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Why Does Blockchain Not Always Work?

20:15 12/02/2019
Where Blockchain Doesn’t Work

Blockchain revolution has brought us the technology of the future, a new way to store information. You can put any data on blockchain, apply it in widely different areas of knowledge — but this is not always necessary. We have already talked about how to check whether the project needs a blockchain, but today we will focus on another thing. The use of blockchain technology doesn't guarantee compliance with the agreement between parties because of the human factor. Let's have a look at five popular use cases of blockchain and find out why it might not work there.


Supply Chain Management


Blockchain is used to track and manage supply chains of goods, such as food and pharmaceuticals. In both cases, the transportation of such goods requires strict temperature control. Suppose a temperature sensor is installed in a truck and it tracks temperature changes during transportation. All data from the sensor is automatically transferred and recorded in blockchain.


The scheme seems to be good enough because customers can use blockchain to check whether temperature requirements were met. But what if the sensor isn't located in the back of the truck but in a separate small refrigerator inside? It still shows there are no violations, although this is not true. At the same time, a dishonest service provider (or employee) doesn't spend money on cooling the whole truck. The problem here isn't in the use of blockchain but in providing control in the physical world. There is always a possibility that someone may cheat.


Authenticity guarantee


Authenticity guarantee is another popular use case we have already talked about. Here, blockchain is used to store information that assures the authenticity and helps tracking valuable goods, such as pieces of art, rare diamonds, or even bottles of expensive wine. For example, each bottle of wine corresponds to a certain digital token. The bottle is marked with a unique code that authenticates it. The code is entered into blockchain, so you can track the shipment of the wine from the seller to the customer — the one who purchases the token and hence the bottle.


In this chain, the seller is a potential flaw. They can cheat the whole process at the very beginning: to falsify the bottle and assign a unique code and a token to it. Another way is to replace the original product with the cheap one and send to the customer in the original and assigned bottle.


Money transfers


Here we are talking about transfer of funds between different financial institutions. Blockchain is necessary here if two or more parties don't trust each other or a third party. However, banks aren't ready to use a public blockchain and open information on interbank transactions to anyone. At the same time, a private blockchain isn't much different from a distributed database in this case.


Voting on blockchain


The problem lies in the openness of the vote-counting process. Only transparency ensures that real people took part in the voting. But in this case voters may be pressured by interested parties. This eliminates the whole idea of using technology. All data on blockchain will be true, but the possibility of pressure on voters cannot be ruled out.


Authentication of the documents


It's sufficient to use a digital signature to guarantee the authenticity of documents, for example, an education degree. To prevent the possibility of getting backdate diplomas, timestamps can be used. Blockchain successfully replaces both of these technologies, but there is no need to use it if only one digital signature is enough — it's more expedient and much cheaper.


Blockchain stores hashes of issued documents with build-in timestamps. This means that you neither can add data to blockchain retroactively nor delete any information from there. But all these advantages fade away if verification is centralized. For example, it can be a website of an educational institution.


Here are some examples showing that blockchain revolution isn't a panacea for inefficiencies in economic, political, or government interactions. If there is an opportunity to abuse the system, there will always be someone who will do it. Of course, these problems may be solved by the symbiosis of crypto security technologies, the development and adoption of the Internet of Things — everything that can control the fulfillment of an agreement without human intervention. We have a lot ahead of us as now we are on the threshold of progress.

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