After the ICO craze hit the markets during 2017, it seemed like every problem had a blockchain solution. Once the euphoria passed and markets came back down to the ground, the issue of applying a blockchain solution to every problem was called into question. There are indeed several reasons why every problem does not have a blockchain solution. Nevertheless, it is difficult to tell those problems that can be solved by deploying blockchain technology from those that can’t. This is mainly because blockchain technology is not even 10 years old yet, so there are many misconceptions about how it may or may not solve a problem.
Finding Wisdom in a Tweet
Sarah Jamie Lewis explained the issue that most projects face when they attempt to use blockchain technology to solve a problem. In an April 2nd, 2018 tweet, Sarah distilled the complexity of the issue in the following manner:
- Step 1: You have a problem.
- Step 2: You introduce a blockchain to solve the problem.
- Step 3: You now have an incentives problem, a trust distribution problem, a community management problem, a regulation problem, a speculation problem, an upgrade path problem…
The wider public outside cryptocurrency enthusiasts and developers might not be familiar with many of these except perhaps the regulatory and speculative issues.
Therefore, it might be helpful to explain briefly one of the most fundamental issues that makes blockchain suitable to solve some problems but not others. That is the issue of incentives. At its core, blockchain technology deployment creates an “ecosystem” in which a variety of actors perform different tasks to keep the system running in a decentralized manner. The interests of these actors are not always aligned, so there must be some kind of balance between them in the form of incentives to keep them from corrupting the system.
To achieve this, developers must invest a great deal of thought into the rules and the provisions in the system that will allow the actors on the blockchain to change the rules if needed. The Bitcoin scaling issue showcased how a well-designed system, in which the incentives are carefully balanced, can still face existential crises due to new challenges that arise.
Therefore, blockchain solutions should not be taken as a silver bullet. The problem must be explored exhaustively before deploying a blockchain solution. Once a blockchain solution is chosen, the team in charge of the development must work through all these issues carefully to make sure that the deployment does not create more problems than it solves. Given that blockchain is a new technology, professionalism and attention to detail must prevail over the urge to get into the hottest space in the market.