If you look at the blockchain from a technical perspective and focus on a distributed ledger/database which is slower and less performant than a conventional centralized database you will miss the point.
The real “sex appeal” of the blockchain is that no central authority is needed and therefore no central point of failure and control is present.
The disruption of the trusted middleman by combining several technologies is the genuine invention of the blockchain. In other words the digitization of trust. The transformation to a fully technical consensus protocol, agreed by its users, is the paradigm shift.
That said, as a consequence a private blockchain can be at best an efficiency tool if the technology further advances. The same applies to centrally controlled but publicly accessible blockchain platforms. Also, the tokenization of real assets like gold, diamonds, art etc. is quite limited in its benefits as the needed trust in a central custodian doesn’t vanish.
Further it is kind of naive to find blockchain technology very interesting but dismiss crypto currencies. The internet of money as the blockchain is sometimes called, looses quite a bit if you take away the money aspect. Crypto currencies like Bitcoin are the first fully decentralized blockchain killer applications and that for a good reason. Moving values is a key element of the blockchain. Bitcoin is therefore kind of the first innovation based on the invention of the blockchain, but as we know they were not developed sequentially or let alone separately. The concept of the blockchain was later separated from Bitcoin.
The full potential blockchain
As so often in software/internet applications network effects also apply in decentralized architectures like the blockchain. In a decentralised blockchain they are actually the very basis for value generation. Bitcoin is a striking example for this. The intrinsic value of a widespread crypto currency like Bitcoin equals finally the value of a global, independent, immutable and secure transaction platform. I am not going to quantify this but it is for sure not zero as some claim.
The full potential of the blockchain will be released in broadly used, fully decentralized and highly scalable blockchains which also provide additional functionalities like
- Smart contracts which can be verified by non-technical people
- Bullet proof testing mechanisms for smart contracts
- Powerful frameworks for decentralized applications
- APIs and oracles (data interfaces to the real world) to interact with the blockchain
- User centered security features
- Value stabilizing mechanisms
Such blockchains in combination with oracles which are designed with an incentive scheme where no profit can be made from false input, will be the basis for the next blockchain killer applications.
A final but very important challenge is to establish an incentive scheme where all participants in the ecosphere of a blockchain (developers, miners, users etc.) get their fair share of the success and appropriate say.
I will cover the points mentioned above in future articles in more detail, since each is already very interesting in itself.