For the past few years, cryptocurrency and blockchain enthusiasts have been touting a variety of use cases for these technologies, suggesting that they will disrupt/revolutionize pretty much everything [2]. It’s a floor wax and a desert topping!
With time, we are sifting through these use cases, discovering which ones are more realistic.
The most successful uses to date are, unfortunately, extralegal commerce and cybercrime. Other areas that appear promising are supply chains and other business to business cases. In also seems likely that private blockchains may well disrupt FINTECH, and eliminate hundreds of thousands of jobs.
What haven’t panned out yet are the benefits for regular folks and the imagined benefits for the world’s poorest.
It is readily apparent that blockchain-based technology isn’t necessarily the right way to do community currencies and similar projects. Cryptocurrency has made surprisingly little inroads into “the remittance problem”. For that matter, cryptocurrency has made little inroads for real world commerce, mainly because it solves problems that consumers don’t actually care about. (Most people don’t care about the innards of their digital payment systems.)
This month the ID2020 project summit gives reason to think that blockchain is also not a particularly useful technology for “identity”.
ID2020 is an international group dedicated to helping people who lack formal identity papers. This is a significant problem for refugees and others, and it’s quite reasonable to try to create portable digital documentation.
“1.1 BILLION PEOPLE LIVE WITHOUT AN OFFICIALLY RECOGNIZED IDENTITY”
I’m rather baffled by why this is called an ”identity’ problem, which it is mostly an “official recognition” problem.
Michael del Castillo comments in Coindesk, “Identity without the Blockchain? Skepticism Grows for Once-Hot Use Case”. Essentially, the ID2020 people aren’t convinced that blockchain technology is the solution, or at least, the only solution.
I don’t know exactly what their thinking is, but I suspect that a key point is that credentials are all about trust, and in fact, trust in third parties. The importance of credentials aren’t that you can prove that you are who you say you are, but that you can prove to someone that a mutually trusted party says you are who you say you are.
“Trustless” blockchain systems offer little to help provide these proofs. Decentralized blockchains are certainly cheap and easy ways to reliably pass around such certificates, but they don’t address the hard part, which is creating them in the first place.
Identity problems of rich people
There is a second “identity” use case for blockchains, and that is portable and flexible digital identities, i.e,, control of personal information on line. The idea is to make it possible for people to access digital services without having all their information linked. This is truly an important challenge, though, again, I wouldn’t call it a problem of “digital identity” per se, it’s more of an information control problem.
This use case is lumped with the passport issues above because the same technology could, in principle, solve both. If we had a good way to exchange verifiable cryptographically shielded certificates, we could use them to, say, access services without a universal ID number.
As del Castillo says,
“In theory, those users would own their own identities, as opposed to Facebook, Google, the government, or any number of organizations, all of whom want to keep a record of – and profit from – that data.”
This is an interesting statement of the problem and perceived solution.
He lumps all organizations, private, public, and “other”, which glosses over important differences, which is intellectually and politically dubious.
The Drivers License folks keep a record of you because they need to certify your qualifications to drive. Doctors keep medical records for obvious reasons. And so on. There are many reasons why organizations keep your history.
On the other hand, advertising companies like Google and Facebook, keep information on you to make money by “selling” you. So do numerous other companies.
Solving this problem is difficult, and not only because there is a lot of money begin made, and the powers-that-be don’t want to be disrupted, thank you very much.
The technical problems are actually quite difficult. Figuring out what sort of information needs to be exchanged and developing secure ways to present just what you need to and no more is very difficult. Furthermore, this process involves—wait for it—trust. No matter how clever the credential scheme, the credentials have to come from somewhere in the first place, and have to be accepted where you need them.
Blockchain technology is a good way to pass around cryptographically shielded credentials. But, again, it doesn’t help the process of obtaining credentials in the first place. If you can create a good system for digital credentials, a blockchain will certainly be one of the places you use it. But the blockchain alone doesn’t solve the problem.
I’ll add one more pedantic point. Some of the enthusiasm for blockchains is actually based on the extreme usefulness of public key cryptography, which will definitely, for sure, be the critical piece in these digital systems. But you can use PKI with lots of different architectures, “centralized” and “decentralized”, and with many different business models. Just because cryptographic signatures address a use case, it isn’t necessarily true that blockchains are relevant.
- Michael del Castillo, Identity without the Blockchain? Skepticism Grows for Once-Hot Use Case. Coindesk.June 22 2017, http://www.coindesk.com/identity-without-blockchain-skepticism-grows-hot-use-case/
- Don Tapscott and Alex Tapscott, Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World, New York, Portfolio/Penguin, 2016.
Cryptocurrency Thursday
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