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Illustration by Alex Castro / The Verge

‘Blockchain’ is meaningless

‘You keep using that word. I do not think it means what you think it means’

Bitcoin, Ethereum, and other cryptocurrencies have entered the mainstream discourse, but they’ve also been joined by a concept that is widely circulated, but poorly understood: “the blockchain” or just “blockchain.” The idea of a blockchain, the cryptographically enhanced digital ledger that underpins Bitcoin and most cryptocurrencies, is now being used to describe everything from a system for inter-bank transactions to a new supply chain database for Walmart. The term has become so widespread that it’s quickly losing meaning.

“What is a ‘blockchain’? The word is a buzzword that is increasingly ill-defined,” David Gerard, author of Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts, said in an email.

There are countless blockchain explainers in text, audio, and video around the web. Almost all of them are wrong because they start from a false premise. There is no universal definition of a blockchain, and there is widespread disagreement over which qualities are essential in order to call something a blockchain.

The Bitcoin system is considered the first blockchain — the epiphany that launched the blockchain industry that proponents say will revolutionize money, government, and beyond.

Bitcoin was designed to be public and allow anyone to join, and its blockchain was born out of the need to keep people honest in the absence of a central authority. The design sacrificed efficiency in order to ensure that theft wouldn’t pay because rewriting the ledger would require so much computational power that it would be more costly than any potential upside. In order to achieve this effect, the Bitcoin blockchain consists of a digital ledger that records all transactions from the beginning of time to the present. Copies of the ledger are not stored in a central place; instead, they are kept by superusers called “nodes.” Some of these nodes, called “miners,” batch transactions and add them to the ledger in “blocks,” cryptographically linking each block to all the previous blocks. Miraculously, this system, combined with stewardship from the core Bitcoin development team, has functioned for almost 10 years.

Bitcoin, which debuted in the wild in 2009, “is the first implementation of blockchain technology,” according to IBM. And yet, many of the technology designs that are labeled “blockchain” today bear little to no resemblance to Bitcoin’s blockchain.

Differing definitions

Google’s definition of “blockchain” is “a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.” While most people would agree that a blockchain is a digital ledger, many blockchains do not have an associated cryptocurrency and are not recorded publicly. Some would even argue that a blockchain needn’t be digital.

Investopedia says, “A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions.” Again, many blockchains are not public, and many others are not decentralized.

IBM’s definition says, “Blockchain technology is used in a peer-to-peer network of parties, who all participate in a given transaction.” Except that at least for one well-publicized blockchain, the one built by World Food Programme, there is only one participating party: itself. IBM goes on: “Because the ledger is distributed, everyone involved can see the ‘world state’ at any point in time and can monitor the progress of the transaction.” Mastercard’s blockchain, however, is not viewable by anybody (and seems to have no function outside of marketing since Mastercard admits that payments are still running through its existing system).

Highly marketed efforts in Estonia provide a good example of how the term “blockchain” has been stretched and diluted. “Since 2007 Estonia has been operating a universal national digital identity scheme using blockchain,” the Harvard Business Review wrote last year. The New Yorker wrote in December 2017 that “the backbone of Estonia’s digital security is a blockchain technology.”

Estonia’s system actually predates the Bitcoin blockchain, and there is some disagreement over whether it should be called a blockchain technology.

David Birch, a fintech consultant and author of Before Babylon, Beyond Bitcoin, found himself at a blockchain event with Estonia’s CIO, Siim Sikkut, who seemed to confirm that Estonia’s system is not a blockchain.

“I asked him where this ‘Estonian blockchain ID’ myth came from since I find it absolutely baffling that this urban legend has obtained such traction,” Birch wrote. “He said that it might be something to do with people misunderstanding the use of hashes to protect the integrity of data in the Estonian system.”

Estonia’s technology vendor, Guardtime, rebranded its offering from “hash-linked time-stamping” to a “blockchain technology.” That’s not necessarily untrue since “blockchain” has no agreed-upon definition — and for now, it’s a good marketing tactic.

“We have been working on the topic long, long before Bitcoin was thought of,” Mike Gault, the CEO of Guardtime, said in an email. “There is no new cryptography in Bitcoin — the genius behind it was taking different cryptographic building blocks and building a cryptocurrency protocol that incentivizes people to use it.”

Blockchain is “an append-only data structure that contains data records that are cryptographically linked together,” he said. “Data records are added to the data structure when multiple distributed parties come to consensus based on pre-agreed rules.”

Private blockchains

A significant chunk of new blockchain proposals, like those proposed for the financial industry, are so-called “private” blockchains. Critics say these projects are old technology masquerading as something new.

“‘Private blockchain’ is just a confusing name for a shared database,” wrote Arvind Narayanan, an assistant computer science professor at Princeton who co-teaches a popular blockchain class on Coursera.

Narayanan argues that the key innovation behind Bitcoin’s blockchain was the so-called proof-of-work consensus mechanism, which was intended to replace the need for a central authority with rules and incentives that would keep members of the network honest. Proof of work is inefficient and is the reason Bitcoin’s network consumes so much energy, so it’s not necessarily a bad thing to ditch it. But without proof of work, is there anything really new about blockchains?

