The emperor’s new chains – seeing through the Blockchain hype

Since Bitcoin first appeared in 2008 people have been looking for the next ‘killer application’ for the technology that made it possible: Blockchain.

NB This is a viewpoint by Brian Lewis, CTO at OpenJaw Technologies (a TravelSky Company)

Bitcoin’s cryptocurrency magic has fuelled the hype behind Blockchain, but this hype belies a shallow understanding of what Blockchain can and can’t do.

This is not surprising, as to say you truly understand Blockchain, which in polite company is now often referred to as  a“Distributed Ledger Technology” (DLTs) to avoid those ‘negative branding issues’, you would need to recognise and be able to explain the following equation:

Not something us mere mortals would want to spend our time doing, and in truth, detailed knowledge of the above is not required to have some comprehension of how Blockchain works.

However, the real problem is that what passes for an explanation of Blockchain in articles outlining its ‘potential to change everything’ often demonstrates limited insight into what it fundamentally does.

A random sample of articles reveals that Blockchain works because it is: ‘decentralized’, ‘secure’ and ‘can be read by anyone’ – which is interesting and mostly true, but it’s not the reason it can do its ‘magic trick’ and points to the real problem in all this: if you don’t understand what a technology does, how can you create or evaluate use cases for it?

Explaining why Blockchain is so astounding without resorting to equations and coding algorithms is difficult. So, it is understandable that, for the most part, discussions are based on simplified descriptions and analogies.

Use case scenarios

But the trouble is that you can’t make decisions about Blockchain based on analogy. If you have a sense that DLTs such as Blockchain are secure, distributed databases that can remove middlemen, then you look for instances in your industry that seem to match that description, without understanding if the specific use case truly makes sense.

In the second part of this Blockchain series, I will explain in detail as to how Blockchain works and its origins, but for now, it will be enough to understand these necessary attributes for any given implementation:

  • Fully distributed data
  • An immutable record of transactions
  • No central governing or issuing authority
  • Incentivised participants who ‘mine’ or ‘forge’ blocks (confirm transactions, ensure integrity of the ‘chain’)
  • A reliance on no single entity controlling 50% or more of the network
  • Inherently slow performance
  • Heavy resource usage

Some of the above list may surprise you, particularly the last two. To allow Blockchain to do its magic it will by necessity be comparably slower and heavier on CPU usage than other technologies. It will also need participants who are actively willing to spend money and time collecting transactions into blocks, then run resource-heavy algorithms over them so they can be added to the chain. This is not a limitation of current implementations or existing hardware, these are core attributes of how a Blockchain works.

There are variations out there and some iterations have a better performance than others, but removing certain key features means it is no longer a Blockchain and can no longer do the ‘magic trick’ that got everyone so excited about it in the first place.

Taking flight in travel

So, where in the travel industry does Blockchain fit? Where could we use a slow, resource-hungry database that you can’t alter and which requires an incentivised network of users in order for it to work?

Some of the more realistic uses may be closer to governance, administration, identity management and security rather than a disruptive change to existing B2C business models.

The ability to guarantee the provenance of something with transparent and distributed data that (for the most part) can be confirmed by anyone but updated by no-one opens possibilities for everything from federated identity management to aircraft part registries. Combine Blockchain with smart devices using Trusted Execution Environments and you have the possibility of a trusted, federated digital identity.

Use cases where the lack of speed and real-time updates are less important than the secure replication of immutable ‘always available’ data among parties who all have a personal stake in keeping everybody else honest would seem the most likely to succeed.

When looking at other proposed uses, it is worth remembering that often quoted statistic: VISANet handles around 1,700 transactions per second with a theoretical limit of 56,000 while Bitcoin is currently processing between 3 and 4 with a theoretical limit of 7. There are faster Blockchains out there than Bitcoin’s but they are certainly not 600 times faster.

Also worth considering is the fact that the Bitcoin network currently has an annual power consumption comparable to that of Ireland, which is being paid for by ‘miners’ because it is backed by a cryptocurrency and it is currently profitable for them to do so.

