Why Most Blockchain Applications Are Dumb

Most blockchain applications are useless [1], built by people who have no clue what they’re doing, and funded by people who have no clue what they’re funding.

There are a few reasons for this:

First, a blockchain does away with the need for a central authority, but such an authority is often helpful. For example, someone proposed an Uber-like site that’s operated on a blockchain rather than having one company control the platform. But I want a minimum standard that I can expect from a taxi, and I want a central party to enforce it. If I have a problem, I want to be able to contact someone who can take care of it. If a driver repeatedly mistreats passengers, I want him booted off the platform. Some naive techies think that middlemen are always bad. But a trusted authority often helps. An Uber-on-the-blockchain would be a worse Uber.

Second, a blockchain can verify things only till they touch the real world. For example, someone proposed a courier company that uses Blockchain to verify that people received their packages. If I claim I haven’t, but the delivery guy claims that he gave it to me, a blockchain can’t validate that. We don’t have robots walking around taking notes of everything happening in the world.

Third, one aspect of blockchains, smart contracts, are dumb. Partly because most contracts involve something happening in the real world (see the previous point). And partly because, as the aforelinked article mentions, code is not the ultimate authority when people sign a “smart” contract that does something unintended. Saying that courts are irrelevant fails the minute one party disagrees and takes the matter to court.

For all these reasons, when a startup says they’re using the blockchain, your first reaction should be skepticism.

[1] This post focuses on non-cryptocurrency applications of blockchain, but cryptocurrencies are broken, too.

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