Blockchains and Their Imitators: Efficiency or Hype?LEONARDO MARIA DE ROSSI AT BOCCONI'S DEVO LAB HAS STUDIED AND WRITTEN EXTENSIVELY ABOUT BLOCKCHAINS
“I know we do not need a blockchain, but let’s create a problem that can be solved with it”. The hype that surrounds the digital transaction ledger of Bitcoin is so strong that managers fabricate problems in order to use it. This is one of the stranger things that Leonardo Maria De Rossi has encountered in his three-year research on the topic. He is the coordinator of the blockchain observatory of DEVO, the research lab of SDA Bocconi School of Management that addresses the impact of digital transformation on enterprises.
DEVO Lab carries out continuous research on the most interesting areas of application of the blockchain. A part of its research activity is summarized in the book The Blockchain Journey. A Guide to Practical Business Applications (Egea) and in a number of papers. “Most blockchains are an imitation of Bitcoin or a failed attempt to compete with it”, De Rossi says. Blockchain basically replaces an intermediary – in the case of Bitcoin, the bank – by using a distributed network. This idea has been applied in many areas. Those networks are similar to those of the cryptocurrency, but they store data of different kinds. “They lack both the critical mass of active users – the so-called miners of Bitcoin – and a strong community. These are fatal shortcomings. Due to its characteristics, the more diffused a blockchain, the safer and valuable it is”. Not to mention the case of traditional players such as banks and insurance companies that have tried to imitate Bitcoin by creating a similar network, only centralized and closed.
“These are called permissioned blockchains. To use them, you need an authorization from a central authority. There is no real distribution and the information is simply replicated in many nodes, which is an inefficient redundancy”. So why do companies use the blockchain technology? According to De Rossi, there are two reasons: the media hype that surrounds it and need to digitize and make more efficient very complex processes, most of which, however, do not need the Bitcoin technology. So much so that, De Rossi says, “only 1, maybe 2, at most 3 out of the 2000 existing public blockchains will endure”.
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