
Ask HN: What problems does blockchain solve? - bvod
People seem to be raving about blockchain technologies and new startups are popping up to apply it to new industries every week. How does blockchain actually help a sector like healthcare, finance, retail, etc? Are there examples of where having a decentralized data store solved major pain points?
======
austenallred
The blockchain keeps track of who owns what, even as those things change
hands, without requiring some central body to keep track of it all. The
easiest way to think of it is an instant, incorruptible market that somehow
magically just works.

To know why that matters you have to understand the problem(s) it's solving -
it's something people have been working on since the beginning of money, but
there are so many edge cases we usually ended up just going back to a
centralized authority. In the past you've needed something like a bank or a
government or a company to have the authority to declare, with authority,
"Person x owns the title to that house."

There are a few problems with that: They could do things to screw everything
up (a government printing currency and causing inflation), be corrupt
(countless examples), or perhaps not even exist because it's too much effort
to create, set up, and monitor some body.

With the blockchain, the software everyone runs keeps track for everyone else
in an incorruptible way (yes this is a simplification), so you're free to make
changes (or transact) without having someone in the middle to wait for, and
with no one that can really screw things up. Just boom, instant marketplace.

The most obvious thing you'd trade on a blockchain is some kind of asset - a
cryptocurrency is the main example, or titles or stocks or something valuable.

Say, for example, I have some loans that people owe me on. I can throw those
loans on the blockchain, and without a clearing house somebody else can buy
them, and when the loan payment comes due you can easily see who owns the
right to be paid.

It seems trivial, but allowing people to seamlessly make transactions of any
kind without the overhead of a bank or clearing house is a _big_ deal, and has
a ton of applications.

~~~
nikkwong
Care to enlighten me on how you place a 'loan' on the blockchain? Isn't a loan
issued from a bank -> borrower? My assumption in this case would be that the
ETH contract would be written to change the legal owner of the loan? How is
that then reflected in the real world?

~~~
bostik
Quoting myself from
[https://news.ycombinator.com/item?id=14775416](https://news.ycombinator.com/item?id=14775416)
:

 _Cutting through all the [templated] legalese, we can say: "Contract A,
between parties K and L, concerning transaction T: T shall be considered done
and legally binding once Coloured Coin X has been paid from address [foo] to
address [bar], and has been verified by no less than 20 subsequent blocks."_

The idea of a Coloured Coins is that you use something uniquely identifiable
to make a transaction in globally verifiable transaction log. (Iow:
blockchain.) Real-world contracts can reference the binary result of "has this
transaction happened?" to verify that a contract has been completed and an
off-blockchain transaction is valid.

------
colept
The blockchain really only solves one problem:

How to trust a single entity by using a magnitude of peers to establish an
agreement. In the case of Bitcoin it's a monetary transaction.

One example would be file digesting. When you consider malware: if files were
signed and digested on ablockchain we would have better oversight of the
authenticity of a download. A file could be confirmed against the blockchain
to detect if it matches the certification. Since the source alone cannot be
trusted, the confirmation of many adds that layer of trust.

Anything beyond the issue of trust is not suitable for a blockchain as there
are more efficient technologies.

~~~
mpfundstein
i smell an ICO

------
davidgerard
PREDICTION: all examples in this thread will be hypothetical. If a real-world
example is linked, it will be a pilot programme, probably one IBM is writing
press releases about.

I have a book coming out next week (!) on the subject.
[https://davidgerard.co.uk/blockchain/](https://davidgerard.co.uk/blockchain/)
I have a whole chapter on business blockchains, and I looked _hard_ for a
real-world example of one in use. There actually aren't any.

The closest we have is .. git! Transaction ledgers, each with a tamper-evident
hash, in trees and chains of hashes. Devs routinely throw entire ledgers/repos
around, identified by hash. It definitely counts as a "distributed ledger
technology", and it's hugely successful. The only thing it doesn't have is a
consensus mechanism - it's "here is my tree" or "here is this repo, this is
the hash".

As we're seeing here today, _most_ claims for business blockchain are
literally the airiest hypotheticals regarding Bitcoin, with the buzzword
changed.

The usual concrete posited use cases are interoperability (that it will
magically clean up your data and formats) and that it will magically resolve
real-world human-level disputation. Neither of these is likely to work out
that way.

