Last Updated on March 25, 2021 by Shaun Snapp
- Blockchain has become a popular item for vendors, consulting companies, and software buyers to hype.
- How accurate is the hype around blockchain?
As readers probably know, the major vendors have been scamming their customers by making vague promises about blockchain for several years.
Get Ready for the Closed Source Vendor Scam Festival
We cover how SAP has been doing this in the article How Real is the SAP Intelligent Enterprise?
Gartner Speaks at the Highest Possible Level About Blockchain
Gartner has a video on blockchain. But how does having an online register do anything that Gartner proposes? Gartner speaks at such a high level on the topic; it is not possible to know. The lack of specificity makes it appear as if Gartner does not know, but they still want to talk about it.
Gartner hypes blockchain just like it hypes every other technology — regardless of its viability. The following quote explains this.
“Data and analytics should position blockchain technologies as supplementary to their existing data management infrastructure by highlighting the capabilities mismatch between data management infrastructure and blockchain technologies.”
But apart from the laughs. I read an article about the Syrian Refugee camp in Jordan. One of the UN Aid agencies stimulates entrepreneurship in the camp and supports individuals who want to set up trade, but they are not allowed to use the Jordan currency. So, they use a blockchain based pay system, developed by IBM, supervised by the NGO to get the economy running in the camps of 100,000 (of thousands) of refugees. I cannot remember which magazine, but it was an impressive story on giving people purpose who are there “temporarily” for – but now for 8 years. – Martijn ten Napel
The rest of the videos are from IT consulting firms. IT consulting firms are highly unreliable sources of information about IT and routinely lie to obtain projects. To see the track record of IT consulting firms, see the Brightwork Consulting Management Article Library.
WiPro Enabling Tax Evasion with Blockchain in Bermuda?
Bermuda is an offshore tax haven. Why does WiPro having blockchain improve the ability of companies to evade taxes by using Bermuda banks? So this is listening to WiPro, which is known for corruption (here is Wipro’s position on lying on sales decks How to Understand Wipro’s Position on Lying), from and on the topic of Bermuda, which has an international banking sector for only one reason. There is nothing in this video that remotely explains why blockchain will do anything at all for Bermuda.
Throughout the video, the WiPro representative repeatedly refers to the excellent standards and regulations of Bermuda. However, Bermuda allows companies to escape taxes is, therefore, an escape latch for regulation. Why else would a company have bank accounts in Bermuda, a tiny country where companies have bank accounts but transact no business?
Notice the following quotation.
But Bermuda’s status is under threat. Its tax advantages — long one of the big attractions of doing business there — have been eroded by US laws designed to stem the flow of capital offshore.
Over the past 30 years, the Atlantic Ocean island has turned itself into one of the world’s biggest insurance hubs through a combination of low taxes, flexible regulation and easy access to the US.
The increased scrutiny of tax havens and calls to improve transparency in such jurisdictions will increase the pressures on the island nation of 65,000 people, which has suffered from a decade of economic decline.
The early days were pretty hairy. “Bermuda was a dirty word in the 1980s,” says Stephen Catlin, an insurance industry veteran. “There was terrible regulation — you could turn up with a brass plate and do what you wanted.”
Low taxes were also a major attraction. Bermuda has no corporate income tax, which is a big advantage to a reinsurance industry where years with no significant natural catastrophes can be very profitable.
Earlier this year, it appeared on the EU’s tax haven blacklist. Although it managed to get itself removed from the list just three months later after making technical changes to its rules, the episode has dented Bermuda’s reputation. – Financial Times
What part of these quotes matches anything said by the WiPro representative. Insurance companies insure companies in countries with income taxes. And because they are based out of Bermuda, they pay no taxes.
This is a good indicator that this WiPro representative is not a good source of information, and now the information he provided on blockchain also did not hold up.
Capgemini Provides a Terrible Blockchain Case Study
Capgemini is often useful for highly deceptive videos, as we cover in the article How Many IBM and other AI Projects Will Fail Due to a Lack of Data?
