Simply put, a blockchain is a decentralized database with tight rules about how data is entered, maintained and accessed. Instead of being stored at a single location, the data in a blockchain are stored in a series of discrete nodes. Think of it as a connected series of ledgers, each with identical data. Because each transaction must be exactly the same across all the ledgers, blockchains are “very difficult to work with, expensive to maintain, hard to upgrade and a pain to scale,” writes developer Jimmy Song at the Medium website.
“The main thing distinguishing a blockchain from a normal database is that there are specific rules about how to put data into the database. That is, it cannot conflict with some other data that’s already in the database (consistent), it’s append-only (immutable), and the data itself is locked to an owner (ownable), it’s replicable and available. Finally, everyone agrees on what the state of the things in the database are (canonical) without a central party (decentralized),” according to Song. “It is this last point that really is the holy grail of blockchain. Decentralization is very attractive because it implies there is no single point of failure. That is, no single authority will be able to take away your asset or change ‘history’ to suit their needs. This immutable audit trail where you don’t have to trust anyone is the benefit that everyone that’s playing with this technology is looking for. This benefit, however, comes at a great cost.”
Here are the six factors Song cites as reasons why blockchain is great for one specific task but terrible for most of the others its hyped for, including healthcare:
- Development is stricter and slower. Because the blockchain’s data must be consistent across all of its nodes, a tiny error in one place can corrupt the entire database. Perhaps worse, that bug could render some data different in one node than in the other nodes. “There is no ‘move fast and break things’ in a blockchain,” Song explains. “If you break things, you lose consistency and the blockchain becomes corrupted and worthless.” And its incredibly hard to fix a bug, he adds, because all users must agree to any changes. “The blockchain has to be a public resource that’s not under the control of a single entity,” he says.
- Incentive structures are difficult to design. Ensuring that bad-actor users can’t abuse or corrupt the blockchain means creating incentives that span the gap between a low barrier to data entry – resulting in frivolous, useless data – and a too-high barrier resulting in a blockchain with almost no data. “What gives the data finality? How can you ensure that the rewards are aligned with the network goals? Why do nodes keep or update the data and what makes them choose one piece of data over another when they are in conflict? These are all incentive questions that need good answers and they need to be aligned not just at the beginning but at all points in the future as technology and companies change, otherwise the blockchain is not useful,” Song writes.
- Maintenance is very costly. That’s because, compared with a centralized model in which tasks are performed only once, with blockchain those functions must run thousands of times.
- Users are sovereign. Bad actors can’t be booted from your blockchain for entering frivolous data or gaming the system for profit, because there’s no governing entity with the authority to do it. “The blockchain has to be impartial and enforce the rules defined by the software. If the rules are insufficient to deter bad behavior, you’re out of luck,” according to Song.
- A forced upgrade is not an option. “The point of a blockchain is that it’s not under the control of a single entity and this is violated with a forced upgrade,” he explains. That means all upgrades must be backwards-compatible, making the addition of new features and testing new versions extremely challenging.
- Scaling is really hard. “The same data has to live in hundreds or thousands of places [rather] than in a single place. The overhead of transmission, verification and storage is enormous as every single copy of the database must pay them instead of those costs being paid just once in a traditional, centralized database.
Most of the industries looking to blockchain for salvation really need upgrades to their IT infrastructure, especially the “notoriously terrible” software used by the healthcare industry, Song says.
“What’s clear is that a lot of companies looking to use the blockchain are not really wanting a blockchain at all, but rather IT upgrades to their particular industry,” he says.