Is blockchain a dangerous nonsense? An analysis by Nicolas Lenz

For Nicolas Lenz, a computer science student in Germany, blockchain solves nothing. In a blog post, Nicolas Lenz indicates that blockchain as a technology is already deeply flawed in its basic concept.

Blockchain technology promises to eliminate trust in central institutions. Initially, this would have applied to a currency: bitcoin (defined by Lenz as a speculative commodity, not a currency). Instead of having centralized banks manage account numbers, bitcoin uses a decentralized ledger, the blockchain, for this purpose.

For Lenz, the idea of ​​untrusting centralized organizations may sound appealing, but it doesn’t work: Blockchains don’t remove trust, they just change who to trust. Don’t believe the hype, says tech entrepreneur Ewan Kirk.

What tech entrepreneur Ewan Kirk thinks:

The bitcoin blockchain handles just under three transactions per second, which requires incredible amounts of electricity to operate. Some argue that blockchain is increasingly using electricity from renewable sources, but that’s a red herring. If bitcoin uses this renewable energy, then someone else has to use coal and gas to power their house.

All blockchains are far more inefficient than any alternative. For example, Ethereum uses the same amount of energy as the Netherlands. Bitcoin produces nothing. It only destroys the environment.

According to Lenz, trust in institutions controlled by humans and bound by established laws and rules is replaced in the blockchain by an unconditional trust in the infallibility of the code (in code we trust is a popular phrase in the industry). Since the code is written by humans, it is rarely infallible.

Remember that the Dutch tax authorities have ruined thousands of lives after using an algorithm to identify suspicions of social security fraud. For some analysts, the Dutch scandal is a warning for Europe about the risks linked to the use of algorithms.

For Lenz, even if all the code was error-free, blockchains cannot do anything against threats such as scams, frauds, hacking of devices containing blockchain keys or simply typing errors in a parts transfer.

Normally, cases of fraud or error can be rectified or reversed by the bank or similar institutions after a human review of the situation. However, in the blockchain world, there is no human oversight authority. It is independent of banks, states and laws, which is precisely the main selling point of all this technology.

The technology presents yet other problems. The absolutely perverse use of energy in times of climate change is just one of them (this is mainly due to proof of work, still used by all relevant public blockchains, and general inefficiency) , says Lenz.

Blockchain as universal miracle remedy

The main purpose of blockchain is to decentralize trust and consent. That doesn’t stop many people from touting blockchain as an innovative silver bullet for problems where it’s just plain nonsense.

A recent example of this madness, in Germany, is the development of the digital vaccination certificate in early 2021. Initially, it was planned to use blockchain technology. In this case, they wanted to use not one, but five. After massive public criticism, the plan was scrapped and replaced with a simpler non-blockchain architecture, which is still in use today.

Another even more recent example which, unfortunately, has not yet been canceled is the digital ballot in North Rhine-Westphalia. For Lenz, the concept is already completely absurd. The problem in question has been solved for decades and no one needs a complex, inefficient and expensive blockchain for this. Very soon after going public, the project was exposed as completely insecure, despite blockchain security.

For Lenz, these are just two of countless projects in which blockchain technology has been incorporated without any regard for common sense. Neither I nor anyone I know has ever heard of any use of blockchain being useful in any way.

The virulent spread of blockchain technology

But why is blockchain spreading at such breakneck speed if it is so useless? To understand why, Lenz suggests taking a look at the original and still dominant use of the technology: cryptocurrencies and their more recent derivatives, such as NFTs, DAOs and web3.

According to Kirk, the hype around Web3 is just another reminder of the tech industry’s short-term memory. For someone who has been mining bitcoin since 2012, it’s clear that Web3 is just a new version of the blockchain technology we’ve been discussing for ten years,” he said. Web3 followers want to add a layer of blockchain to our internet infrastructure and radically decentralize the network, or so they claim.

These things are useless nonsense that exist to extract mass money from people who don’t know any better. Nevertheless, a massive industry has grown up around them. This industry burns incredible amounts of energy, money and human labor time without contributing or producing anything of value to humanity,” Lenz said.

From this industry stem increasingly frequent attempts to export its core technology, blockchain, to other areas of life. Blockchain is being pushed everywhere in society. This forced release is supposed to give the blockchain industry a reason to exist outside of being a financial bubble, give it a shimmer of respectability and trustworthiness, and thus attract more people to the cryptocurrency market.

This market urgently needs these people and their money. This is a fairly obvious and huge speculative bubble. There is absolutely no real value in the whole market and it produces no value by itself. To prevent the bubble from bursting, or at least to slow it down, and not to let profits dry up, real money and real economy must be injected into the cryptocurrency market. This money must be found elsewhere. Not in the blockchain world, in the real world. And this is how blockchain is presented everywhere as “modern”, “disruptive”, “innovative”, “secure”, etc. In reality, she’s none of that, argues Lenz.

Blinded by the glare of crypto bubble revenue standards, many companies and government organizations are looking over the top. Everyone wants a slice of the blockchain cake and tries to cram a bit of blockchain into something, anything. Fueled originally by the blockchain industry lobby and backed by the brilliance of its incredible profits, a huge hype has formed. It has long since taken on a life of its own, it’s no longer just the blockchain industry touting this technology everywhere.

Lenz concludes by saying: The spread of blockchain technology is not only maddening nonsense, it is actively harmful and dangerous. For these reasons, we need to work against the hype by publicly exposing the absurdity of the technology and how the blockchain industry promotes it in order to increase its profits. For the future of technology, computing and to protect people from the predatory crypto market.

Source: Nicolas Lenz’s blog

And you?

What is your opinion on the subject?

See as well :

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Can Web3 change the world? It’s not just a new joke, says tech entrepreneur Ewan Kirk, don’t believe the hype

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The Dutch scandal is a warning for Europe on the risks linked to the use of algorithms, the tax administration has ruined thousands of lives with an algorithm

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