Right now, blockchain is quickly becoming another bubble, the same as bitcoin. It is a great technology but certainly not a panacea to every technological, societal, human, etc. woe. Looking at blockchain, it’s important to keep in mind where it fits in the whole information processing cycle.

When we look at the diagram below, the places where blockchain would be applicable are storage and, to some extent (think Ethereum smart contracts), processing. This still leaves input and output which need to be taken care of using the current approaches and controls.

Source: Accounting Information Systems — Foundations in Enterprise Risk Management, Cengage

For example, one startup wants to use blockchain to manage “good” diamonds by tracing and storing their history. Once in the system, nobody will be able to change anything maliciously and we can be assured of the “goodness” of a diamond. But that still doesn’t solve the problem of entering that information in the first place. If a diamond is coming from a war zone, but is entered as being mined in Australia this is something that blockchain cannot solve.

Thus, although blockchain will certainly have its place amongst future technologies, the current hype is hardly justified. It reminds me of the trains in the late 19th century. A “train bubble” existed at the time, which burst in the same way as the “dotcom bubble” in early 2000s. Lots of companies disappeared, were taken over, merged and in the process huge amount of wealth was destroyed or transferred.

However, 130–140 years later we still ride trains and use them for moving cargo. And, the trains are now one of the several ways to move people and goods in addition to airplanes, trucks and ships.

In the same way, blockchain will coexist with other technologies, or its own mutations, and will be one of several technologies enabling better information processing and exchange.

Leave a Reply

Your email address will not be published.