If you provide a service and you store sensitive data, you have to point out, that you store the data in THE BLOCKCHAIN and all is fine. Blockchain is the synonym for trust. Blockchain is the Switzerland of databases. Is it?
Let’s take a closer look, shall we.
Again, we use the bitcoin as an example. Everyone loves the bitcoin.
A few weeks ago, we went through the bitcoin blockchain mechanics in some length, and I will not bore you with that again today. You can find it here if you would like to read it (Link)
Why do we trust that transactions on the bitcoin blockchain are correctly kept and not manipulated?
- Well…first there is a clever algorithm in place that allows participants to control each other.
- And second, much more importantly, there are a lot of independent participants that fulfill that role of controlling each other. Independent…that is very important.
So where does the trust come from? Not from the bitcoin blockchain as such. The blockchain is merely the instrument that many independent participants use to control the integrity of the transaction stored in it and make sure it is not manipulated by a single participant or a small group of participants.
Let’s play through a scenario. Let’s say tomorrow all participants lose their interest in mining bitcoin. There is just one left. One single participant to the bitcoin blockchain. How much trust is left?? None!! As now that single participant can manipulate current and historic transactions as he seems fit.
So…if there was just one participant that mined blocks and kept track of the bitcoin transactions the trust would be zero, despite the fact that the transaction would still be in that exact same bitcoin blockchain. Think about that for a moment.
It is not the blockchain that creates trust. It is the fact, that a lot of independent participants control each other using the blockchain as a tool to do so.
Let’s summarize our findings:
A blockchain is a tool that can generate trust, given that a sufficient number of independent people participate in running it.
What is the incentive for participants to contribute? This is an easily answered question in the bitcoin case. It is money. They get new bitcoins for mining and collect transaction fees for including your transactions into the next block.
Let’s look at another example.
Company A offers a service and stores your data on their blockchain. They are the only participant that runs that blockchain. Then there is exactly as much trust as you trust company A itself. The blockchain does not add any additional trust.
So, in this example using a blockchain is merely a promotional gag.
That takes us to the main question.
When does using a blockchain actually really make sense?
In my eyes there are two important questions to be answered.
- First, is there no entity that I trust sufficiently to store the data at hand. Only then there is a need for a blockchain.
- Second, if question one was answered with yes, will I be able to give an incentive to a sufficiently large group of independent participants to help and maintain that blockchain. Not just now – also in the future. Because if that is not given, then there is no trust either.
If both questions can be answered with yes, then using a blockchain might make sense.
I would like to close the article with my own opinion.
The question raised in the title was, if the blockchain is the Holy Grail of trust. Trust is not given by the blockchain. Trust is given by a large number of independent participants that run the blockchain, controlling each other. They need an inventive to participate, not just now, also in the future.
I haven’t found (m)any cases myself, where I see a blockchain as a valid technology to use, considering all the parameters, and in which it actually adds some benefit and is not merely a promotional gag.
I would be glad to hear your opinions.
