Tim Ruffing: In 99% of Cases Blockchain Use Doesn’t Necessarily Make Sense
Blockchain's stratospheric rise has been well publicised, with investment pouring in from all quarters. Its potential has been touted in a diverse array of industries, from healthcare to the arts. But will this potential be realised?
Optimism is certainly high. In a 2018 study by Deloitte, 84% of respondents agreed that blockchain is broadly scalable and will eventually achieve mainstream adoption. However, it is not wholly true to say we are seeing a cross-industry race towards blockchain integration. In the same study, just 14% of US companies said they had blockchain projects in development – with the number rising to 40% in the UK and 49% in China.
“14% of US companies said they had blockchain projects in development – with the number rising to 40% in the UK and 49% in China”
The fact is that, although many are aware of the technology’s potential, it is still some way off making the leap from theory to reality. Key to making this leap is collaboration between academia and industry, who must work together to ensure that the solutions being developed are applicable to real-world problems.
BDJ spoke to Tim Ruffing, PhD candidate at Saarland University in Germany and respected cryptography advisor, about the nature of blockchain's continued adoption and how he sees the platform progressing.
From Theory to Real-World Application
While blockchain is still some way off widespread adoption, Tim cites the willingness to take experimental ideas out of the lab and into serious development as one of the primary reasons he enjoys working in the sector so much.
He explains that academics in the past have, to a degree, existed in something of a bubble when it comes to their projects, simply because nobody outside of those circles has had any interest in them. With blockchain, that has changed.
“Usually in academia, you work on a project and it could be that it's used in like 20 years or maybe not,” Tim says. “In cryptocurrencies, it's actually used right now. I don't know any other field where things are getting this importance to practice that quickly. So, it's really nice to be able to work on things that can be used in practice.”
A More Diverse Pool of Idea Generators
Because of the in-demand nature of academics' works, there is a far greater scope of collaboration for projects in their early stages. The idea of diversification in the initial stages of conceptualisation and development is key.
“There are ideas in the academic space, there are ideas in developer communities, ideas in governments and listeners,” Tim says. “So, actually, it is interesting to note how, for example, Bitcoin started. It started as an idea from some clever guy – whoever, whatever it is – and it ended up getting interest from all of these communities. I think we are all – all of these communities – have meaningful ideas, and we should bring them together.”
Held Back by a Lack of Developers?
While there may be a greater access to sources of ideas and talent, the sheer scale of blockchain development poses the very real problem of a lack of developers. This is an issue not unique to blockchain – research from The App Association in 2018 found over 223,000 unfilled job openings for software developers in the US.
With blockchain being in its infancy still, combined with the demand for speedy development, this skills shortage is keenly felt. For Tim, it’s not a simple matter of there not being enough people with a general skill set in this area. The actual issue could be closer related to the proliferation of different cryptocurrencies.
“Certainly I think there's a lack of developers, but I think we're getting better there,” Tim says. “People are getting interested in educating developers – they educate themselves, and there are a lot of great resources to learn. I think one of the problems is just that there are so many cryptocurrencies out there.”
“The problem that we don't have enough developers… [is] getting better. The problem is that we have so many currencies now that it's just that the ratio between currencies and developers is crazy at the moment”
“So, it's not the problem that we don't have enough developers – I mean, we also don't have enough developers, but we're getting better. The problem is that we have so many currencies now that it's just that the ratio between currencies and developers is crazy at the moment.”
Education to Cut Through the Hype
Rapid adoption of technology generates excitement. Excitement leads to hype. This is an unfortunate but unavoidable aspect of a platform’s growth. The saturation of blockchain’s public presence is bringing it to the attention of levels of seniority within companies that have the power to invest in the platform’s adoption, but do not have the sufficient education or experience to make informed decisions about where it needs to be used.
