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 industries, far beyond the cryptocurrency universe. However, to fully understand a technology, it is also necessary to know its limits, boundaries, what it cannot 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. Therefore, 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 blockchain) is a technology that allows this shop and of transmit information in a sense transparent, safe (using cryptographic processes that prevent them from being modified afterwards), disintermediate And decentralized (it is not hosted by a single server). We can relate the blockchain with a gigantic database containing the history of all the exchanges made between its users since its creation. Concretely, the blockchain is used for transfer of assets (cryptocurrencies, stocks, shares, etc.), traceability (activities, products), alautomatic execution of contracts (They smart contracts). However, to truly understand the concept of blockchain, it is important to understand what it cannot do …
An example of last mile problem
To understand this concept of last mile problemwe can take the example cited in this article from theHarvard Business Review. Imagine a hospital ward decides to develop a system to track babies so they don’t get confused at birth. All parents fear that their newborn will be swapped for another during the transfer to the incubators. Although anecdotal and often never discovered, the cases are revealed every year. Therefore, tracing the children inside the hospital linked to the blockchain that keeps all the data in an immutable and immediately verifiable way seems to be an advantageous solution. However, this solution presents a major problem: the link between a blockchain entry (data) and a real 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 kind of physical tag), or in a more futuristic world, a small chip linked to the digital record. This is where blockchain often fails! This limit has a name: the last mile problem “.
the last mile problem : the main limitation of the blockchain
the last mile problem is a fundamental blockchain challenge. In fact, it is mainly this limitation that explains why blockchain is not (yet) used massively by companies. To fully understand this concept, it must first be remembered that all the use cases of the blockchain refer to two types of assets:
- Digital assets (such as cryptocurrencies and smart contracts)
- Physical resources (such as gold, food, real estate, a physical event, or children in our previous example).
the last mile problem it concerns only material goods. Refers to the 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. It therefore needs a trusted third party to “explain” to what or to whom the data refers at the time of data entry. This trusted third party guarantees the “Last Mile Link”. 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 create the link between physical assets and digital data. It is quite paradoxical for this disintermediation solution!
The last mile problem in our children’s example
In our example, the blockchain would have to rely on humans to properly and honestly implement the pairing between the child and the digital record. And if humans mess up or manipulate data as they enter it, the integrity and immutability of the blockchain becomes useless. The data entered was false and the blockchain stores and recovers this false data as true. Child X of pair X will be confused with child Y of pair Y, if there was initially a reversal in the entrance of child X and Y. The blockchain solution cannot solve this problem …
Conclusions of the study by the Capgemeni Research Institute
An excellent 2018 study from Capgemini addressed this issue. Is titled “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 “The 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 notes that even as more and more companies are designing blockchain solutions:
- They have difficulty developing them on a large scale (we are closer to the prototype or the Proof-of-Concept);
- They strive for a return on investment (ROI).
Within this study, Capgemini specifically recommends that companies establish strong security controls before developing a young, large-scale blockchain project. A company usually creates a blockchain solution because it wants to have the immutability of its data. But, before reaching this immutability, he must make sure that the data entered actually correspond to reality. It should focus on connecting the last mile (last mile of 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”
Speakers, politicians, great professors, writers, philosophers are unanimous: a short incisive sentence can have more effects (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, acquiring 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, usefulness and scalability of a blockchain project is at the level of its greatest weakness within its chain, generally its last link (the last mile of connection), the link that connects digital data to their real meaning.
The other limitation of the blockchain: the verification of the honesty and humanity of the users
Another limitation of the blockchain is worth mentioning. It is about verifying the honesty and humanity of the buyers. It is less frequent and less known than the 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 doesn’t know if the person who saw your ad is actually a potential customer. For example, the advertiser might think they paid the website for showing their ad to a wealthy person in their forties looking for a Lamborghini. However, the ad may have been shown to a broke student who likes to admire beautiful cars. Even worse, the ad could be seen by a robot! Blockchain technology can therefore determine which digital identifiers are associated with the display of an advertisement. However, it cannot be used to verify the humanity or honesty of a buyer’s intentions. Verifying who is actually behind the 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 discernment of the honesty and humanity of the users behind the data. Another interesting and similar topic could be that related to the blockchain. For example, we can mention the environmental cost (even if some blockchains are very energy efficient or run on renewable energy), the legal vagueness and lack of regulation, the problems of slowness, congestion or failure on some blockchains, problems integration with existing systems.
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Entrepreneurship enthusiast student fascinated by the technologies behind cryptocurrencies! Yes, I am convinced that the two are intimately linked: blockchain and NFT are revolutionizing many sectors and present unprecedented opportunities.