~~~
haspok
Not entirely hypothetical example (although still "beta"):
[http://www.coindesk.com/asx-completes-first-distributed-
ledg...](http://www.coindesk.com/asx-completes-first-distributed-ledger-
prototype/)

"The decision of whether to use the technology as an commercial-grade
replacement [of ASX's existing settlement system] will be made in fiscal year
2018."

~~~
davidgerard
yeah, I actually cover that one in passing. Digital Asset Holdings (Blythe
Masters/Hyperledger) sold the previous CEO a pile of blockchain bafflegab that
wasn't realisable with any extant blockchain (and certainly not Hyperledger).
Said previous CEO had to resign after a bribery allegation, and the new guy
isn't very keen on the plan. The main thing driving it is that their old
system is creaky as hell.

The thing is, though, that blockchains promise replacement by magic, and
there's no magic there - it's just as much work as any major system
replacement. Also, other stakeholders are already unhappy this doesn't
interface a lot like the old system did.

If this pilot works out at all, I suspect the first thing they'll do is rip
out the blockchain and replace it with a conventional centralised database.
Because this is for dealing with the ASX, and centralisation is obviously the
correct thing and "permissioned blockchain" is another word for "the world's
most inefficient centrally-administered clustered database".

------
retube
None of the responses in this thread so far give a specific real-world example
of _how_ blockchains solve a problem. Just repeating the mantra that a
decentralised ledger is great for payments or trade settlements or whatever.
Yes but how?

The only use case I know, beyond proof of ownership of coins/tokens (and,
again, how can that be applied to a real world problem), is proof of document
state at a certain point in time (via storing document hashes in the
blockchain) which clearly has some uses in law for example, but apart from
that I am stumped.

~~~
thisisit
The additional problem is everyone forgets a real world problem called
"negotiations". If one were to accept the fact that loans or bonds can be put
on blockchain for clear ownership, what happens in case there is a need for
haircuts or re-negotiating the loan/bond? In a real world, I can talk to a
person at the bank and re-negotiate the terms but given the nature of
blockchain transactions, how will that work?

Edit: Not to mention, immutability means human errors cannot be recovered from
- a wrongly worded contract cannot be restored.

~~~
flukus
> Edit: Not to mention, immutability means human errors cannot be recovered
> from - a wrongly worded contract cannot be restored.

I can't speak for the blockchain stuff but typically in financial software
data is treated as immutable as well and errors are accommodated for by adding
an additional correction record. I assume blockchain would enforce this
practice, but then again, I don't know how it would distribute the amended
contract.

~~~
thisisit
Doesn't it depend on the data? Sure, the actual money transaction cannot be
changed. Only journal entries can be passed to correct the amount.

But can't things like name of the person taking the loan can be changed?
Obviously there is still a journaling entry recorded to track who and what
changes were done. This is specially important because wrong names can and do
affect credit ratings etc.

~~~
flukus
That will depend heavily on the particular domain for what can and can't
change. Changing names might be fine in some areas of finance but not others.
I know in some medical stuff you can't change names, even when a person gets
married and changes their name. When you view an old script for instance, it
has to display their name as it was (and as it was printed) at the time the
script was created.

Nailing down this stuff is where you really appreciate a good architect.

------
tbking
There's room for blockchain in every place where: 1\. there's a central
authority involved 2\. the central authority is prone to error, bias and
hostility

️=> Most used application is money-based transactions. Banks are central
authority and are affiliated with governments, which makes them charge of your
money. Use blockchain (Bitcoin).

=> Supply chains are inefficient due to checks and sign offs by so many
people. Use blockchain (Hyperledger)

️=> People don't agree on terms, and they end up in a feud or a lawsuit which
is costly. Use blockchain (Ethereum)

Blockchain, and decentralization on whole is seen to be as future. Many want
to tap it before others. Of course, large number of startups will fail, but it
doesn't say anything about the potential this technology holds.

