We regularly hear well-deserved praise for blockchain technology. Indeed, this new technology has the potential to do amazing things. It offers new opportunities in many sectors, far beyond the cryptocurrency universe. However, to fully understand a technology, you also need to know its limits, boundaries, what it can’t do…
In 1991, Stuart Haber and W. Scott Stornetta first came up with the concept of Blockchain. They were two researchers looking for a new system that would allow the non-falsification of document timestamps. Thus, they conducted the first scientific study on cryptographically secure blockchains. The first concrete application of this concept dates back to 2008 with the Bitcoin blockchain by a person (or team) known as Satoshi Nakamoto.
The blockchain (or chain of blocks) is a technology that allows it shop and of transmit information in some sense transparent, safe (through cryptographic processes that prevent it from being modified subsequently), disintermediated And decentralized (it is not hosted by a single server). We can relate the blockchain to a gigantic database containing the history of all the exchanges made between its users since its creation. Concretely, the blockchain serves for transfer of assets (cryptocurrency, stocks, shares, etc.), traceability (goods, products), alautomatic execution of contracts (They smart contracts). However, to truly understand the concept of blockchain, it’s important to understand what it can’t do…
An example of last mile problem
To understand this concept of last mile problemwe can take the example mentioned in this article fromHarvard Business Review. Imagine that a hospital ward decides to develop a system to track babies so as not to confuse them at birth. All parents fear that their newborn will be mistaken for another during transfer to incubators. Though anecdotal and often never discovered, cases are revealed every year. Hence, tracking the newborns within the hospital tied to the blockchain which keeps all the data in an immutable and instantly verifiable way appears to be a win-win solution. However, this solution has a major problem: the link between a blockchain entry (data) and an actual child. How do you know which digital data is linked to which child? To do this, each child must be assigned a physical identifier linked to the blockchain (a sort of physical tag), or in a more futuristic world, a small chip linked to the digital record. This is exactly where the blockchain often fails! This limit has a name: the last mile problem “.
the last mile problem : the main limit of the blockchain
the last mile problem it is a fundamental blockchain challenge. Indeed, it is above all this limit that explains why the blockchain is not (yet) used massively by companies. To fully understand this concept, we must first remember that all blockchain use cases refer to two types of assets:
- Digital assets (such as cryptocurrencies and smart contracts)
- Physical assets (such as gold, food, real estate, a physical event, or children in our example above).
the last mile problem it concerns only material goods. It refers to bridge between a physical asset and its digital translation on the chain. The blockchain cannot automatically link the data it stores to the individual or physical object to which the data relates. She therefore needs a trusted third party to “explain” to her what or who the data refers to when entering it. This trusted third party guarantees the “Last mile connection”. It can be company personnel, a third party company, an electronic label, an electronic plant… Therefore, the blockchain is in dire need of a trusted third party to establish the link between the physical assets and the digital data. It is rather paradoxical for this disintermediation solution!
The last mile problem in the example of our children
In our example, the blockchain would have to rely on humans to correctly and honestly implement the match between the child and the digital record. And if humans mess with or manipulate the data as they enter it, the integrity and immutability of the blockchain becomes useless. The data entered was false and the blockchain stores and retrieves this false data as true. Child X of pair X will be confused with child Y of pair Y, if initially there is a reversal in the input of child X and Y. Blockchain solution cannot solve this problem…
Conclusions of the Capgemeni Research Institute study
An excellent 2018 study by Capgemini addressed this issue. It is entitled “Is Blockchain the Key to a New Era of Transparency and Trust in the Supply Chain? How Organizations Moved from Blockchain Hype to Reality ». Which means “Blockchain is the key to a new era of transparency and trust for the supply chain ? How companies are adopting the blockchain, from hype to reality”. This study finds that even as more and more companies are designing blockchain solutions:
- They find it difficult to develop them on a large scale (we are closer to prototype or Proof-of-Concept);
- They struggle to get a return on investment (ROI).
Within this study, Capgemini specifically recommends that companies establish strict security controls before developing a young large-scale blockchain project. A company usually creates a blockchain solution because it wants to have its data immutable. But, before achieving this immutability, he must make sure that the data entered actually corresponds to reality. Should focus on last mile link (last mile connection) between a real event and the digital recording of that event. If these data entry points are altered, the blockchain loses all value.
Two adages to understand forever the “Last mile problem”
Orators, politicians, great professors, writers, philosophers are unanimous: a short incisive sentence can have more effects (of persuasion and memorization) than a long monologue. In the case of the blockchain and the ” last mile problem », two adages deserve to be remembered:
- “The quality of the output is determined by the quality of the input”. In other words, capturing the right data is the challenge for organizations developing a blockchain solution.
- “A chain is only as strong as its weakest link”. That is to say, the security, efficiency, utility and scalability of a blockchain project is at the level of its greatest weakness within its chain, generally its last link (the last mile connection), the link that connects digital data to their real meaning.
The other limit of the blockchain: the verification of users’ honesty and humanity
Another limitation of the blockchain is worth mentioning. It is about verifying the honesty and humanity of buyers. It is less frequent and less known than last mile problem.
Let’s use an example again to address this limitation. In marketing, an advertiser pays a website based on the number of views. However, the advertiser does not know whether the person who saw his ad is actually a potential customer. For example, the advertiser might think he paid the website to show his ad to a wealthy individual in his 40s looking for a Lamborghini. However, the ad might have been shown to a broke student, who likes to admire nice cars. Even worse, the ad could be seen by a robot! Blockchain technology can then determine which digital identifiers are associated with viewing an advertisement. However, it cannot be used to verify the humanity or honesty of a buyer’s intentions. Verifying who is actually behind your digital ID requires offline verification. Verifying the honesty of apparent purchase intentions is perhaps beyond any technology we have today.
Within this article, we have discussed the limitations of the blockchain; its scope of use. These limitations are the difficulty in connecting the blockchain and the real world (the last mile problem), as well as the lack of insight into the honesty and humanity of the users behind the data. Another interesting and similar topic could be the problem of the blockchain. For example, we can mention the environmental cost (although some blockchains are very energy efficient or run on renewable energy), legal vagueness and lack of regulation, problems of slowness, congestion or failures on some blockchains, integration with existing systems.
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Passionate student of entrepreneurship and fascinated by the technologies behind cryptocurrencies! Yes, I am convinced that the two are intimately linked: blockchain and NFT are revolutionizing many industries and present unprecedented opportunities.