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Cryptocurrencies don't let us see the forest

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By Blockchainnyc12 - Cryptocurrency, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=58487911

- What are you doing?

- I’am developing with blockchain!

- Ah! That's the bitcoin thing, isn't it?

This example can be one of the most common reactions we encounter when we try to build solutions taking advantage of the capabilities offered by the Blockchain and Distributed Ledger Technologies (DLT). In the last three years, the hype acquired by the so-called virtual coins or cryptocurrencies, and especially Bitcoin, has led to a false equivalence between these and the technologies that support them. The hype has caused us to lose sight among the multitude of cryptocurrencies the possibilities that the Blockchain and DLT can offer us.

The boom in the media is related to the recent speculative bubble, led mainly by bitcoin. Bitcoin was born in 2009 as the cryptocurrency of a P2P system that uses the Blockchain and DLT to register payments between individuals (see https://wikipedia.org/wiki/Bitcoin). Its success has originated a bubble of more than 4,000 different cryptocurrencies, either Bitcoin variants or generated in other similar networks.

By Theymos from Bitcoin Wiki http://www.bitcoin.org/wiki/doku.php https://commons.wikimedia.org/wiki/File:Blockchain.png

The concept of virtual currency is not new. As early as 1944, Keynes proposed an international monetary unit, which he named bancor, that had many of the features that we now associate with cryptocurrencies (see https://wikipedia.org/wiki/Bancor). But a cryptocurrency is something else. It is a digital virtual currency that requires a decentralized system that:  

  • Define its properties (characteristics, transactions, maximum volume).
  • Define a cryptographic proof of ownership.
  • Avoid the problem of double spending (the same currency is transferred simultaneously to more than one recipient).

The Blockchain and DLT are currently the most popular tools used to implement such system.

Today, Blockchain and DLT are considered disruptive technologies. A Blockchain is a secure data structure by design that consists of a list of blocks (valid transaction records), linked (reference to the previous block), secured (using cryptographic hashes) and immutable (blocks cannot be manipulated after being added to the list). DLT is a decentralized technology secure by design that consists of a distributed database (e.g. with a P2P network), replicated, shared and without central authority among multiple nodes, and that has a consensus algorithm to confirm/validate transactions (add blocks).

By Matthäus Wander - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=26816920

But we still have the fog generated by the cryptocurrency bubble limiting our vision. If we eliminate the crypto currencies from our field of vision (and there are already Blockchain systems that do not depend on them, as is the case with Corda (https://www.corda.net), and we only look at Blockchain and DLT, what we obtain is a technology that proposes a paradigm different from the one we have been following up to now.

If we put both technologies to work together, what we can achieve is a distributed infrastructure capable of registering without intermediaries (banks, agencies, payment gateways, ...) all types of digital records  (transfers, certificates, titles, ...) and even execute digital contracts in a distributed manner, in what has been named programmable economy.

But let's stop for a moment. We should not think that the above can only be created with Blockchain and DLT and that we do not need databases or similar systems. It is bad engineering to think so. First, we must investigate and measure the potential added value or cost reduction offered by Blockchain and DLT compared to the technologies we have. From there, we have to try to identify the scenarios in which we may gain value with respect to the use of other approaches. But in order to reach this point it is necessary to experiment, and a lot.

From the IAAA, and in collaboration with GeoSLab and other companies, we are developing several experiments aimed at providing us with knowledge and experience that allows us to have criteria to make use of these technologies where they really bring us value. In the same way, we are working on how to incorporate them into the engineering processes. For example, lack of notation and compatibility with tools and languages of analysis and design, and specification and test management are just two of the software engineering problems we have encountered right from the start.

After many years operating against the backdrop of some industrial systems, Blockchain and DLT have emerged at the forefront of technologies (this has already happened with other technologies such as the Python language which, conceived in the late 80’, it did not emerge strongly until the year 2000). It remains to be seen if they will stay with us for a long time or if they will be a flash in the pan. In the meantime, we have to keep in mind that they are not the Holy Grail capable of solving all the world's problems. They are technologies and, by their own definition, they must be means to a goal, not a goal in themselves. Let's analyse the problems we face to see if it makes sense to solve them through Blockchain and DLT or not. And do not let the cryptocurrencies will not let us to see the forest.

Authors: PhD. Francisco Javier López-Pellicer and  PhD. Francisco Javier Zarazaga-Soria

 Advanced Information Systems Laboratory (IAAA)- Universidad de Zaragoza

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