The bitcoin boom spawned new billionaires and videos of beach parties and Lamborghinis. The collapse of cryptocurrencies brought devastation to small investors and the bankruptcy of many companies.
Blockchain technology underpins crypto and has been hailed as a world-changing innovation, but does it have any use beyond creating speculative financial instruments?
AFP asked crypto critic Stephen Diehl, author of the recently published “Popping the Crypto Bubble,” to apply the rule to some of the most popular claims about blockchain technology.
As tension and turmoil engulfed the United States after the 2020 election, Changpeng Zhao, the billionaire founder of crypto firm Binance, had a suggestion.
A “blockchain-based mobile voting app,” he tweeted, would mean “we won’t have to wait for the results or have doubts about their validity.”
Crypto billionaire Vitalik Buterin responded that there were “significant challenges” but thought he was “directionally 100 percent correct.” Until now, the experiments have been on a very small scale. For Diehl, blockchain was more likely to present problems than solve them.
“From the American perspective, each district has its own voting program,” he said. “This is seen as a feature because to corrupt any election you would have to corrupt many, many public officials.
“Centralizing the voting system in a digital place would be quite risky, so all you have to do is corrupt the blockchain and you could corrupt democracy.”
Automated house purchase?
Blockchain at its heart is a ledger, a way of storing transactions that fans say is secure, transparent, and permanent.
Those qualities have led countless enthusiasts to propose that the technology could replace paper contracts for things like buying a home.
Diehl said it was “absurd” for the blockchain to “go back to things that were worked out a millennium ago to justify its very existence.” “This is the system we’ve had since the Middle Ages: You have a government land registry, a title and a deed that transfers when ownership changes,” he said.
“Blockchain is not solving anything here.”
Payments without banks?
Blockchain grew out of a 2008 white paper on bitcoin, which was envisioned as an alternative to fiat currency.
The first line reads: “A purely peer-to-peer version of electronic money would allow online payments to be sent directly from one party to another without going through a financial institution.”
Bitcoin was the first cryptocurrency. There are now over 10,000 more sitting on many different blockchains. Large companies have been desperate to find ways to accept payments in crypto.
Diehl pointed out that crypto assets are speculative instruments that are not suitable for payments. “When was the last time you paid for your coffee with Apple stock?” he asked.
“It just doesn’t happen. You want something that is stable so that the price of your coffee is the price of your coffee next week.”
Supply Chain Tracking?
Do you want to know where your mango comes from? Some supermarkets believe the best way to find out is to access a blockchain-based system capable of tracking fruit from the tropics of Central America to the corner store.
Walmart and Carrefour are among the companies touting blockchain systems. Carrefour told AFP earlier this year that shoppers could scan a QR code and discover the provenance of a variety of products.
Stores expect the blockchain to provide security, certainty, and transparency. Diehl noted that digital supply chain management has been around for years and is perfectly adequate without blockchain.
“Blockchain does not add any incorruptibility to the system,” he said, noting that people in the supply chain can tell lies on blockchain just as easily as on any other platform.
“If I have a carton of apples and report that I put 100 percent of them on the truck, but then take 50 percent off, the blockchain will not prevent it.”