All of this should give you pause for thought when weighing up proposals for distributed marketplaces or supply chains based on Blockchain that could operate at the scale and speed required in the travel industry.

As two prominent Blockchain tech researchers, Michael Mainelli and Alistair Milne, state in a research paper “The impact and potential of blockchain on securities transaction lifecycle“:

“Current interest in mutual distributed ledgers has established significant momentum, but there is a danger of building unrealistic expectations….Understanding of the technology lags well behind the hype….Blockchain technology seems to promise major change for capital markets and other financial services, but few can say exactly how or why.”

NB1: This is a viewpoint by Brian Lewis, CTO at OpenJaw Technologies (a TravelSky Company). A second article looking at how Blockchain works and the true origins of the original Bitcoin algorithm will be published soon.

NB2: Image by BigStock

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A founding principle of tnooz was a diversity of viewpoints from across the spectrum. Viewpoints are articles by guest contributors from around the travel and hospitality industries. The views expressed are those of the author. and do not necessarily reflect those of the author's employer, or tnooz and its partners.



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  1. Ben Lee

    What do you think of Webjet’s move to create a blockchain for hotel bookings?

    • Brian Lewis

      It’s interesting – it’s a private blockchain and not intended to remove middlemen but to ensure those middlemen get paid.
      What I’ve read on the 3 phases of it’s implementation sound a bit vague, probably in part due to complex technical details being simplified for publication.
      So it’s not 100% clear if the use case is or isn’t something that any other technology that imposes an agreed ‘workflow’ process on any given database would do just as well.

  2. Fabian Bartnick

    Really enjoyed the article. Thank you. You are fully right and for me Crypto currencies at present feels more like Wall Street back in the 80′ or even .com in 00′- mostly unregulated, highly speculative and many jumping on the bandwagon with literally a new ICO every day.

    The fundamental problem here lies with most people treating the currencies as stocks / shares or bonds and use it to derive a profit to dump it back into the pool and then converting it back into fiat. so its not about the technology anymore but the getting more fiat at the end – ask some of the guys trading and check if they actually use their coins for purchases in the real world (most I guess will say no).

    Nevertheless though I believe the underlying tech structure and principles will shape the future and many new openings based on “blockchain” tech or the evolution of blockchains.

    I agree with Yannis – Speed, power can all be addressed. Question for me is more about public vs private networks that Douglas raises as well.

    Looking forward to the next article.

    • Brian Lewis

      Thanks for that. Interesting points, agree with you and it will be interesting to see what happens with the SEC and the ongoing ICOs

  3. Douglas Rice

    These are indeed limitations of the early generation of public blockchains, along with significant latency in confirming transactions. Innovations such as state channels and payment channels are already addressing some of the concerns with respect to public blockchains; those innovations are continuing. And private blockchains – which can meet many needs – can be engineered quite differently than public ones, to optimize against factors like speed or cost or authentication. Blockchain is not a single technology but a family of technologies that, used creatively, can foster disruptive innovation. We should neither be drawn in by the hype that blockchains can do everything, nor deterred by the limitations of a an early generation of one type of blockchain.

    • Brian Lewis

      Some valid points, you obviously know your stuff – I’d like add one more word of warning though
      When we start to look at solving the limitations of Blockchain with things like reduced consensus, private blockchains, permissioned blockchains etc. we start to lose what made blockchain so interesting in the first place. We make the problem it’s solving more trivial and have to be careful that the subsequent use cases aren’t then better served by existing, simpler technologies.

      • Douglas Rice

        I agree entirely, Brian. Blockchain is a family of database technologies that, like all prior database technologies, has its own unique advantages and disadvantages. No technology should be chosen just because it’s there, but rather because it’s the best way to address a particular use case.

