes out of the truck after signing them in, or scanning the label after emptying the box! If all participants must use a common platform, then we have a centralised, permissioned system (as above). |
| Supply Chain Traceability | Blockchain helps operations to track (in real-time) and adjust their flow of parts through the supply-chain, with multiple vendors and logistics partners. | Blockchain can't actually do this; we need a proper supply-chain management system, to help know what part is where and when, solve problems, predict, adapt, and fix issues when they arise. Most suppliers are honest, but fallible, busy, overloaded, delayed, … |
| Chain of Custody (digital) | Blockchain provides an auditable (and legally valid proof) of the provenance of a digital asset or piece of evidence. | This works, provided that the item itelf is the digital file. However, blockchain isn't needed: standard cryptographic signatures are perfectly adequate, and much simpler. |
An example of this faulty-reasoning is given by PWC, in their paperon blockchain in logistics. Their summary of the challenges in supply-chains is correct, but their recommendation is not supported by the evidence.
Smart Contracts
A smart contract is a legally binding, self-executing transaction that occurs automatically in response to predefined events. The most common example is: "make payment to the artist conditional upon playback of their music". The idea of the smart contract is that the record label has to pay you, and can't wiggle out.
These are often less useful than one might think: Consider how intrusive it would be if every time you play a piece of music, your computer has to report it to the performing-rights organisation so as to bill you. Consider how much worse the "zero-hours contracts" (and minimum-wage) problem would become for workers, if every single 10-second task were individually billed — and would the client want such complexity anyway?
Contract law is meant to be interpreted by humans, whereas immutability makes mistakes unfixable. The same procedure that enforces that the record label has to pay the artist means that, if your credit-card expired early (because the bank replaced it before the due-date), now your car won't drive! And it's a smart contract with immutable code - there's no customer service you could potentially call to fix it.
Cryptocurrency
Cryptocurrency can actually work, from a technical perspective, because the currency token is itself the digital item that is labelled. However, there are many problems compared to fiat currencies, including volatility, lack of regulation, and the fact that anyone can launch one, making it ideal for pump-n-dump schemes and money-laundering; the FTX and Terra-Luna debacles illustrate this. Bitcoin, as the largest and most well-established cryptocurrency, is slightly less vulnerable, but the CO2 emissions from mining and processing it are globally significant.
Cryptocurrencies, such as Bitcoin, permit untraceable currency-exchange. This has "advantages" (bypassing illiberal government restrictions) and "disadvantages" (circumventing the laws of a fair and just society). Mathematics is non-moral: an algorithm doesn't kow whether it is supporting human-rights , or facilitating ransomware payments to criminal groups.
Most of the claimed advantages of cryptocurrency could be achieved far more straightforwardly, simply by capping the transaction fees charged by the credit-card processors (or equivalently, a central-bank issued fiat digital currency).
Other issues
Environmental and Energy Use: blockchain distributed-ledgers are a very, very inefficient system in terms of power-consumption - the CO2 emissions are a global problem. Instead, using a simple permissioned central database, with API, would solve this. The energy-problem is partly mitigated by the recent Ethereum layer 2 design.
Versatility: a well-designed SQL database is far more capable, computationally efficient, can store and search more data, has fine-grained access-control, and is supported by exceptional open-source tooling for data-interchange and management. SQL also allows for deletion or correction of data, whereas undo is, by design, impossible in blockchains.
Non Fungible Tokens (NFT) are proposed as a way of selling digital artworks, making something inherently copyable (fungible) into something that isn't. But it only applies to digital art. A good example of this is color.museum , which seeks to sell the rights to different 'collectable' colours (on their platform only), and then use these to collect a per-pixel fee on every artwork sold through the platform! This is manifestly silly.
Distributed Trust is the USP of blockchain: the idea is that we can create an un-tamperable record, even an environment where absolutely nobody can be trusted. But such situations rarely occur in practice (perhaps in criminal-networks and dystopian apocalypses); and it still fails if any one actor can ever gain control of more than 51% of the compute-resources.
Web 3.0 is simply a 'buzzword' for a less-efficient version of the current web, inserting blockchain-tools where they are not needed.
GPU proliferation: crypto mining created a huge demand for high-powered GPUs in 2017-2022, bootstrapping their wide availability and higher performance, just in time for the massive surge in the use of LLMs (large-language models) in 2023-2024. So it may turn out that the true purpose of blockchain was to create the preconditions for its own existence, by a time-travelling A.I. !
For more: see the book "Attack of the 50 Foot Blockchain".
Telos Digital: Insight
It is possible to do full supply-chain traceability and cryptographic verification (of the right item) using normal digital signatures. If you are considering blockchain (technology) based on its stated benefits, what you most probably want is supply-chain traceability (functionality). This is something we can help with.