As is so often the case in the real world, the truth is somewhere in-between. Blockchain solves a specific, real problem. However, it has also become a shiny new buzzword and is used to promote some very dubious offerings. There is so much fraud and crime surrounding blockchain-based work that stories about hacks, such as cryptojacking – where a website installs malicious software into your web browser to “earn money” while solving blockchain problems.
The technology has expanded rapidly, with numerous uses of blockchain, both benign and malign in appearance. Some actually make a lot of sense to me. For example:
For example, an old friend reached out to talk about his latest venture, indaod.io. This is an intriguing example of a class of uses that I have seen for blockchains that make sense. In this case, it provides an interesting technology for improving the timeshare business. Buying and selling timeshares is difficult for many reasons, several of which can be addressed using a blockchain technology solution. For example, three reasons listed in this online article, 9 Reasons Why Timeshares Are a Bad Investment, can be solved by a solution like my friend’s: it makes ownership more transparent, which can be used to ensure the person selling the timeshare truly owns it; simplifies temporary rental of it, and; encouraging a better resales process. Of course, this does not fix all of the issues, but it is an excellent example of good use.
Another case is one I suggested to add value to a friend’s work on performing “livestock facial recognition.” Such a system could be combined with a blockchain representing ownership of the given animal, providing provenance (the chain of ownership,) ease of transferability, and better tools for preventing theft. Again, this is not something we can do yet, but the technology is far enough along to make sense, and it solves a real problem.
Other uses of blockchain technology are more challenging to evaluate. For example, the Ethereum blockchain technology model is widely used because it provides abilities beyond the basic blockchain idea. A crucial part of that is the idea it can contain a contract. While businesses routinely use contracts today, such agreements are written in natural language formats that can have ambiguity. An Ethereum “smart contract” is written in a language that has a specific definition of its behavior. It enables someone writing a contract to formally validate that the agreement does what is expected. That is surprisingly hard – after all, we have lots of programmers writing many programs, yet we routinely find they struggle to “get them right.”
One specific example of a smart contract that I keep running into is the “non-fungible token.” The term “fungible” might be familiar to you, or perhaps it is slightly vague. Essentially, it captures that something can be replaced with an “equivalent” object. In cooking, many things are fungible: you can substitute margarine for butter, for example. The results aren’t necessarily identical. Some things are not substitutable. For example, a unique cultural or architectural element, such as the Mona Lisa, does not have any substitute. Thus, a “non-fungible token” is a “token” (entry on the blockchain) that represents verifiable ownership of something. This is the opposite of cryptocurrency. Indeed, few of us worry about the specific currency we have – if it is a £20 note, it is likely just as good as any other combination of currency adding up to the same amount. Of course, sometimes specific currency units become valuable for some reason, such as when they are misprinted in a way that makes them unique and interesting.
Personally, I have mixed feelings about NFTs. The scheme I suggested earlier with cows and timeshares makes sense. There are blockchain-based land title registries, which I think are a great use of distributed ledger technology. The challenge with the generic term “NFT” is that you need to understand what the NFT represents to determine if it has value. For example, I suggested NFTs that could represent ownership of a real thing, but many of the NFTs being marketed represent a reference to a virtual object. If the object is itself part of the NFT, say a digital image, and the ownership of the image is transferred, it might have value. Then again, that signed first edition of The Shining has value as well, but it does not give you the rights to do anything beyond owning that one copy. In other words, the right to create copies or derivatives need not be what was sold as part of the NFT. Thus, if you buy an NFT, you might find yourself asking if you bought a usable template for making bags of poo, or just a bag of poo itself, or a URL that points to a picture that someone made of a bag of poo that anyone else can use or access. The value of this is something you can leave on your own.
From my perspective, the interesting aspect of all this is trying to break things down and explain the process: what is a blockchain, what is a smart contract, what is a Turing Complete language like Solidity, how do these get used, etc. While potentially complicated, I have found most people can understand the basics. From that basic model, it’s then possible to explore some specific issues, whether it is for crypto-currency, smart contracts, NFTs, or any other uses that people keep finding for blockchain.
I expect that as the interest in NFTs continues to expand, I’ll have more opportunities to put my skills to good use, explaining how these technologies work and applying that to the legal cases that continue to arise around them.