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The Space between Blockchain & “The Blockchain”

Last Updated March 4, 2021 4:49 PM
Justin OConnell
Last Updated March 4, 2021 4:49 PM

Frankfurter Allgemeine Zeitung, a center right, liberal conservative German paper founded in 1949,  recently wrote a long article about the catchword after Bitcoin: the Blockchain. Or, as the article sometimes puts it, “the Blockchain.” 

The article at many points takes on a sarcastic tone, poking fun at the many wild theories about the potential of the “Blockchain” which proponents tout beyond the use-case of Bitcoin. When speaking about sober possibilities of the Bitcoin blockchain, the author Bettina Weiguny drops the quotations. She’s not convinced the blockchain can save the world. Throughout the article, nevertheless, she acknowledges that very influential people in the financial world are paying attention.

The article goes over the blockchain basics. The blockchain means there’s no need to pay banks to transfer money, nor a notary to buy a house. Exactly this promises the Blockchain Technologies. Banks, cash and much else will be overhauled. In fact, the entire way we see the economic world will be changed.

Cash, Banks & Liars

Called “‘Bargeld, Banken und Betrüger , Weiguny begins with a peak into the life of Richard Branson, the Virgin founder, and his Summer conference “Blockchain Summit” on his private island. She paints a quirky picture of the blockchain proponents. For many, it is still not clear what problems the technology actually solves. FAZ asks: “Are these loudmouthed visionaries at work or only visionary sounding braggarts?”

The report notes Microsoft founder Bill Gates swears by the Blockchain. And US foreign finance minister Larry Summers goes around in the blockchain circles of Silicon Valley. The “Blockchain”, like in the US, is being experimented upon in the upper echelons of Germany’s traditional corporations. Deutsche Börse (The German Stock Exchange), Telekom and others are getting a feel for the “Blockchain.”. RWE-Chief Peter Terium is totally optimistic that the “Blockchain” will “save his failing energy business,” Weigunly writes.

What’s behind this “magic word” that’s grown so popular? Weiguny asks, as if not giving the concept much credence here. “It is, according to followers, a Network-Technology, that can revolutionize everything and ‘the greatest innovation since the invention of the Internet.”’ 

Weiguny quotes a blockchain pioneer who told financial institution heavy weights at Davos: “I’m sorry for you but in ten years, all your banks no longer exist.”  But, there are sober individuals she respects who have visions of a future world on a Blockchain. The skeptic Edward Budd of Deutsche Bank in London  touts the “great potential” of the Blockchain. The article then examines how the blockchain works. First, it outlines one of the software’s biggest potentials:  “Nobody has the power to manipulate the data.” The Blockchain functions like a digital cash book. Security is such on the Blockchain that little is worth stealing because the the amount of energy that would need to be expended is too great.

Weiguny characterizes the “Blockchain” as a fad. There is lots of excitement about the Blockchain, the article acknowledges, such as that Bank Santander estimates the blockchain could save banks $20 billion per year.

The reason for the interest: “Because everyone wants to be involved up front,” the manager of a large international bank tells FAZ. Edward Budd, the skeptical expert at Deutsche Bank, formulates his idea as such: “We want to use the Blockchain in order to optimize certain business divisions.”

In securities, trading takes two to three days to post. “This is suboptimal,” Budd said.

Each large international bank experiments now with Blockchain Products. Swiss UBS operates a London private research laboratory, Goldman Sachs has developed a crypto-currency, and the German Stock Exchange and Nasdaq are testing blockchains, as is the Bank of England investigating distributed blockchain technology.

Nation-states, such as Greece and Honduras, are deliberating how they could build basic books on a Blockchain. Great Britain has gone further still, and hopes to overhaul its tax system, the pension system and the issuance of passports. Blockchain followers also believe the Blockchain will overhaul Facebook and Google. Large Silicon Valley corporations could start feeling the heat from Blockchain competitors. The article cites projects looking to remodel Uber and Airbnb on the “Blockchain.”

As a proponent says: “For taxis to communicate, there is no need for a $60 billion dollar company like Uber, the drivers can do this themselves.”

The article acknowledges Bitcoin has somewhat fallen into disrepute. Bitcoin is now seen as only for gambling and dubious shopping, Weiguny suggests. 

A Healthy Skepticism

The article details with skepticism how blockchainers view the technology: In the beautiful Blockchain-world lies will no longer be possible. Fraudsters won’t exploit bitcoin’s vulnerabilities due to the sheer cost of doing so. “Block Chain makes Internet fraud extremely unattractive,” Don Tapscott, an economics professor at the University of Toronto, whose new book” Block Chain Revolution “appears in May, told FAZ.

Through “blockchains,” stocks and bonds can be traded, loans can be given, records of any kind, IDs and notaries could be stored in the networks, and contracts can be entered into. Diamonds, houses and land can change hands. All of this, promises the protagonists in the Blockchain world. Everything – faster, simpler and less expensive than today.

In scrutinizing the “blockchain,” Weiguny raises a good point. A lot of what is discussed, when the blockchain is discussed, are models and theories without any real world use-cases. Sure, some banks here and there have engaged in financial transactions using the playground that is a smart contract system like Ethereum, but, for sure, the only modern large-scale example of blockchain technology at work is Bitcoin. And, something Weiguny doesn’t touch on, many of the so-called blockchain projects strip the innovation of Bitcoin – a distributed ledger or distributed crypto-security – out of the system.

Nonetheless, distringuishing between blockchain, and “blockchain,” is a good idea.