For years, cryptocurrencies such as bitcoin and its blockchain operating principle have been promoted by their fans as a technical panacea. Technology has little to do with this magical tale, says computer scientist Jürgen Geuter. In reality, there is only one use case.
Is blockchain coming or not? Technology and business pundits have been asking this question for years – but so have politicians. Because although its function is severely limited, the technology is supposed to be capable of a lot. Simply put, the blockchain is an open, tamper-proof cashbook. Entries and changes are always added at the end – encryption technology and a decentralized structure of this list ensure that entries cannot be changed later.
This operating principle is of course perfect for a digital currency: who owns a bitcoin, to whom is it transmitted. But with a little creativity, the functional principle can also be integrated into a number of other areas.
Crypto fans see areas of application, for example, in the insurance industry, the energy sector, public administration or supply chain management. As early as 2019, the federal government had pointed out a number of useful uses for blockchain. As a result, it should be used more in the financial sector for electronic securities.
But apart from Bitcoin speculation, no concept has really been able to establish itself. Computer scientist and philosopher Jürgen Geuter, known online by his pseudonym @tante, explains why this is the case. In an interview with t-online, he explains why blockchain is actually only interesting for exactly one application – and what the ideology behind Bitcoin actually is.
t-online: Mr. Geuter, everyone who follows you on Twitter knows that you are very skeptical about blockchain technology. Why?
Jurgen Geuter: I don’t particularly like technology. A blockchain is a relatively simple technology that can be written in two or three hundred lines of code. The basic idea is as old as me, it was patented in 1979. The relevant thing is that at some point the community started making the wildest promises about this technology. Blockchain is supposed to solve all kinds of social problems. All supply chains must be fully controllable. Even on the issue of Northern Ireland during the Brexit debates, various politicians have suggested that blockchain could somehow solve the problem. It gives technology a magical narrative that it has little to do with. And then there was the aggressive wave of investments. At that point at the latest, I believe that as someone who knows and understands the technology, you have some obligation to inform the public about what is really behind it.
Blockchain is about creating trust in a system where participants cannot trust each other and still need a common truth. This is to avoid the situation where two people can argue about what is true. Bitcoin, for example, is about who owns how many coins, and all participants want to have a common truth about it. The blockchain fulfills its function there.
And where does it not come from?
When it comes to supply chains, for example, I want to monitor my suppliers. If I can’t trust my suppliers, it doesn’t help me that they write data to any blockchain. Then I have a completely different problem: I need other suppliers. And the blockchain does not solve this problem. And yet attempts are being made to apply the technology, which has a very specific area of application, to many other areas which do not meet these requirements at all.
What about blockchain applications in public administration?
In Germany, various Bockchain consultants are calling for the land registry office, for example, to be integrated into the blockchain. Why? This is a sovereign task that is handled centrally by the state. The State also supports the processing structures. There is an office that manages the tasks and there are notaries who are empowered to make registrations. Again, there is no system in which no one trusts, everyone must trust the state as an institution.
So you’re not criticizing blockchain in general, but rather that use cases are being sought in areas where none exist.
I am okay. We cannot transfer the blockchain to our real world. For example, we have to intervene in many places from time to time, which is not possible with a blockchain. For example, let’s say we are driving a refrigerated truck from one place to another. And we have to prove that the cold chain has been maintained. We have integrated a digital sensor that writes data to a blockchain. Now that sensor is broken and that’s why the wrong data was written to the blockchain. Fortunately, we have a second backup sensor that measured the correct temperatures. Now, how can we write the correct data to the system? This is not possible or only with a lot of effort, which would not make the system simpler but much more complex.
Why exactly is the system not suitable for the real world?
The blockchain system is tamper-proof. It’s good. You cannot therefore transfer Bitcoin that you do not have in your wallet. It also works and is technically clean. But as soon as I start wanting to map complex, real, real processes on the blockchain, it gets complicated. Take Ethereum smart contracts, where a token represents something on the blockchain. For example, I can sell a token that claims there’s a kilo of gold behind it that I don’t have. And that’s where it gets complicated, because the blockchain claims it, but it can’t be proven.
If there are so many question marks and uncertainties, why is blockchain still being sold as the panacea in so many areas?
He comes from very different corners. There is a political level. We hope to be able to empty the state with it. Thus, tasks now organized by the state should be subject to a private market. It’s a very right-wing ideology. David Golumbia, an American researcher, has written a book that shows the political currents from which the Bitcoin white paper emerged [Anm. d. Red.: Konzept vom Bitcoin-Erfinder Satoshi Nakamoto] feeds itself. A harsh right-wing libertarian ideology prevails, which consists in rendering the state incapable of acting. On the other hand, we have the economic domain. If you look at job postings on LinkedIn, there’s a lot of money there, especially for start-ups. You can get a job as a blockchain developer in a booth for a lot of money and then the topic needs to be pushed. If you, as a business partner, manage to establish blockchain as a business model, you are ready. Companies spend a lot of money there.
What would you advise companies to invest in instead?
If you need a database and you only have five people writing to that database, use a database as well. Today we know how to build and secure databases. It’s old technology that’s cheap to get. I don’t need a blockchain for that. Of course, the idea of being able to map processes transparently on a database theoretically readable by everyone and secure also has its appeal for companies. But do I really want to write internal company data to a blockchain where the competition can constantly watch? It makes no sense at all. Also, with a blockchain, it is not possible to know who read the data. This makes things even more difficult.
Why is politics so convinced of the blockchain?
In German politics, the blockchain has established itself as a symbol with which one can show that one has understood the technology and its future. Here, too, politicians must be made aware that it is not this magic technology that will solve all problems and create billions of start-ups in Germany. This hope then allows the government to carry out such helpless leapfrogging actions in which millions are poured into certain research projects. For someone who knows the subject well and then sees such grant applications, it makes no sense.
Can this hype really be stopped?
It never completely disappears. Bitcoin will continue to exist, Ethereum too. Decentralized systems are robust and well protected against external technical interventions. The question is whether these issues will ever be so important. What works well is regulatory intervention. There are first movements in the EU. Thailand has banned offering Bitcoin as a means of payment. Other countries are taking action against cryptocurrency mining. It’s first aid.