Working With the blockchain

• Blockchain: An elegant concept but its possibilities and potential require careful research.
• Treating it as a solution for all is promoting Techno-determinism.

Blockchain and Current Take

• It is a fascinating data structure.
• It draws a great curiosity in computer science, social and political sciences, and public policy.
• A lot of hype about its concept and its adoption.
• But its promises are faith-based, driven by unsubstantiated vendor and consultant claims.
• This is risky and stems from an inadequate understanding of the blockchain properties.
• A blockchain is a sequential append.
• It is a public bulletin board of transaction records.
• It has two main functional properties:

1. What can get added is reconciled by multiple participating peers.
2. The bulletin board is immutable, once a record is added, it is cryptographically ensured.

• Permissioned” or private blockchain: Only with pre-identified participating peers.
• Collusion is possible and integrity can only be ensured through regulations.
• Without political decentralization, safety is scarce and difficult.
• Blockchain structure does nothing for the notion of privacy & secrecy aspects.

Consensus and Applicability

• A decentralized consensus is required.
• Current issues with safety concern and privacy is not an ensuing property of a blockchain.
• Consensus is inapplicable when there is only one authority.
• The claims of security based on blockchain are unpromising.

RBI and Cryptocurrency

• The role of blockchain in RBI’s digital currency proposal is doubtful.
• A convincing method independent of consensus needs to be developed.

Cryptocurrencies and Blockchain Tech use

• Cryptocurrencies make valid use cases for blockchains.
• But political decentralization of involved participants is questionable.
• The question is whether cryptocurrencies are consistent with traditional means of transactions and larger macroeconomic implications of cryptocurrencies.
• Only a limited set of commodities are traded with crypto assets.
• But their price determinations with fiat currencies are uncertain.
• Also their potential to increase inequality is also considerable.

Physical aspects of Cryptocurrency

• Mining in cryptocurrencies is achieved by spinning the CPUs.
• Carbon footprint is equivalent to few megacities, it is ungainly, energy-inefficient and unsustainable.
• This requires regulation and taxation, especially for the potential environmental impacts.

Conclusion

• It is amazing that cryptocurrency research and deployment has not been adequately addressed.
• This raises concerns to develop sound theories for their regulation.