This video’s strategy appears to be to repeat the terms “cryptocurrencies” and “digital world” as many times as possible. Furthermore, this video makes it sound like there is no connection between the physical world (the supply chain) and the financial world (blockchain). As the past several decades have been about, this is a curious assertion about providing integrated financial and supply chain systems to companies. Therefore, this video’s explanation appears to be describing a situation that was true before systems being implemented at companies. The video also proposes that companies need to investigate EDI solutions to enable the supply chain ledger. However, once again, EDI systems predate ERP systems that began to be implemented in the 1980s.
In the video, the Capgemini representative also proposes that an IoT layer is required between the supply chain/physical layer and the digital layer. However, this already exists in companies and governments, and there is no IoT layer required. The video describes a construct of wheel reinvention.
PwC States it is Necessary for a Distributed Ledger?
PwC asserts that a distributed ledger is necessary. However, why is this true? The current system has each company or entity with its own ledger. Nothing explains why this ledger must be distributed, or if it were distributed, things would improve in some way.
The video explains how blockchain obtained its name (a series of blocks — placed in a chain). However, that still does not explain why it is advantageous.
SAP Asserts that Blockchain Helps Remove the Use of Paper Documents
Like the CapGemini video, this is an assertion of benefits based upon the use of a time machine. Before the computerization of companies, paper documents were used, but this has mostly been eliminated.
SAP shows blockchain being implemented by SAP Cloud. Still, we have already reviewed the SAP Cloud and How SAP Plans to Markup Cloud Service Providers to High Profitability, and there is never any reason to use SAP Cloud.
SAP shows that with blockchain shipping, documents are shared — however, this is already done with document signing applications where both companies can sign legal documents like Hello Sign. It has zero to do with blockchain. Furthermore, SAP has just about zero involvement in freight forwarding or anything related to what the video discusses. SAP then proposes using the TM system. However, what SAP does not want views to know is that this is not a good system to implement, and most companies that have implemented it have either failed or have been dissatisfied with the outcome. SAP TM, which we cover in the article Comparing SAP TM Versus MercuryGate as a TMS, is based around the requirements of shipping companies (trucking companies, air freight companies, etc..), who don’t buy it — but SAP sells it into shippers (companies like Wal Mart, Amazon, etc.), where it frequently fails in implementation.
Using SAP’s transportation management system is one of the worst ways to manage transportation. Now faux blockchain functionality has been added to the claims about TM made by SAP.
The entire SAP video is a type of false advertisement. It begins by stating the topic is blockchain but then showcases its SAP TM solution, which shows the online signing of transportation documents — that has nothing to do with blockchain. Notice the term ledger is not used to describe anything that is occurring. This means that SAP will attempt to mislead customers and prospects that SAP TM is related to blockchain.
Deloitte on Blockchain
As with all the other videos, while it explains what blockchain is, the video does not explain the benefit. It asserts that without blockchain, one requires “intermediaries,” but this is not true. For example, when a shipment is received without blockchain, it is scanned into inventory, which may trigger payment completion (or the payment has already occurred). But there are no extra intermediaries because of the absence of blockchain.
The video also asserts that a property deed can be transferred without an intermediary. This is true — an escrow company is between the buyer and seller in a deed transfer.
However, there is a reason for this.
The escrow company performs a title search to determine the title is clear of claims. It then holds the money from the buyer in escrow.
Trying to replace this with blockchain makes little sense because the title search must be performed, and some entity must hold the money in trust. If the title search fails or other preconditions fail, the escrow money is returned to the buyer.
How is this replaced by an online ledger? Are Deloitte employees interested in buying or selling houses without an escrow company and with some online ledger?
Some companies have sprouted up like Natmin to provide blockchain escrow services. They state that they eliminate intermediaries. However, isn’t Natmin an intermediary? When an escrow company records a transaction between a buyer and seller, how is this different from a blockchain entity like Natmin doing so? Perhaps Natmin is more efficient. Escrow companies are not known for efficiency — but how revolutionary is this?
Notice this quote around blockchain for aviation purchase escrow.