        To me one of the more interesting consequences of public blockchains may be the boost they can give to open source APIs. Travel technologists have talked about the desirability of open source for longer than blockchain has been around, but so far it hasn’t really happened. Even if blockchains are only ever used for a small subset of (say) travel booking or payment transactions, the public APIs that support those transactions may well be repurposed for private blockchain or point-to-point transactions, significantly reducing marketplace friction and the cost of entry for innovative startups.

      • Ginger Sullo

        Totally agree Brian, and in what you’ve stated in trivializing a serious problem/issue that could likely be solved with simpler tech, applies to so many platforms already out there…the race to scalability/efficiency sometimes gets lost over the true essence of improving or truly differentiating a platform’s core problem solver.

  4. Patrick Linnihan

    Question: If we take the article – and replace “DLT” with “BVM” ( for blockchain virtual machines)- like what Ethereum uses – is the author still correct? Because the hype out there is that Ethereum was made to solve these issues.

    • Brian Lewis

      I think it’s a bit of a complicated ‘yes and no’
      Some of the hype is just that.
      Ethereum is currently faster transacationally than BitCoin and transactions are only part of what it does – but I have seen some claims for it that seem hard to justify. Interestingly, there are indications of Ethereum moving from the slow BitCoin style ‘Proof of work’ to a hybrid model using a lighter (but possibly less secure) algorithm called ‘Proof of stake’ to add blocks to the chain.
      There are also state channels that Douglas mentioned, which effectively turn the Blockchain into a way of ‘locking’ a record or state which participants can then change and update quickly outside of the blockchain until the new state is agreed among the parties when it is ‘locked’ again by writing to the blockchain. This has it’s own complications but is certainly interesting. With regard to this and Ethereum – Raiden Network is certainly worth Googling

      So in short, transactionally Ethereum at the moment is based on what BitCoin is doing and suffers from the same scale issues, fixing those still seems to involve the usual suspects of reduced consensus or moving transactions off the blockchain.

      • Patrick Linnihan

        Speaking of scale – this just in – and shows how fast this tech is moving – “Microsoft is today revealing a new blockchain framework designed to make it easier to build enterprise networks using any distributed ledger.”

        “Out of the box, the new Coco platform – built to supercharge transaction speeds and simplify governance decisions – will be integrated with a number of popular open-source blockchains and distributed ledgers, including ethereum, R3’s Corda, Hyperledger Sawtooth and JPMorgan’s Quorum.”

        “In the first-ever live demo, the framework resulted in an increased volume of 1,700 transactions per second on a private version of the ethereum blockchain. The average transaction volume of blockchains integrated with Coco (short for “confidential consortium”) is about 1,600 transactions per second, and it features a built-in governance model that lets consortia members vote on all terms and conditions of a network, including when members can be added or ejected.”
        Acknowledgement: source Coindesk

  5. Yannis Moati

    Good article. Yet, my first thought is that transaction speed and energy consumption are such easy problems to solve on a nascent technology. I’m sure gravity was listed as a major problem to the Wright brothers, yet, 100 years later…

    • Michael Meyer

      Yannis, 100 years later as you point out, gravity IS the major problem with flight. Fuel usage, distance traveled, plane size, engine size are all constrained by that one nasty bit of physics.

    • Brian Lewis

      This was one of the myths I was really trying to expose “it’s new, I’m sure it will get faster”
      The difference is that for something like the Bitcoin Blockchain – the network actually self calibrates to enforce a transaction speed limit – it’s inherent in the way it works (which is something I’ll go into in more detail in the next article).
      There are other things out there, but to achieve speed and efficiently – they are looking less and less like Blockchain
      As for being nascent, It’s not that far off it’s 10th birthday…

      • Douglas Rice

        “As for being nascent, It’s not that far off it’s 10th birthday…”

        TCP/IP’s 10th birthday was 1993, which was before even the launch of the Netscape browser. Blockchain is still very early in the game, or as Gartner says, at the peak of the hype cycle.

    • Peter Topping

      Insightful analogy with early flight, nice one

  6. Glenn Wallace

    Awesome article — I fear the hype will continue but I hope companies will continue to evaluate blockchain and other technologies objectively.


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