DWARS in Debate: the Blockchain

In 2018, the Zuidhorn municipality suddenly won the GemeentePioniers award for most innovative digital services and it was nominated for a number of other awards, including that for Best Government Organisation 2018. EenVandaag and RTL News dropped by. What amazing feat had the municipality accomplished? They had built an app that works ‘on the blockchain’. On the what? Exactly.

Blockchain has gained tremendous popularity in recent years, especially thanks to its main application: bitcoin. This digital currency was constantly in the news in 2018 because one bitcoin was suddenly worth €14,000. Its price fluctuates enormously: in February 2019, one bitcoin was only worth €2900, now it is already €7000. This notoriety makes everyone suddenly want to do something with it. But bitcoin is not so widely applicable (only as a currency), so then something with the technology behind it: the blockchain.

But many people lack knowledge about it. Even at the Zuidhorn municipality, they did not know exactly what it was, according to an official. But: ‘What we did know is that it is coming at us and is disruptive’. No one really knows what it is, but everyone wants something from it. So: what exactly is it, and what is it good for?

What exactly is blockchain?

Let's take the best-known application as an example: bitcoin. So this is a digital currency. But it works differently from a normal bank account. When I want to transfer money at my bank, I tell the bank I want to transfer money. My bank then checks that I have enough money, withdraws the money from my account and deposits it into the recipient's account. Pretty simple.

If I want to send bitcoin to someone, it's different. I then send to a huge network of users the message: I want to transfer bitcoin. Other users (the miners) can store these messages in a block. They can add this block to the database, but have to solve a complicated mathematical puzzle to do so. Once this is successful, my payment is recorded in the database (the blockchain) and the recipient gets the bitcoin.

OK, so that's a pretty complicated process. The reason everyone is so enthusiastic about this: it is decentralised. Because all transactions happen publicly, anyone with the necessary knowledge can check that they have not been tampered with. The creator of the blockchain distrusted banks, because they can just take money out of your account if they want to. With the blockchain, you cannot cheat, and so your money is safe.

What problems does it solve?

Back to the app in Zuidhorn. This app is now used to arrange the child package: poor families can use it to get a bicycle, for example, or to go to the cinema. It works like this: the user gets a QR code in the app. A connected shopkeeper can scan it. The shopkeeper is then automatically sent blockchain coins, which are also automatically converted back to euros. This works well: the shopkeeper gets its money directly and without intervention by the municipality, and the user has no administrative hassle.

But is that because of blockchain? Actually no. The municipality can also transfer money automatically. Then the merchant also has her money, without the need for a whole blockchain. The blockchain ensures that transactions cannot be tampered with. Fine. But this was not a problem at all: the child package in Zuidhorn is small-scale enough that this is fine just to be monitored. Moreover, there is little to gain from adjusting the transactions.

So what did Zuidhorn win those awards for? They just made a good app. It happened to use blockchain in it, but it didn't have to - an ordinary database would also have sufficed. Now, of course, developing such a well-loved app is impressive: in government, ICT projects often run into trouble. But the fact that this app is so good is because of the good developers who worked on it, and not because of the blockchain.

Blockchain's problems

Using the blockchain also brings problems. Because the data is stored decentrally and unmodifiable, it can therefore never be removed from it. For example, links to revenge porn have been put in the bitcoin blockchain, and they can never be taken out again. Similarly, if you are scammed, you can never reverse a transaction: what is once on the blockchain can never be removed or changed.

Some forms of blockchain use also cost a huge amount of energy. The arithmetic of the so-called proof-of-work models take a lot of computing power to solve, and therefore also use a lot of energy. For example, bitcoin now uses as much power annually as the whole of Austria. Yes, really: this digital currency that you can buy practically nothing with uses more energy than an entire country. This is obviously a huge setback for the fight for a clean planet.

So: using the blockchain for your project?

So, want to put a project ‘on the blockchain’? Think again first. It sounds hip and all managers are going wild about it, but in practice there are few applications where it brings benefits. You are better off putting the money into a regular, decent app.