Wednesday 20 January 2016 5:03 pm

Blockchain technology is useful - just not for everything

You may have heard of blockchains and Bitcoin as exciting new innovations but you’d be forgiven if you’re confused about what they are or their relationship to each other.

Blockchains provide a way to store information so that many people can see it, keep a copy of it, and add to it. Once added, it is very difficult to remove information, which can reinforce trust in a blockchain’s content.

Bitcoins are a form of digital currency and blockchains were originally designed as a system to manage them. Within the Bitcoin system anyone can access and add information (such as what Bitcoins are used for, where they were spent and when) to the blockchain. Other blockchain systems may be more restricted.

Yesterday the Government’s Chief Scientific Advisor published a report on blockchain technology, exploring where the technology could be used to manage things other than Bitcoins. It recommended that government should provide leadership and invest in:

  • researching and piloting the new technology in our cities
  • building skills and awareness of the technology
  • developing standards for security, privacy and identity

This last piece is really important.

In our research at the Open Data Institute we’ve seen many ideas that would manage personal data using blockchains but learnt that, if misused, this would create significant new privacy issues. We want to increase trust in the handling of data, and need to be careful not to have the opposite effect.

Pilot projects to test the different uses of blockchains trials and the required skills to exploit its value are important too. New technologies often go through a hype cycle where we tend to inflate expectations before we focus on productive uses.

The current challenge, as we sit near the beginning of this cycle, is to cut out the hype and identify the uses and applications that will stand the test of time. Being aware of the strengths and weaknesses of blockchain technologies will help people to understand their real potential and prevent them from reinventing things that work well enough.

We have come across cases attempting to bolt old, failed or impossible ideas onto the new technology such as reinventing democracy, tracking all payments made by government or revolutionising space travel. All things that will be helped by better technology but we need to start by thinking about the problem we are trying to solve.

Yesterday’s report presents lots of sensible recommendations,however think there needs to be another, more fundamental tier of work to make those recommendations stick and focus on what we want to achieve. This should start by bringing people together in sectors such as finance, agriculture and healthcare to understand the common challenges they face and pick the right tools for the job to address them.

The challenge comes first then the tool comes second. We might find a problem that will benefit from using blockchains but we need to start with an open mind. Blockchains are just one of the tools in our technology toolbox.

We are already working with the banking sector through the Open Banking Working Group, using this approach to improve banking services for customers and create opportunities for new products and services.

Banks want to make it simpler for customers to find bank branches and identify which ones have disabled access. They want to make it easier for people to manage one bank account, or many, and switch between them because they found a cheaper deal, one that provides better customer service or one that accepts payment in Bitcoin.

We suspect that by making the banking sector work openly together like this, we can help to make banking services cheaper and better for all of us. And, so far, we haven’t found that any of that work has required a blockchain.

Meanwhile we do need to be aware of new organisational models that can be supported by blockchain technology, such as peer-to-peer maintenance of data published openly by people who share a common goal. Can blockchains improve the way we maintain lists of addresses? information about road congestion? food standard ratings for restaurants? air quality data? Collaborative maintenance of data that anyone can add to and use is an area where blockchains show some promise.

Data is part of our infrastructure now. Just like roads help us navigate to a location, data helps us make decisions, both as businesses and as citizens. How we build that infrastructure should be led by the decisions we want to make and the ways we want to work together, not the latest technologies available to us.