~~~
zv
Let's take first example. As a bank - why it is in your interest to release
that authority to blockchain when you are authority and existing
infrastructure exists?

~~~
steven_braham
Even banks can be victims of inefficacy or corruption due to too many middle
men. Furthermore, they can also have disputes about ownership of loans,
property or money. In my country, there is a bank that is actively embracing
and supporting blockchain: [https://www.abnamro.com/en/about-
abnamro/innovation/blockcha...](https://www.abnamro.com/en/about-
abnamro/innovation/blockchain/index.html)

------
eksemplar
I heard Maersk were using it for container shipping forms.

Because a shipping form gives you global ownership of a container and because
corruption, the security required to handle shipping forms pre block chains
meant it was more expensive to ship the form than the container, and still it
wasn't completely secure.

The block chain shipping form solved this issue completely because you can
never fake forms or hide when ownership of a container changes hands.

You could frankly do something similar for public records of landownership,
which might not be important in the west where corruption is low, but could
revolutionize the third world.

~~~
zhte415
Yes, you heard.

This is in early days in Maersk, who are an early adopter in shipping. Most in
shipping have never heard of blockchains, and international standards like
ICP600 have yet to mention it, banking trade departments not touching it yet
(for things like LCs); Maersk are using internally and on small scale.

Very early ground. But a good starting point. Blockchains for shipping are
pre-beta, but that doesn't mean testing isn't happing, yes.

------
haspok
Try this for a start: [https://hackernoon.com/why-everyone-missed-the-most-
importan...](https://hackernoon.com/why-everyone-missed-the-most-important-
invention-in-the-last-500-years-c90b0151c169)

Actually, this is better:
[http://iang.org/papers/triple_entry.html](http://iang.org/papers/triple_entry.html)

My attempt at trying to explain it in one sentence: blockchain provides the
technology to connect the double entry ledgers of two (or more) parties by
recording the transactions between them, in a way that makes it possible to
_prove_ the existence and validity of the transaction independently, without
relying on either party's ledger.

------
nikanj
Right now, it seems like the number one problem solved with blockchain is "how
do we convince investors our startup is an unicorn in the making".

It's like XML in the 90s or Web 2.0 in the 00s. Gotta use the technology to
get the funding, regardless of actual suitability to task.

------
dragontamer
For the industry, I don't think they actually want a decentralized data
store... nor do they want anonymity, or any of the stuff typically talked
about in BTC or cryptocurrency circles.

I think for most businesses, the real applicable portion of the blockchain was
cryptographic signatures to solidify public ledger. That's about it. Kind of
simple, but I think that's what people are paying attention to.

In effect, its less about the technology that BTC and/or cryptominers care
about... and more about the boring part that seems to get people excited.

A lot of "blockchain" companies seem to be enabling peer-to-peer transactions
for example. By centralizing all transactions to a particular server. There's
this one company (I forget the name) which claims to be using Blockchain for
exchanging Solar-credits between neighbors.

Having a ledger that is cryptographically reliable, even if centralized, is
the main benefit. Also, one that can be fully automated is a big deal. I mean,
that's all Visa or Mastercard really are: systems that describe when and where
transactions have occurred around a centralized source of trust.

\---------

EDIT: And yes, I know what a blockchain is in BTC circles. But I don't think a
"Bitcoin Blockchain" is what people are talking about on typical marketing
material. Just like "the cloud" has evolved to mean something new...
"blockchain" seems to have been picked up by managers and/or venture
capitalists to mean something totally different.

~~~
Animats
The business case for a blockchain is when the alternative is creating some
neutral organization to act as an intermediary. Depository Trust Corporation,
Mortgage Electronic Registration Systems, Inc., and the Internet Corporation
for Assigned Names and Numbers are examples of such intermediaries. Such
organizations tend to become centers of power in their own right, and start
acting like they own the thing for which they keep records.

~~~
dragontamer
And so... how does blockchain make money?

