Now that we’ve seen all these use cases, let’s go ahead and finish off with some generalizations.
These points can be used to understand and discuss any use case you come across or come up with.
These points describe the properties of a good blockchain use case, along with the scenarios in which a blockchain is not needed or inferior to a centralized solution.
To start off, let’s talk about the scenarios where a blockchain will work, but is not necessary.
We often hear the term “efficiency” in the context of blockchain use cases, but this isn’t often applicable.
For example, let’s take Bitcoin.
If I’m buying coffee, it’s less efficient to send Bitcoin and wait 10 minutes for a confirmation than to hand over a few dollars or use a credit card.
However, it is more efficient to send value overseas with Bitcoin, which takes a mere ten minutes in comparison to the days that banks take to coordinate… and the transaction fees they levy for international transfers of value.
Hence, efficiency depends on context.
The other bullet points listed below are properties of blockchain that are not exclusive to blockchain.
For example, just because you didn’t hear of fault tolerance, consensus, or public key cryptography before blockchain doesn’t mean that blockchain’s the only way to do it.
Each of these bullets can be achieved by using a subset of the technology that goes into making a blockchain.
While blockchains will work, they’re over-engineered solutions to these problems.
As mentioned in the smart energy grid example, blockchains allow us to solve coordination failures.
We are able to implement arbitrary incentive schemes, allowing us to create a system which incentivizes individuals to operate according to our expectations.
In addition, blockchain can be thought of as a “technological solution to a social problem.” Theoretically, every blockchain protocol could be run by a single node.
However, you’ll notice the issue that if only one person runs the protocol, then we lose out on the guarantees of auditability and decentralized control, properties that are meaningful only in a social setting.
When individuals don’t trust each other, then the blockchain allows them to coordinate between each other without relying on some trusted third party.
With this, smart contracts can be used to make commitments, to fund public infrastructure or do crowdfunding.
The miners will force the actors to honor their commitments, as was the original intention of smart contracts.
Instead of bringing in lawyers to settle matters when things don’t according to plan, we’re now able to rely on a smart contract to execute as intended, giving us the ability to believe in this code as law.