three different concepts: encryption;
automated execution of transactions
(“smart contracts”); and distributed ledger, a type of a distributed database. The
three may be applied together, but they
are separate tools, and not all of them
are necessary in a blockchain system.
So, what is “blockchain”? While
there is no one standard definition of
blockchain, the most parsimonious
BLOCKCHAIN HAS ATTRACTED a lot of attention. Many are excited about this new technology based on a pub- lic, permissionless, distributed ledger that cryptographically assures immutability without a need for
a trusted third party and allows for
smart contracts. Large and small companies want to get on board, as they
expect this technology will lower their
costs by making transactions quicker,
safer, transparent, and decentralized.
However, the technology behind the
blockchain is for the most part not well
understood—there is no consensus on
what benefits it may really bring, or on
how it may fail.
A more careful look into the technology reveals that most of the proposed
benefits of “blockchain technologies”
do not really come from blockchain.
Smart contracts, encryption, and distributed ledger are separate concepts.
The three may be implemented together, but they do not need to be. Most
of the proposed benefits come from
encryption and smart contracts. But
encryption and smart contracts do not
Confusion Around What
Blockchain Actually Is
The growing excitement about block-
chain technologies is perhaps best
summarized in the increasingly popu-
lar slogan “blockchain revolution.”The
revolution is buoyed by a few forces, of
which the most significant is the expec-
tation of substantial cost savings.
The main sources of savings are supposed to come from increased security,
faster transactions, and a shared ledger. However, the statements about the
benefits of blockchain seem to confuse
without the Blockchain?
Most of the suggested benefits of blockchain technologies
do not come from elements unique to the blockchain.
• Marshall Van Alstyne, Column Editor