Some would cite other cryptographic techniques as being the distinction between a blockchain and “a vanilla shared database,” Narayanan wrote, but those techniques are nothing new. “The crypto makes the system harder to tamper with and easier to audit,” he wrote. “But these aspects of the blockchain weren’t Bitcoin’s innovation! In fact, Satoshi tweaked them only slightly from the earlier research that he cites in his white paper — research by Haber and Stornetta going all the way back to 1991!”

Definitions in the law

This uncertainty has contributed to the general bubbliness of the industry by inflating the number of “blockchain” projects and exaggerating the capabilities of the technology. It may also cause unpredictable problems in the future as states pass blockchain-related legislation.

Angela Walch, an associate professor at St. Mary’s University School of Law and research fellow at the Centre for Blockchain Technologies at University College London, wrote a paper about blockchain-related terminology and the law.

“A bunch of states are really in a rush to pass some sort of legislation to demonstrate how crypto-friendly or tech-savvy they are,” she said. “Many of them are putting definitions of blockchain technology in these statutes, and from my perspective, they are very problematic definitions.”

The definition that concerns Walch the most is the one developed by the state of Arizona. Arizona’s Electronic Transactions Act was amended in 2017 to clarify that it covers transactions done on a blockchain. In doing so, the legislature wrote a definition: “‘Blockchain technology’ means distributed ledger technology that uses a distributed, decentralized, shared and replicated ledger, which may be public or private, permissioned or permissionless, or driven by tokenized crypto economics or tokenless. The data on the ledger is protected with cryptography, is immutable and auditable and provides an uncensored truth.”

In particular, Walch is concerned about the phrases “immutable” and “uncensored truth,” which ascribe absolutes to a technology that may be better described as “hard to change” and “uncensored as long as the people maintaining the network, who may include miners, developers, or dictators, want it to be.” Gideon Greenspan, founder of Coin Sciences, wrote that the cost of rewriting the Bitcoin blockchain is well within reach for a motivated nation-state. There are many highly publicized instances of blockchains being altered: Bitcoin was forked multiple times, including in 2010 when an “integer overflow” error in the software led to the creation of 92 billion bitcoins and the entire network had to roll back the ledger. Ethereum was forked after a massive hack in 2016. Furthermore, due to Europe’s General Data Protection Regulation, which comes into effect in May and says users must have control over their data, developers are now exploring ways to delete data from blockchains.

The phrase “uncensored truth” also ignores the fact that just because the data is in a blockchain doesn’t mean the data is accurate. Inaccurate data, such as a mistake on a medical record, can still be validated in a blockchain.

“What is a court supposed to do later when the definition there has no resemblance to the technology? And what are the implications for that from a legal perspective?” Walch said. “Things can get very messy.”

To make things worse, Arizona’s definition is now being used for proposed legislation in other states including California. Blockchain designs have also been proposed by over 200 governments for use in various applications including voting, property records, and digital identity.

Toward a standard

Victoria Lemieux, an associate professor of archival science and head of the blockchain research cluster at the University of British Columbia, is leading the effort to develop a blockchain terminology standard for the International Standards Organization.

“In general, if the transactions are gathered together in blocks, and it is blocks that are secured on the chain using cryptography, and it is designed to be tamper-resistant and produce immutable records, the system qualifies as a blockchain,” she said in an email. “That said, in general usage, blockchain is often a term that encompasses a broad range of distributed ledgers, even if transactions are not organized into blocks.”

Her team has run into some challenges, including the fact that “different epistemic communities have formed their own ideas about what blockchain is, some with very strong political and social views around open source, sharing, and autonomy.” These communities are not well-integrated into the ISO process, she said, and many members feel they are being overshadowed by large tech firms and other commercial interests.

Another challenge is the proliferation of legal definitions that “may mean that these jurisdictions are out of step, and complicate legal processes or application of the technology,” she said.

Lemieux is also well-acquainted with misconceptions about the capabilities of blockchains. “The concept of trustworthiness — at least from an archival science perspective — goes far beyond what the blockchain can do, or even promises to do, in most cases,” she said. This idea implies that records are accurate, “which is not something typically in scope of a good number of blockchain solutions” and exaggerates their reliability, which is an “issue if you have poorly written smart contracts or novel and untested consensus algorithms.” It also exaggerates claims of authenticity, which relies on the robustness of whatever identity system is paired with the blockchain. “Finally, immutability implies permanence, and there’s no guarantee that ledger records created and kept on chain will last, even with lots of copies around, because of technological obsolescence and the fact that incentives to keep the system going may die off after a time,” she said.

Establishing a clear definition will help clear up some of these misunderstandings. “Developing a more precise understanding of what blockchain technology is will help us address its shortcomings and improve upon it so that it can better be used to in the transformative ways that its proponents envision,” she said. “It’s difficult to have a conversation about advancing a technology or using it when we all mean different things when we speak about it.” Unfortunately, she estimates the terminology standard will take approximately 18 months to be finalized.

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