Because you just described how a bunch of businesses can make money in a way
"Blockchain" cannot. From a financial feasibility perspective, it only
demonstrates that a decentralized store of information is going to be innately
unprofitable.

~~~
ebcode
Isn't that the whole point of the Bitcoins themselves? Without that incentive,
storing the public, distributed ledger would be a thankless, expensive task.
By incorporating the Bitcoin "reward", the miners are incented to maintain the
ledger. It certainly appears to be working, looking at the current value of
Bitcoin.

------
ebcode
If you forget about blockchain for a moment, and just focus on your last
question, then you can see that the internet itself is a type of
"decentralized data store", which solves one major pain point of humanity,
namely, access to information.

If you're old enough to remember the days before the internet, access to
information beyond what your parents and peers could tell you was found in the
public library. Books. I have always loved books for this very reason. They
give me access to information beyond what my immediate community can (or will,
when you think about it) tell me.

Of course, the problem with the internet (in its present form) is that the
information is so unreliable. There are just too many conflicting interests.
With the library, you at least have the librarian, who, being a sort-of
gatekeeper, makes sure that the library contains only "good" books.

So, blockchain. What problem does it solve? It's a really good question. The
blockchain is a distributed ledger, that is, basically, a key-value store. The
keys are the bitcoin addresses, and the values are the bitcoins themselves.
What is unique about it, and what makes it such an interesting program, is
that the record of transactions is constantly being updated, because there is
a bitcoin "reward" for running the program. So, even if everyone stopped
trading bitcoins tomorrow, if they were just like, "nah, we're over it", the
bitcoin network itself would still generate some new bitcoins, and the ledger
would be updated. It's really a fantastic invention, when you think about it.

The value of a blockchain is that it adds a type of "reliability" on top of
the internet. Because the ledger is public, anyone can inspect it. Because the
network is distributed, all the miners running the program are, for want of a
better phrase, "keeping eachother honest". When you look at a regular website
(or book, or movie), it can be hard to tell if the information you're seeing
is legitimate/honest. Whereas when you look at the record of the Bitcoin
blockchain (for example), you can be _fairly_ confident that those keys
(addresses) were assigned those values (bitcoins) at that time.

To sum up, the problem that a blockchain solves is storing a _reliable_ record
of transactions, by harnessing the inherent self-interest of people to "make
money" (ha ha).

------
Hamcha
If you can't find investors it's a nice buzzword

------
bmcusick
The blockchain is an accounting ledger that no one has global write-access to,
so you don't have to worry about your bank/broker being hacked, going out of
business, or freezing your accounts.

It solves the problem of financial intermediation. The whole financial world
has been built on financial intermediaries (banks and stock exchanges) to
verify that you actually own things. Now you can point to a public record (the
blockchain) for that, and no one can take it away from you (without your
private key).

------
ruairidhwm
It'd be handy for tracking baggage in the travel industry. Your bags are
handled by numerous different companies/parties at different points and
through a ton of locations.

Blockchain would be excellent for verifying that a bag has been received and
processed at a certain place.

Lots of the large GDSs such as Sabre/Amadeus/Travelport are actively looking
into this.

~~~
retube
why would blockchain be excellent for that? why not just a regular db?

~~~
ruairidhwm
Good question. I'm not an expert by any means, but would expect that the
immutability of the record prevents a party passing the buck on who is
responsible for the loss of luggage.

But I suppose a DB could do that too. Maybe it's all hype ^^

------
itamarst
Capital flight from China:
[https://www.ft.com/content/bad16a88-d6fd-11e6-944b-e7eb37a6a...](https://www.ft.com/content/bad16a88-d6fd-11e6-944b-e7eb37a6aa8e?mhq5j=e1)

------
Abimelex
Best source for me understanding block chain at least a bit was here:
[http://johnmathews.eu/blockchain-
introduction.html](http://johnmathews.eu/blockchain-introduction.html)

------
mshanu
In a nutshell I feel, blockchain can be used in places where you need robust
place to store immutable events. In real world, I can give examples of, birth,
death, transferring money, casting vote, owning an asset etc

------
0x4f3759df
If there's a transactions that go through multiple companies (A->B->C->D->E)
then you'll have 5 databases with data replication or you could have 1 shared
database on the blockchain.

------
shpongled
One of the main benefits is that data (financial transactions, healthcare
records, etc) stored on the blockchain is immutable, decentralized, trustless,
and cryptographically signed

~~~
omarchowdhury
[http://www.dictionary.com/browse/trustless](http://www.dictionary.com/browse/trustless)

How is the average person going to respond when they hear a new form of money
is "trustless"? (I know what it really means in this context, but think about
slope of adoption).

~~~
subway
They'll probably respond in the same way they respond to hearing about TCP
handshakes. They won't. The implementation details are unimportant to the end
user.

Just like today you probably don't ask your doctor the details about how they
securely store your health records, nor do you talk to your bank about how
they clear transactions.

