“‘Blockchain’ and ‘distributed ledger technology’ (DLT) have become almost meaningless buzzwords that are mainly used for marketing and PR purposes,” say the authors of a new Cambridge University study.
Given the hype, arriving at a conceptual framework for this emerging technology seems like a thankless task.
What is there in common between an open-source, open-access network like bitcoin, which operates largely outside the control of the traditional financial system, and a proprietary, invitation-only database set up by banks to share transaction details? Yet, by convention, we label both these systems as blockchains.
And what about cryptocurrencies that claim to offer a radical improvement on bitcoin’s processing capacity, which is limited to seven transactions per second?
Faster systems may be more centralised and have limited resistance to external censorship. How can we measure the trade-offs involved?
Confusion over the meaning of the terms ‘blockchain’ and ‘distributed ledger technology’ is worsening
These are some of the questions addressed in an exclusive interview with New Money Review by Michel Rauchs, lead cryptocurrency and blockchain researcher at the Cambridge Centre for Alternative Finance (CCAF), part of Cambridge University.
In our latest podcast, Rauchs talks about the challenges involved in cutting through the blockchain hype.
Some highlights of the interview:
- Confusion over the meaning of the terms ‘blockchain’ and ‘distributed ledger technology’ is worsening
- A true blockchain has decentralised control, yet decentralisation is not a binary property—it varies continuously, depending on the way a system is set up, its hierarchies and power structures
- A blockchain without decentralisation is better described as a shared database—yet such shared databases could still be revolutionary in sectors where data has historically been held in silos
- The trade-offs involved in competing blockchain systems are rarely advertised by their promoters
- Any analysis of a blockchain must be holistic: it must cover the structure of the underlying protocol, the network itself and the kind of data recorded
- The study of blockchains draws on many academic disciplines: for example, computer science, cryptography, network science, economics, finance, anthropology, sociology and politics.