There is an episode of South Park title Crème Fraiche which lampoons the rise of cooking shows and food TV. Randy takes up cooking and tosses in Crème Fraiche in everything he creates.
Blockchain is the new Crème Fraiche, whether you like it or not. Everyone is finding an application or two of the technology behind Bitcoin and trying to solve any number of problems using the open ledger technology. While innovation and creativity aren’t necessarily bad things, too much of a good thing can lead to problems.
A lot of people are playing with Blockchain at the moment which includes security companies, large banks, governments, private individuals, stock exchanges and others. All of these people realise that Blockchain’s ability to handle transactions without a central framework is important for the future.
The problem though may lie in areas where there is a free for all.
An identity crisis
A digitally verifiable identity document is the solution to many of the world’s problems according to the proponents. They claim that having a unique identity document can help narrow down people who are in needs of benefits and enable them to access a system where their needs can be met.
In India the government is currently implementing an ID programme called ‘Aadhar’ which loosely translates into English as basis. This programme, while successful, has raised concerns over privacy and security of the data that the government has collected.
Personally I have avoided getting a government issued biometric identity managed by a central Identification Authority as is the case with Aadhar, because I have real world concerns about this data being lost or falling into the ‘wrong hands’.
There is an alternative way of creating digitally verified identification documents as well, and that involves using the Blockchain. In its sustainable development agenda, the United Nations say that they would like to provide legal identity for all including birth registration by 2030.
The UN is considering a Blockchain approach and has met with industry people in this regard. However this push for the need for everyone to have an identity is also a concern for those of us that would like freedom from a future where we are forced to prove who we are at the drop of a hat by the powers that be.
However, at the moment the positives seem to outweigh the negatives. Alex Matanovic, CEO ofEC District, says in response to a question whether digital identity will be based on a Blockchain run solution:
“I definitely think that is going to happen, sooner or later. I still have no idea how it is going to look like, but I am looking forward to it. I am sure that type of solution will solve many problems we have now, but also create some new problems that we will be tackling in years to come.”
The Internet of things
It has already begun, our devices are talking with each other. Fridges and Toasters talking with each other for the betterment of humanity or at least that is the idea.
However the question at the centre of this development is who controls the flow of data and who has access to all the information that is generated.
There are valid concerns about the misuse of such data by a central authority. A Blockchain of things could indeed help decentralise this information but then again the problems surrounding the openness of this data creep into the equation.
The truth is that while the bitcoin Blockchain has existed now for a while, there are valid concerns about how safe and secure it would be when exported to a universal Blockchain of things.
When we talk about the internet of things we are talking about an unknown realm. Will this Blockchain be open to theft, hacking or a possible failure? The answer to this is unknown at the moment.
A complete shift to cryptocurrency
Many central banks are now experimenting with Blockchain technology. We have already covered the Reserve Bank of India’s interest in Blockchain as well as the Dutch Central Bank’s efforts in this direction.
In a future where all the money is cryptocurrency and all of which is based on Blockchain technology, certain risks will present themselves.
One of the biggest problems would be that every single transaction would or could be in the open domain. Even if it were not to be, authorities would still be able to trace every transaction and know who spent how much on what exactly. While this could have potential benefits of deterring crime, it is also a massive invasion of privacy.
David V Duccini, Executive Director of Strength in Numbers Fundation, says:
“The transactions themselves are essentially anonymous in that the chain doesn’t hold WHAT was acquired, all we know is that two or more parties transacted — and THAT information is certainly valuable if say a narcotics or illicit drug dealer’s wallet identity was known and then any and all transactions to/from it would in effect identity his users and likely his suppliers. Unwitting victims might fall under suspicion if you meet him in coffee shop and buy a cell phone off of him from a local swap board (like craigslist in the USA)”
In the end it cuts both ways
Blockchain is an amazing technology which has the potential to be applied in a myriad of ways but in the end it also can cut both ways. The open ledger system while giving a lot of power to individuals also has the disturbing potential to leave them exposed.
The trick lies in the implementation of the Blockchain and the concerns of privacy, security and flawless execution have to be addressed in the real world. This means that we need scrutiny as well as experimentation to make sure that things go smoothly.
The dangers of a centralised system are no less than the dangers a distributed system brings with it. Ultimately it is about taking an approach and factoring in security and safety of the individual end user.
Blockchain has arrived and is here to stay, and it is only a matter of time before we see it all around us.