~~~
omarchowdhury
You don't need to know about TCP handshakes to use the Internet. You do need
to be sold on the benefits of cryptocurrencies to start using one (other than
that the price for them is going up).

~~~
subway
This thread is about _blockchains_ not crypto-currencies. The fact the two are
conflated as frequently as they are is quite unfortunate.

A great use case is in EHR. Your doctor, your insurance company, and all their
BAAs participate in private block chain that controls access to your records.
Any time a record is accessed, the chain is updated.

~~~
dragonwriter
That's actually a horrible use case, becayse, while it is essential that
covered entities track and be accountable for access to a record, the details
of that access itself leak information to which access should be minimized,
but instead it unnecessarily leaks across organizational boundaries to people
who have no legitimate need for it.

~~~
subway
Not all parties have the access to the plaintext of all messages on the chain.
An example of such a permissioned blockchain is JP Morgan's Quorum.

Nodes can participate in establishing consensus without having the ability to
decrypt the record.

------
Temasik
Nothing blockchain is a fail concept and it can't scale plus the expensive
fees

~~~
sebst
Storing immutable data without the need of a notary costs money, true.
Blockchain is the first concept to bring a decentralized trustless database to
the table. Imho it's a bad thing that Bitcoin as a monetary ledger was its
first application, but however: A few days ago, someone here came up with an
easy to understand implementation of a blockchain-free idea of such a
decentralized ledger:
[https://news.ycombinator.com/item?id=14730354](https://news.ycombinator.com/item?id=14730354)

So, we will see many concepts around trustless transaction verification in
future, in the same way Napster has not been the final solution for P2P data
share, but eventually led to BitTorrent.

------
contingencies
First employee and architect of a major cryptocurrency exchange here.
(Disclaimer: I am not a mathematician.)

IMHO the term "blockchain", in current and common use, actually means Merkle
trees applied to time-series information that is shared between multiple
computers over the internet, hence 'distributed database'.

Merkle trees are basically a way of saying "this precise set of information
was used to generate this new precise set of information". Applied to
successive timestamped data in a blockchain, this means that participants
within a network can provide strong evidence for past state and state change -
ie. they establish relative trust in the fundamental integrity of a shared and
evolving database (the blockchain) based upon mutually agreed rules.

What is the real world advantage? Frankly, in most cases, there isn't one, but
there are definitely disadvantages. Distributed databases are not new, and
_any_ other way of executing them is demonstrably more efficient, simple, etc.

The main _potential_ advantage is to remove the ability of a central authority
(or small colluding group of bad actors) to "change the rules" by "rolling
back" the state of the system, halting the system, seizing control, removing
actors, etc.

This property is perhaps at its most potentially impressive when its
implications with respect to the conventional business environment, government
and politics are considered for large global industries with deep pockets.
Simply speaking, right now most regulations are issued in airy-fairy lawyer
speak and cost a lot of money to skew/change/interpret/argue/take to court.
This is the case for government regulation, case law and non-governmental
agreements (industry codes of conduct, informal protocols, MOUs, contracts,
SLAs, etc.).

The potential advantage of distributed systems with mutual trust (note that
blockchains are only one implementation of this concept) are that all of this
overhead can be removed, since an adequately cross-border (ie. cross-
jurisdiction, or government-independent) network of an adequate size will be
essentially immune from direct state actor intervention, and the rules for all
parties remain clear.

To summarize: save lawyer money, ignore regulators, save time/hassle, remove
any means of effective government intervention.

The reality, however, is that most industries are not able to agree on a clear
set of interactions and rules under which to formalize their activities, and
even if they could it would probably not be feasible to do so in all cases,
therefore this semi-utopian objective cannot be reached, and in my
professional opinion few corporate blockchain projects to date are delivering
anything more than an inefficient means of distributing simple time series
transaction data.

The big exception (ie. winning example for your last question) is Bitcoin,
IMHO because it was the first, and because it quickly enabled safer and more
cost effective means of recreational drug distribution, which essentially
provided the initial market which funded its growth (now tending to
speculation).

