Forrester report: Here are the biggest myths about blockchains
The research firm lays out the top ways in which the hype about this technology approach misrepresents the reality.
It’s hard to imagine that blockchain technology will ever be able to live up to its grandiose billing. It has been touted as the solution to ad tech transparency, financial instability, personal data security and many of the other problems of the modern world.
In an effort to bring the expectations a bit closer to the real world, Forrester is out with a report pointing to the technology’s most common myths.
First of all, says “Blockchain Technology: A CIO’s Guide to the Six Most Common Myths” [fee required], there’s no “such as thing as the blockchain.”
Instead, Forrester says, it’s a “technology concept or architectural principle that can be — and has been — realized in many ways,” such as distributed ledger technology, mutual distributed ledgers or other blockchain-inspired solutions.
Then there’s the commonly cited idea that blockchain-based systems are unchangeable. Nope, says Forrester. They can be rewritten by such means as recomputing the chain, or forking it. Nevertheless, the report notes that the write-once, append-only structure is a distinguishing feature that adds a level of data assurance.
There’s the fallacy that “there won’t be trusted intermediaries in blockchain networks, or indeed that these networks are entirely decentralized.” In practice, the report says, there will be new intermediaries, such as wallet providers or crypto-currency exchanges, while miners and core development teams represent a kind of central control.
Although blockchain systems can facilitate value exchange between strangers, Forrester notes, this isn’t the same as a “trustless” environment, since there is trust placed in the code, the math and the blockchain miners, among others. Governance models — including entirely new ones that could involve autonomous software — still need to obey existing laws and regulations, especially when financial institutions are involved.
As for preventing fraud, the Forrester authors point out the obvious: If someone registers false ownership of a property into a blockchain system, it’s still false, even if it’s visible to everyone and very difficult to change. By itself, blockchain tech cannot ensure valid supply chain origins for products, for instance.
Similarly, the fact that all blockchain transactions are available for every participant to see seems like a huge advantage at the moment, when fake news and ad fraud makes transparency a highly desirable asset. In reality, the report says, radical transparency of every transaction could have negative consequences, like diminishing competitive advantages or promoting price fixing.
And, alas, smart contracts “are neither smart, nor are they contracts in the real sense.” In fact, the report says, they are “business process automation,” which certainly doesn’t sound as sexy.
They will not replace actual contracts, Forrester notes, and they could, if not carefully controlled, result in unexpected consequences. The report points to triggered trading algorithms that have sometimes gone awry, such as in the 2010 Flash Crash on the stock market.
Like other tech, the report says, blockchain tech is about tradeoffs, and it will continue to depend on changes in environments such as regulatory frameworks. More importantly, in the long run, blockchain-like approaches could stimulate massive changes in how businesses and individuals collaborate for their own and their common interests.
But whether they will — that remains to be seen.