So-called “cryptocurrencies” like bitcoin are changing the way that many people conduct business, both online and off. But as the push towards digital cash intensifies, it’s important to remember that not everyone is keen on where things are headed, including corporations that simply don’t want their day-to-day operations publicly shared via the blockchain system upon which bitcoin was built.
A blockchain, for those who are unaware, is a public, digital ledger that keeps track of every transaction made with bitcoin. It’s a decentralized system that resides on countless computers all around the world, which means that it’s supposed to be impenetrable against hacking and manipulation. But it also comes with its own limitations that preclude its widespread use as a transactional standard. (Related: You can learn more about Bitcoin and blockchain technology by checking out this Natural News article.)
The potential for blockchain technology in general to change the way that the world operates is enormous. But bitcoin’s blockchain technology has some serious limitations that suggest it will never become the definitive standard of use, especially in the business world where privacy and inter-operability are vitally important.
One of the biggest problems with the bitcoin blockchain and others like it is that they function almost proprietarily. One isn’t compatible with another, which makes it difficult for companies that operate on a global scale to conduct business.
“One of the concerns around building standards for that network of data is how to make sure it’s inter-operable, and not just a bunch of stuff,” says James Smith, head of the labs program at the Open Database Institute (O.D.I.), a non-profit company that offers advice on how to use government data.
Smith has other concerns about blockchain technology, including the fact that there’s only one way to use the network – all at once and only in its entirety.
“The more machines you have running the network, the more secure it is,” he says. “[But] maybe sometimes you only want some of the data. It would be better to have a smaller [network] for that. There’s a real trade-off between security and size.”
Bitcoin blockchain isn’t as private as many people think it is
Another major problem with the blockchain for bitcoin is that every piece of data contained within it is shared publicly with everyone on the network. This isn’t to say that every single transaction is tagged directly to the person who made it, of course, as individual bitcoin “wallets” are private and encrypted. It does, however, mean that data stored on the blockchain isn’t 100 percent secure.
“The bitcoin database has every transaction that has been carried out in that database, and everybody has a copy,” warns Smith. “Who would publish their bank statements online openly for everyone to see? That’s effectively what you’re doing.”
One instance where this was a problem was when the Department of Work and Pensions (D.W.P.) launched a trial of a new program using the blockchain. This program tracked how welfare claimants were spending their benefits, which some see as a serious invasion of people’s personal privacy.
According to other reports, big companies like I.B.M., Intel, and Cisco are already working on their own modified versions of the blockchain that better suit their interests. These alternative platforms aim to overcome the shortfalls of the bitcoin blockchain and improve upon it in ways that provide more functionality and security.
“The current blockchain is a great design pattern,” says Jerry Cuomo, vice president and chief technology officer for I.B.M.’s software group. “Now, how do we make that real for business? What are the key attributes needed to make that happen?”
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