My prediction is that we will see a rise in smaller, private systems and asset
types providing transaction services with different properties to present era
cryptocurrencies and a smart layer will emerge to evaluate and utilize these
based upon their objective properties and per-transaction requirements / risk
models. Many of these systems will not be based on blockchain at all. Instead
of de-facto bank or card systems, we will have a broad range of settlement
mechanisms available. Instead of stock exchanges or large VCs, we will have a
broad range of funding sources available. Access to capital will improve,
business transparency will improve, government regulators and established
financial services monopolies will slowly be disempowered.

Further reading -
[https://en.wikipedia.org/wiki/Merkle_tree](https://en.wikipedia.org/wiki/Merkle_tree)
\+
[https://en.wikipedia.org/wiki/Blockchain](https://en.wikipedia.org/wiki/Blockchain)
\+
[https://en.wikipedia.org/wiki/Time_series](https://en.wikipedia.org/wiki/Time_series)
\+
[https://en.wikipedia.org/wiki/Distributed_database](https://en.wikipedia.org/wiki/Distributed_database)
\+
[https://en.wikipedia.org/wiki/Bitcoin_network](https://en.wikipedia.org/wiki/Bitcoin_network)
\+ [https://en.wikipedia.org/wiki/Money](https://en.wikipedia.org/wiki/Money)
\+
[https://en.wikipedia.org/wiki/Cryptographic_hash_function](https://en.wikipedia.org/wiki/Cryptographic_hash_function)

~~~
davidgerard
> IMHO the term "blockchain", in current and common use, actually means Merkle
> trees applied to time-series information that is shared between multiple
> computers over the internet, hence 'distributed database'.

As I note elsewhere in this thread, you literally get that with Git, which was
released in 2005 and based on previous work in DVCSes back to the late 1990s.
And Merkle trees were invented in 1979.

The new thing in blockchains is the consensus mechanism. The best-known
example uses as much electricity as Ireland.

One could _call_ Git a "blockchain", but it'd pretty clearly be trying to
synthesise a history for a neologism ...

I suspect "blockchain" products that survive will be tamper-evident
transaction ledgers, and I already had one dev admit to me that his company's
"distributed ledger technology" product was basically a simplified Git ...

~~~
contingencies
Good and valid point. To explore further, git has no _need_ to march forward
time for a given node, however, and presupposes human intelligence behind all
decisions. By contrast, to function at all Bitcoin absolutely requires new
blocks to be agreed upon automatically. I feel this is a key distinction.
Also, tamper-resistance is not black and white, and is effectively an emergent
property with scaling.

------
redy
It's a public database. That's it. Anybody can write to the database and
anybody can read from it.

The problem is that whenever you have a public _anything_ there will be spam.
People will come along and they will fill the space up with scam ads and porn
and hate speech. See: the internet.

To prevent the database from filling up with spam you need to find a way to
make people "pay" for writing to the blockchain. Nothing is free and if you're
going to consume resources (storage and cpu) from other's computers then they
ought to get something in return. That's what "transaction fees" are and
that's why they're measured in costs per byte -- the people who are writing to
this public, decentralized, highly resilient database are being charged
storage fees.

So blockchains are the solution to spam. And unlike pre-existing spam
solutions a blockchain doesn't require storage/delivery nodes to "whitelist"
certain certificates or for certificate authorities and CRLs and all that
wackiness. This is kinda remarkable.

This innovation enables all sorts of new models of collaboration (read:
business models). Just today I saw a very interesting proposal for an Uber-
like system built on a blockchain. Everything -- requests for transport,
driver availability, driver fees, driver certification, passenger and driver
ratings -- gets stored in the blockchain. Anybody can read, anybody can write.
Here's the database, here's the type of "transactions" (records) -- go crazy.
The interesting thing about this system is that it doesn't rely on huge
bureaucracy to protect the database. (And what are many business firms but
database maintainers and protectors?) Write whatever you want -- write pics of
your cats if you like -- but it's going to cost you.

(There's another element of what's commonly called blockchain which is "block
verification." The problem here is that when everybody has a copy of the
database how do you decide whose copy of the database is authoritative? This
is the concept of consensus and note that it's only a problem if the peers in
the database don't trust one another. It's actually not so interesting but it
is largely an implementation detail of public blockchains with different
strategies proof-of-work, proof-of-stake, electoral-validation etc.)

