The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

A Really Expensive Good Idea

05/13/2019

Efficiency is a good thing, right?

Is increased efficiency a good thing?  Depends on the price, of course.

Blockchain is a digital platform where buyers and sellers can separately enter information, confirming each other’s info.  It will increase efficiency and reduce accounting costs, especially with international trade finance.  Therefore, “good guys” like it.  It is also a distributed ledger of all transactions, which cannot be altered.  Therefore, “bad guys” hate it.

But, is it a good idea that all information, both true and false, be made permanent?  Is it a good idea if I upload the cell phone number of your kid, for the whole world to see?  Of course not, but how do we insure that blockchain is only used for good, without the right to correct or delete information?  If that information can be changed, the “bad guys” will find a way to hack it.

Unlike the United States, Europe has been pressing the digital world to preserve some consumer privacy, especially with its “right to be forgotten” law.  I don’t think anybody believes blockchain can succeed without Europe.

Sadly, the increased efficiency of blockchain comes at too-high-a-price.  Maybe, that will change with time, but not now.

 

Separately, it is easy to conflate the subject of bitcoin (and other crypto-currencies) with blockchain.  These are very different subjects.  I have long argued the bitcoin is “an elegant solution to a non-existent problem.”  However, the blockchain is used to record purchases and sales using crypto-currencies, as well as real currencies, but it remains very different.  Don’t confuse bitcoin with blockchain!

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