Crypto: 'Blockchain is hype' – MPs warned
Blockchain technology has been damned as nothing but hype and devoid of any meaningful use case at a select committee meeting in Westminster.
On Wednesday UK MPs met in Portcullis House near the Houses of Parliament and questioned various experts on the utility of blockchain technology.
The policymakers demanded examples of blockchain's effectiveness in solving problems in different parts of the world and sought to know what the UK could learn from this innovation.
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The House of Commons Science and Technology Committee on Blockchain was told that the technology is "rather simple" and provides a solution to things that were never a problem in the first place.
Technology journalist and author David Gerard outlined the actual potential of the technology that has been hailed as the foundation of web3.
"Blockchain technology provides security for things that don't need securing and are not a problem and a lot of the innovation started from the technology and then they sought to find problems they could solve with it," Gerard said.
One of the key benefits that blockchain technology provides, its backers say, is the security of data which is beyond the reach of centralised authorities or power groups.
The technology provides efficiencies by cutting out intermediaries that would usually have to verify and inspect data, transactions or information in legacy systems, such as traditional finance, property records and personal information.
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However, two witnesses that spoke at the committee meeting described a glaring hole in the argument that blockchain technology is beyond the reach of manipulation and falsifying of data and transactions.
Izabella Kaminska, editor of The Blind Spot described how blockchain does not solve the problem of accuracy of data and its ability to keep information secure and beyond the reach of corrupting effects.
She said that the blockchain "only records what it is told to record, and you don't know what is going into the blockchain unless you check it and that involves trusted intermediaries, if garbage goes in, then garbage comes out".
This viewpoint was echoed by Gerard who added that "a distributed ledger that cannot be altered is good, but how do you know the data going into the blockchain is good".
He added: "It turns out crooks can fake info digitally as well as on paper."
Referring to the much-promoted use case of blockchain technology for tracking supply chain data Gerard added that, "there is no substitute for having human inspectors who know the industry and know the scams".
So if trusted intermediaries are still needed to verify data being input into the blockchain at source, it would nullify the argument that the technology is a trustworthy alternative to legacy systems that cuts out interfering intermediaries.
When asked by MPs whether the UK should be studying the use case of blockchain technology, Kaminska said that she "can't think of a single successful deployment of blockchain".
She said that during 2016 and 2017 there was a lot of hype surrounding blockchain technology, but "now in 2022 when we look back, almost nothing has come out of that hype".
She added that one former JP Morgan banker had even suggested at a recent conference that "we need to teach companies that they don't always need a blockchain, and most of the time it may be more efficient to have a centralised ledger".
However, Kaminski added that blockchain technology had applications "in low trust societies" such as in Ukraine where a thriving crypto market has managed to deliver funds faster than legacy systems and beyond the reach of Russian intervention.
With the Ukraine situation in mind and other jurisdictions suffering from hyperinflation of domestic currencies, she said that it is "the context that matters and the type of society that matters".
She added: "I don't think blockchain technology should be the go-to standard in finance."