Unless you’ve been living under a rock for the past five years, you can’t help but have heard about blockchain technology.
Fortunes have been made and lost with Bitcoin – the first currency built using the technology. Hospitals have shown interest in the technology for storing patient records. Even Warren Buffet has made his bet on the technology.
As IT professionals, staying abreast of industry shifts and engaging with oncoming technologies is essential. Should you be learning about blockchain as part of your professional development, or is the rise of the technology about to lose momentum?
The case for blockchain technology
Pitched by early adopters as the ‘second layer’ of the internet, sitting as it does ‘above’ the web, blockchain technology is not short of passionate advocates. That’s because the two major issues that the technology engages with – records of transactions and contracts – have been foundational to our politics, society and economics.
“Blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. The ledger itself can also be programmed to trigger transactions automatically.” In short, this means records of transactions are viewable by any party, but not able to be forged or changed by them. Transactions across blockchain technology are cheaper and – in many cases – faster. For many advocates of the technology, the end goal is that intermediaries who record and make transactions – including banks, lawyers and merchants – will no longer be necessary for parts of the successful operation of government, society and the economy.
The technology is already making waves in diverse sectors. In politics, blockchain can prevent electoral fraud. In healthcare, blockchain can track individual vaccination records in societies without efficient medical services. In trade, blockchain can guarantee the origin of fish, wine, or any other stock. For IT professionals, blockchain’s implications for data security – where tracking changes made to datasets – is essential, and could prevent attacks of the type JP Morgan experienced in 2014.
Most visible is the boom in cryptocurrency – which has seen more than 1500 ICO (Initial Coin Offerings) since 2009, with companies seeking to join the blockchain bandwagon by offering financial instruments using distributed ledgers.
For IT professionals, opportunities for making fast money from blockchain development are widespread – but there remain fundamental problems with the technology and its applications.
The case against blockchain technology
At best, blockchain technology could stimulate a slow but complete revolution in computing. At worst, implementation of the technology could grind to a halt.
That’s because the obstacles to adoption are profound.
In the first case, blockchain technology must be adopted by the institutions blockchain advocates want it to overthrow. Powerful industries that serve to process and record transactions are threatened by it, including lawyers and insurance companies.
Financial services providers (like banks and credit companies that transfer and store wealth between individuals and businesses and across borders) are under more direct threat. Currently, these organisations’ business model depends on charging customers to move and store assets, which blockchain providers can do freely or at minimal cost.
Understandably, the financial services community is resistant to a technological idea that could force them to change how they do business. These same institutions are slow-moving, risk-averse and heavily invested and dependent on existing ledger technology – all of which makes the odds of their adopting the technology tomorrow even lower.
“The blockchain is not a disruptive technology. Instead, it’s a foundational one.”
The blockchain is not a disruptive technology. Instead, it’s a foundational one. It cannot be easily adapted by individual or joint organisations into their existing processes because the distributed ledger system is built on a different premise to their current character. Blockchain systems must exist on their own or be integrated slowly and carefully, which costs time, money and risks for organisations.
Today the blockchain community lacks maturity to answer these fundamental questions about integration with existing political and financial systems. Commentators including Joseph Stiglitz and Howard Marks have written the technology off as a tool for financial speculation. Others, including research firm Opimas, have accused the technology of being an over-complicated ‘solution in search of a problem’.
“While the impact [of the technology] will be enormous, it will take decades for blockchain to seep into our economic and social infrastructure,” says the Harvard Business Review. “The process of adoption will be gradual and steady, not sudden, as waves of technological and institutional change gain momentum.”
Blockchain is set to grow in significance – but will not cause the same immediate, profound disruption generated by the advent of the smartphone, or wireless networks.
Should you learn blockchain development?
Unless your organisation is committed to answering difficult questions about how blockchain technology can shape our politics and economy, our answer is a qualified ‘no’.
Today, applications of the technology are at an experimental stage – taking place in innovation departments of corporates like IBM, or in small startups. There is no shortage of blockchain developers, because there has been no significant demand for the technology to date given its complexity and novelty.
Instead of investing significant time developing with it, IT professionals could better spend their time informing themselves about what blockchain technology is and can do, and considering its potential applications for the future. Spend an hour building a simple blockchain with Ethereum. Be inspired by startups building their business on the technology. In interviews, be prepared to talk about how the ‘second layer’ of the internet could impact the industry you’re looking to join in the future.
Above all, however, be clear on the challenges the blockchain faces in being integrated into your sector in 2018. In doing so, you’ll help find the answers that will help take advantage of the technology’s potential in years to come.
