The blockchain has become the acceptable face of bitcoin. In simple terms, it is a decentralised, secure and open-source database that powers the bitcoin network. But if you mention bitcoin in polite company, you will be branded a nutter; mention blockchain, on the other hand, and you will be invited to the ambassador’s reception.
I put this down to the fact that the price of bitcoin has fallen by 75%. Had it risen, the conversation would still be about bitcoin, with blockchain, just a nerdy sideshow. But we can’t escape the fact that the price has fallen a great deal and the bitcoin network is growing far too slowly to change that.
The new consensus is that the currency failed to gain traction, but the technology behind it is amazing. Therefore what else can we do with it?
Some of the banks have set up experimental labs. The venture capitalists think it may change the world and the regulators have been asked to encourage innovation. As people drool over the blockchain, the conclusion is that this technology is brilliant – if only the network was private.
That’s kind of missing the point, but let’s just accept for a moment that private blockchains may be useful. Firstly, we have to ask ourselves what is the difference between a private database and a private blockchain? My answer may surprise you, at least it surprised me once the penny dropped.
When I was a soldier in the British Army, the equipment was designed to be ‘squaddie-proof.’ Take the radios for example. They were 1950s technology, that weighed a ton, being used in the 1990s. For the same price, we could have had a sat phone but it wouldn’t work because the squaddies would have broken it. Instead we had a radio that was like a tank.
Databases, used by banks and exchanges, transact much faster than blockchains and have greater capacity. Against that, they are fragile. If you bought a database, it would come in a box saying ‘this way up, handle with care.’ A blockchain, on the other hand, could be chucked out of the back of an aircraft from 10,000 ft, bounce and breed.
When we ask the question as to why we need blockchains, we must remember that databases have been around for years. The differentiating factor is the robustness and the lack of oversight. Databases are fragile and need tender loving care whereas blockchains can be left in the wilderness without food or water. In exchange for being so tough and robust, they are a little slower and a little heavier, but virtually indestructible.
There is much confusion over the database vs blockchain debate. When we ask what the ideal applications might be, the answer is for applications where we need privacy, scale, security and indestructibility. Perhaps the best application for the blockchain, is bitcoin after all.