Blockchain databases can make the transactions of an aircraft closing accessible to the parties in the transaction. Examples of visible transactions can include submission and/or signing of required documents, submission of funds by parties (though specific amounts can be hidden), filing of documents, registrations of International Interests and more. Through applying conditions to the smart contract, blockchain databases can automate much of the process, reducing the risk of human error. Accordingly, the amount of time spent retrieving and circulating documents, would be greatly reduced.
However, blockchain technology is still largely unregulated. Without consensus among lawmakers as to use and enforceability, there could be jurisdictional issues, especially with other countries. There is currently a lack of integration in the aviation industry as well, which could make it difficult to fully realize the benefits of the technology.
Aviation escrow has to consider all aspects of the aviation and financial industries, so widespread regulation and integration of new technologies is important. However, unlike the use of cryptocurrency and its volatile nature, the use of blockchain technology could mean more security, and a competitive edge. The ability to quickly make more informed decisions increases significantly with automated systems, increasing efficiency and reducing costs. – WB Aircraft
Maybe blockchain can reduce transaction costs for escrow services (although this quotation brings up challenges that none of the videos included in this article appeared interested in bringing to light).
However, this is the most applicable use case that I could find for blockchain, and it is marginal.
Blockchain advocates promote distributed ledgers for many scenarios that are already without intermediaries and perfectly well managed with companies and government entities conducting business using their present systems.
The Primary Issue Around Claims on Blockchain
Blockchain is part of a problem of people casting great hope on something they don’t understand. This is reminiscent of how people have stated they have tried to have a gluten-free diet but then asked what gluten was in the next question. As we cover in the article, they could not answer the question How ERP Adoption is Like People Who Adopt Gluten-Free Diets Without Knowing What Gluten Is.
Reviewing What Blockchain Is
Blockchain is an online/cloud register. It is a database that records transactions — it is usually associated with financial transactions. Sometimes it is referred to as a ledger. It is described well by the following quotation.
At its core, blockchain is a glorified spreadsheet (think: Excel with one table). In other words, a new way to store data. In traditional databases there’s usually one person who’s in charge, who decides who can access and input data, who can edit and remove it. That’s different in a blockchain. Nobody’s in charge, and you can’t change or delete anything, only view and input data. – The Correspondent
How is this revolutionary?
The Inefficiency of Blockchain
There is something very odd about the efficiency of blockchain.
..it’s not actually that good a payment system — Visa can handle sixty thousand transactions per second, while Bitcoin historically taps out at seven. Bitcoin is already estimated to use 35 times as much energy as Visa. – Hackerdom
And something disconcerting about the lack of official control over blockchain projects like Bitcoin.
The government-backed banking system provides FDIC guarantees, reversibility of ACH, identity verification, audit standards, and an investigation system when things go wrong. Bitcoin, by design, has none of these things. I saw a remarkable message thread by someone whose bitcoin account got drained because their email had been hacked and their password was stolen. They were stunned to have no recourse!
Bitcoin is what banking looked like in the middle ages — “here’s your libertarian paradise, have a nice day.” – Hackerdom
A Legacy of Failed Blockchain Projects
The history of blockchain’s implementation success is not at all encouraging.
Most blockchain projects don’t make it past a press release, an inventory by Bloomberg showed. The Honduran land registry was going to use blockchain.
In the late 1990s, I used to arrive on projects and was expected by sales to explain how XML would perform application integration. The salespeople for the vendor I worked for told customers that all of the integration would be performed by XML. The salespeople did not know that while XML could be used in integration — it was just a document standard. Therefore XML could never do what the salespeople told customers that it could do. This same type of thing appears to be happening in the sales of blockchain projects.
It is important to distinguish between what one is for and what one is against. It is wonderful for companies to set up extra databases to register transactions. If any individual or company desires to put a database online that records things, by all means, set up a database on your favorite cloud provider, connect it to another system. But if one does this, it won’t provide the benefits software vendors, and consulting firms propose. Therefore one can “not have a problem” with setting up blockchain ledgers/registers — without agreeing with the benefits proposed by major segments of the IT industry are saying about blockchain.