“I think in, like, 99% of the cases for people saying ‘Oh, we'll use blockchain for x and y,’ I'm not sure if it even makes sense”
“I think there's so much hype at the moment going on in this space and I think a lot of people who talk about it actually have no idea what's going on and what they can use it for, but they are the ones who make the decisions to spend money on it,” says Tim. “I think in 99% of the cases for people saying ‘Oh, we'll use blockchain for x and y,’ I'm not sure if it even makes sense.”
ICOs – Muddying the Waters
The hype has also, unfortunately, been exploited by bad actors – particularly through controversial Initial Coin Offerings (ICOs). Research conducted by ICO advisory firm Satisgroup found that almost 80% of ICOs issued in 2017 were found to be proven scams.
“Research conducted by ICO advisory firm Satisgroup found that almost 80% of ICOs issued in 2017 were found to be proven scams”
On the problems surrounding blockchain’s public persona, Tim holds such well-publicised frauds responsible. He points out that, just as with many areas of public interest, it is the negative headlines that sell: “Usually we hear more about the scams because this is what it’s like in the media; it's more interesting to hear about these things.”
Again, the level of education on the intricacies of blockchain is shown to be one of its major stumbling blocks. ICOs are an exciting concept, and people are getting involved with them with the best of intentions, but with questionable results.
“You have to differentiate between people who really want to scam people, or just don't know better,” Tim says. “Of course, it's difficult if you have no idea of what you're doing. Even if you're honest, you could end up being indistinguishable from scammers.”
“Even if you go to CoinMarketCap and look at the top 10, there are currencies which totally don't make sense”
The rapid growth in various blockchain currencies is another area that Tim hones in on as a source of confusion for people new to the technology:
“Even if you go to CoinMarketCap and look at the top 10, there are currencies which totally don't make sense. I think this is also very hard for people to understand because they think, ‘OK, they are among the top 10, so there must be something meaningful in there’, but there’s not.”
The Issue of Privacy
A certain level of secrecy is expected in a corporation’s infrastructure. The idea of publicly-verified transactions could be seen as alien to traditional models of business practice. Tim explains that it is not an easy issue to clarify.
“One problem is that it's hard to explain to users what privacy really means,” he told us. “Usually, there is this binary thing of understanding, where they say, ‘OK, this Bitcoin is not private,’ and they understand why this is the case, but then there are private coins or privacy technologies like Coinjoin, Zerocash, Zerocoin, and people think they are private if they use them. Privacy is very subtle.”
“Privacy is a fundamental right,” Tim continues, “and it's important to have it, and actually if you think about it, having private money is not a weird idea. Cash is also pretty anonymous and it has always worked as a money. Of course criminals use it, terrorists use it, but terrorists also use encryption and I don't think that's a reason to disallow encryption for everybody else.”
What Comes Next?
Addressing these matters of uncertainty around blockchain’s potential uses for big businesses is a continuing challenge. It’s hardly a surprising state of affairs, given the platform’s infancy and rapid growth, and especially its potential to disrupt lucrative industries.
“We're still so early. We still have to figure out what will be the interest in cases that really make sense, and will be successful. But there's a lot of potential”
For Tim, it’s a matter of pressing on. “We're still so early,” he says. “We still have to figure out what will be the interest in cases that really make sense, and will be successful. But there's a lot of potential.”
One of the stranger cases of blockchain being used where it absolutely does not belong is the story of the Long Island Iced Tea Corp., which specialised in making premium non-alcoholic beverages. In December 2017, the company changed its name to Long Blockchain and released a statement declaring a pivot towards the emerging tech.
Almost immediately, the share price of the company spiked, from $2.44 to $9.49. The company still very much produces drinks and there is currently no discernible application of blockchain at the company. Whether it was an earnest pivot towards blockchain or a cynical exploitation of the hype cycle, the jump in share price shows just how overvalued blockchain is at present.
Illustrations by Kseniya Forbender
To contact the editor responsible for this story:
Margarita Khartanovich at [email protected]