Blockchain v World Cup - it could go to penalties…

David Reed, knowledge and strategy director, DataIQ

If you have been watching the World Cup on commercial TV, your jaw might have dropped. Not because of that Ronaldo free kick or Hannes Halldorson saving a Lionel Messi penalty. Not even England winning its first group match. 

If you work in the data industry, what might have surprised you was seeing ads for a blockchain-enabled IoT business, Hdac. Filled with smart locks and connected fridges, it implied that a new world of machine-to-machine data flows was already at hand, all secured thanks to the use of blockchain.

Of course, if you do work in the data industry, have tried to stand up a live blockchain service or are wrestling with the internet of things, you will know that few of these things have reached a sustainable, viable state. Hdac may have jumped the gun, not least because its own infrastructure is not ready, but also by baffling unsuspecting football fans far too early in the adoption cycle.

Look closely at the company itself and the fact that it is advertising on commercial TV becomes even more surprising, as outlined below. The tech industry has form on this front, of course - the 2000 Super Bowl broadcast is famous for having 14 different dot.com advertisers, of which just four are still going concerns. In choosing to spend heavy on mass-market spots, Hdac may have risked joining that band. It has certainly surface a number of vital issues that the current wave of blockchain-enabled start-ups need to resolve (but seem to be ignoring).

Blockchain has a problem with governance

There is a simple rule to follow when considering whether to deploy blockchain to support a process - if it can be done in a conventional database, do so. The infrastructure underpinning distributed ledger technologies (DLT) continues to be exotic, unstable and reliant on a long chain of third-parties. 

When it comes to putting personal information into blockchain, the rule is simple - don’t.

When it comes to putting personal information into blockchain, the rule is even more simple - don’t. Regardless of the issue of how to correct any errors that might arise (as required by GDPR and as restricted by blockchain’s inherent immutability), there is a big question mark over what happens to that data when some of these projects inevitability fail. Leaving PII in unsupervised and abandoned systems creates a big risk that could come back to bite its creators. 

Hdac intends to use blockchain chiefly for machine-to-machine interactions. But if one of its smart locks is connected to a security system that monitors when people are in their homes, for example, that quickly becomes personal data because of the uniqueness of each of those data profiles. How will it apply the necessary governance which results?

Blockchain has a big problem with smart contracts

One of the most compelling arguments for blockchain and DLT is the ability to set up smart contracts that execute automatically, thereby removing delays and human intervention. But one of the biggest areas of legal action is contesting the terms of contracts, with courts regularly deciding that they are unfair or improperly constructed or otherwise deficient. 

Say hello to a future in which the very USP of blockchain no longer obtains…

So what are the consequences if a smart contract is challenged and needs to be revised? Again, the supposed immutability of blockchain would seem to make this impossible, putting participants in potential breach of court instructions to make changes. 

That is why one of the leading blockchain platforms, Ethereum, is working on protocols that would  introduce mutability into the world of blockchain. Say hello to a future in which the very USP of blockchain no longer obtains…

Blockchain has a very big problem with cyber-security

Despite the claims for the visibility of transactions in blockchain and the need for all participants to agree to each event, the world of crypto-currencies has a very poor record on protecting itself from hackers. Hdac is a prime example - one month after its $258 million initial coin offering, it had to halt withdrawals from its mining pool because of hacking activity.

This led to the most jaw-dropping of all its recent actions - the fact that it was able to disclaim all responsibility because of the decentralised nature of its blockchain-based crypto-currency. In other words, it has investors’ cash, but it respects no obligations around the tokens it issued in return. Imagine a CEO saying something similar in relation to a conventional share issue which turned out to have seen an undisclosed proportion of those shares stolen by criminals.

Compared to that, even the possibility of England progressing to the knockout stage doesn’t seem unlikely…

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Knowledge and strategy director, DataIQ
David is developing the framework for soft skills and career development among data and analytics practitioners. He continues to be editor-in-chief and research director for DataIQ.