Companies selling software or IT services have demonstrated that they are willing to misinform prospects on blockchain, be willing to provide exaggerated claims, and also to comingle blockchain with things that it has nothing to do with. This will lead to or has already lead to confusion around what blockchain actually is — and what happens on a blockchain project after it has been sold.
Over the last 30 days it processed two billion dollars (as of this writing) worth of interbank and interpersonal transactions — about 40 seconds’ worth of volume on the SWIFT interbank network — after three years of being available to banks to trade 90% of the world’s high-volume currencies. This is like the proportion of US GDP comprised by toothpick sales. Why haven’t banks preferred this new technology? The answer is that setting up a Ripple Gateway isn’t actually much different than using the existing corresponding-account system — except that a lost password or security token can lead to much larger and more instant actual losses — which, as a reminder, has happened to more leading bitcoin exchanges than have managed to avoid it. The same features that make the banking system attractive to end users also make it attractive to banks. They already have ledgers, and don’t need to distribute them, anonymize them, encrypt them, publish them, and make them irreversible.
In the end, the advantages of the existing human and software systems surrounding transactions — from verifying identity with a driver’s license to calling and clarifying the statements made in a credit disputed transaction to automatically billing your credit card for a newspaper subscription — outweigh the purported benefits, as well as hidden costs, of irrevocable, automated execution. Blockchain enthusiasts often act as if the hard part is getting money from A to B or keeping a record of what happened. In each case, moving money and recording the transaction is actually the cheap, easy, highly-automated part of a much more complex system.
NASDAQ babbles on blockchain.
It was much-heralded when NASDAQ launched an internal blockchain-driven exchange for privately-held stocks. But wait: correct me if I’m wrong, but the whole purpose of NASDAQ (or the DTCC trade clearing system, for example) is that it has a ledger of who owns what stocks? Were they nervous that their systems, absent blockchain, would soon be unable to keep track of who owns what?
And bitcoin works, it exists, and according to the latest count, there are nearly 1,855 other bitcoin-like currencies out there.
There are very few shops that accept the digital currency – and rightly so. It’s very slow (sometimes a transaction takes nine minutes, sometimes nine days!), a lot of hassle (try it for yourself – cutting open hard plastic packaging with scissors is more user friendly), and very unstable (its price rose to €17,000 euros; dropped to €3,000;
Blockchain generalizes the bitcoin pitch: let’s not just get rid of banks, but also the land registry, voting machines, insurance companies, Facebook, Uber, Amazon, the Lung Foundation, the porn industry and government and businesses in general.
Once something is in the blockchain, it cannot be removed. For instance, “Miners can add arbitrary bits of text to the bitcoin blockchain if they want. And those bits of text include links to child pornography and revenge porn were placed in the bitcoin blockchain by malicious users. It’s impossible to remove those.
The fact that no one is in charge and nothing can be modified also means that mistakes cannot be corrected. A bank can reverse a payment request. This is impossible for bitcoin and other cryptocurrencies. So anything that has been stolen will stay stolen. There is a continuous stream of hackers targeting bitcoin exchanges and users, and “The Wall Street Journal investigated these investment vehicles and concluded that a quarter were fraudulent. The Wall Street Journal investigated these investment vehicles and concluded that a quarter were fraudulent. Fraudsters launching investment vehicles that are in fact pyramid schemes. According to estimates, nearly 15% of all bitcoin has been stolen at some point. And it isn’t even 10 years old yet.
what problem does blockchain actually solve? OK, so with bitcoin, banks can’t just remove money from your account at their own discretion. But does this really happen? I have never heard of a bank simply taking money from someone’s account. If a bank did something like that, they would be hauled into court in no time and lose their license. Technically it’s possible; legally, it’s a death sentence.
If you ask me, they’re building a completely normal, run-of-the-mill database, but extremely inefficiently. Once you’ve cut through all the jargon, the report turns out to be a boring account of database architecture. They write about a distributed ledger (that’s a shared database), about smart contracts (that’s an algorithm) and about proof of authority (that’s the right to veto whatever is entered in the database).