Blockchain is a promising technology but needs to be radically redesigned ‘from the bottom up’ before it is suitable for mainstream adoption, a new report has found.
The report, ‘Blockchain Challenges for Australia‘, was released by the Australian Computer Society this week.
It examines the technical, legal and educational hurdles the technology has to overcome before it is widely adopted.
A long way to go
“Blockchain has some way to go before it becomes a mainstream technology,” said Blockchain Challenges for Australia report author Dr Vincent Gramoli from the University of Sydney.
“We have to solve issues of scalability, security, regulation and employment.”
Gramoli is the creator of the Red Belly Blockchain, which allows for 600,000 transactions per second.
“We’re already seeing blockchains have scalability issues. For example, the Bitcoin blockchain hasn’t been fast enough to cope with the volume of transactions requested for some time, and it’s not designed to scale.
“And then there’s the fact that the competitive nature of mining has led to a massive amount of unproductive power usage – by some estimates as much as 61.4TWh per year, which is enough to power an entire country.”
Ridiculous power demands
The report notes that Bitcoin’s power requirements are greater than the entire state of New South Wales and a single block requires enough energy to power 29 households for a day.
It found that by January this year the Bitcoin blockchain exceeded 197GB, exceeding the storage capacity of most mobile devices which means not every device can fully participate in the blockchain.
Blockchain challenges – ditch “proof of work”
Gramoli says the scalability issues can be solved by “getting rid of proof of work” which Bitcoin, Ethereum and many other cryptocurrencies currently use.
“The scalability challenge will require a complete rethinking of the design of blockchain systems, where proof-of-work is not likely to have a place,” the report concludes.
But that’s not all – the report concludes that as the “slowness and energy-greediness” of exisiting blockchain systems are solved, other “overheads will become more apparent, in terms of storage space, program execution and communication bandwidth.”
That will require a “bottom-up redesign of the blockchain systems” to allow them to”scale worldwide while leveraging the resources of their participants”
Legal issues around blockchain
The report also examined unresolved legal and regulatory questions surrounding blockchain and smart contracts.
“Should holdings stored in encrypted blockchains be considered legal title?” Gramoli asked.
“Is a ‘smart contract’ a legally binding contract? Those are the kind of issues we really need to solve for blockchain to live up to its potential.”
The report calls for clearer regulation in Australia and notes that at present “the extent to which ‘code’ can be considered a legal agreement between parties remains unclear and untested in court.”
The report found there is a “shortage of supply” of experienced blockchain professionals which has led to some companies “resorting to non-accredited individuals to fulfill skill specific jobs”.
It calls for greater funding of blockchain research by academics to allow them to disseminate their knowledge throughout the industry.
Promising future – if we start now
ACS President Yohan Ramasundara said Australia was a “world leader” in blockcahin technology.
“We punch well above our weight in research and deployment,” he said.
“But to take that next step there are issues that need to be addressed. We need to figure out how we can integrate the technology into our legal, technical and educational systems – which is why we’ve put out this paper now. We also need to address the skills shortage.
“If we can do that, then blockchain remains a potentially revolutionary technology in which Australia can lead the world.”