Distributed Ledger Technology is not Blockchain technology
Let me paint the picture, there is this presentation at your workplace, it is one of those big known tech-consulting companies coming to present about “Blockchains”. People are of course interested in the prospect of finally getting some clarity into this subject that supposedly impacts EVERYTHING through million-dollar pictures of bored apes…
Having shuffled around the calendar you show up at the presentation, there are more listeners than usual but still a lot of empty seats, good this might be an opportunity for me to shine later.
The presentation starts with “The four stages of innovation” hmm ok I guess we need to get through this. “Generic advisory firm says 95 % of the economy will pass through blockchains” sure sure, are we getting to the million-dollar apes soon? “Distributed Ledger Technology (DLT) within manufacturing brings you…” ok manufacturing is nice but why are people buying crypto with dogs on them? “This company has leveraged DLT to reduce the mismatch between Purchase orders and Invoices” hold-on what happened within manufacturing? “So to sum up, blockchains lead to traceability which reduces costs, oh and it’s trustless” wait a second what just happened?
As I frequently visit companies to give presentations about Blockchains and Crypto I often hear stories like this. It all comes back to a consulting firm or some bigger corporation having a difficult-to-grasp presentation supposably about blockchains but in reality about DLT/Business Blockchains/Permissioned blockchains.
Since I’m living and breathing blockchains these days I thought I can give it a chance and see if I can bring some clarity to this situation and try to explain why you are getting confused.
Before we dive in I wanted to take the chance to ask for a favor. Communicating in written form is kind of new to me so I’m grateful for any feedback and/or opinion regarding the text. If this lands well I hope to be able to share some more insights into how blockchain and the crypto world work in a similar way.
Let me start by saying this; if you’ve been promised a presentation about blockchains and someone starts to present DLTs my suggestion is that you walk out of there. DLT and blockchains have nothing to do with each other and if someone is trying to make this case they either don’t understand blockchains or are trying to get you to buy something they sell (which is not blockchains).
DLT is known by many names, if not DLT you might have heard “Business Blockchain” or the absolute worst one “Permissioned Blockchain”. All of these are names for the same thing which is: synced databases of historical transactions between one or a trusted set of entities.
I don’t intend to argue that DLT is a hoax. However, the suggestion that DLT and blockchains are the same is.
Before I start to upset some people I want to express that synced data between entities most certainly has its place, and I don’t intend to argue that DLT is a hoax. However, the suggestion that DLT and blockchains are the same is.
Let’s take a quick dip into the confusing world of what (actual) blockchains do. Understanding it hopefully gives you some clarity as to why DLT and blockchains have no business being in the same presentation.
Let’s start with some confusion first and break this down into something (hopefully understandable).
The innovation of blockchains enables transactions Peer-to-Peer without the need for a trusted third party.
So now I’ve probably lost you… Please bear with me and let me try to break this down into something more understandable.
Besides cash transactions, you rarely make a transaction between two individuals without having some third party in the middle facilitating it. This might take the shape of a bank, credit card company, or even an institution i.e. tax authority.
What real blockchains bring in terms of newness is the ability to make transactions with someone (or something) without knowing who or what they are on the other end. This makes the process of transacting open to anyone, even those outside of the approval of agents.
The term “trustless” is often used when talking about blockchain just for that reason. The fundamental functionality of a blockchain network is that anyone on either the sending or receiving side should be able to participate without having to go through some kind of approval process by someone. Another way to put this is that all you need to receive Bitcoin is a computer and a connection to the internet, no account or access is needed.
The innovation of blockchain is therefore the ability to settle a transaction in a permissionless way, and that is also why I find the “Permissioned blockchain” especially cringeworthy.
selling DLTs like “Permissioned blockchains” is a bit like trying to sell cars as “Ground bound airplanes”
As DLTs exchange the openness and ability for anyone to participate with a closed set of trusted entities, selling DLTs like “Permissioned blockchains” is a bit like trying to sell cars as “Ground-bound airplanes”. Sure, you can slap wings on a truck but if it cannot fly there is no truth to calling it an airplane.
DLTs are allegedly trying to do what blockchain does but in a trusted setting amongst a few entities, which then ends up re-introducing the issue blockchains try to address… which is removing these trusted agents.
Therefore DLTs are not blockchains and have no place in a presentation about the subject.
I hope you somewhat have been able to follow my argument. The question still stands however as to why these people keep on presenting DLTs instead of actual blockchains?
There is probably more than one reason as to why. However, I believe it’s largely down to the nature of how real blockchain works. Blockchains are networks and their power comes from openness and participation. Similar to the internet it’s a tool you use and participate in rather than a solution you own.
What consultants and corporations quickly learn is that blockchains are just not very beneficial to their business model
What consultants and corporations quickly learn is that blockchains are just not very beneficial to their business model. Have you ever heard about a consulting firm implementing Google for a customer? No… that’s because, just as for blockchains, Google is open for anyone to use.
To sum it all up, DLTs have no connection to blockchains, as opposed to blockchains, DLTs are made to be used in an environment where you know and trust all parties using them, making them irrelevant to solving the issue real blockchains do. So if you’ve been sitting in one of these presentations not understanding what the heck this is all about, don’t be too hard on yourself, wings were likely a hard sell in 1900 when people were sitting in the truck waiting for liftoff.