People who talk about blockchain and bitcoin tend to be divided into two camps. Either […]
The downsides of Bitcoin according to Jacob Boersma
Crypto currencies resemble a bubble, but the blockchain remains, even if it is under the surface
People who talk about blockchain and bitcoin tend to be divided into two camps. Either they defend them as a radical game-changer or they feel they are a massive hype. Jacob Boersma, manager and blockchain expert at Deloitte, is a big fan of both concepts but he’s also willing to talk about the downsides. “Currently, cryptocurrencies are rather like a bubble.”
How do you feel about the Bitcoin?
“Bitcoins are an amazing innovation. As a concept, it looks in a fundamentally new way at how we pay online and that’s going to change many things. What makes it interesting is this: Bitcoins only actually solve the problem of double spending. At the moment, all kinds of intermediaries are involved: credit card companies, lawyers, banks … Bitcoin takes them out of the equation. The emergence of Bitcoin means that these organisations suddenly have to change their mindset; it forces them to think about what their customers really need. The main fear is that a blockchain start-up will soon offer such a good alternative that it suddenly becomes a threat.”
“However, corporates and start-ups still tend to think the other way round. They think: “We’ve got to do so something with blockchain” without first considering what they want. Many of them are just going along with the hype.”
Are you a fan of blockchain? Or you do see it mainly as a hype?
“I’m a huge fan of blockchain technology! But over the past year, I’ve found myself increasingly in the critical camp. You’ve got to be realistic about both the potential and the problems of blockchains. Take the limited speed for example, or the difficulty of guaranteeing privacy rules. User-friendliness is another thing that needs improving.”
“Traditionally, scalability was also a problem. This is becoming more and more the case for the Bitcoin, but the introduction of the Lightning network largely resolves this. Transactions can be completed thousands of times faster, which eases the network’s astronomical power consumption. And Ethereum, which is receiving a lot of attention from the business community, is also improving scalability.”
What obstacles do Bitcoin and other public blockchains still have to overcome?
“These are mainly related to politics. Not just the ‘world of politics’, but also internally within the cryptocurrency community. More and more altcoins are appearing, for example, all promising to do something better, more securely or more efficiently. Take Bitcoin Cash, a split-off from Bitcoin, which was created by developers who were dissatisfied with the direction in which the developments were heading. However, this creates confusion among potential new users.”
“All these altcoins are also very volatile. So much money is now being pumped into various coins that you’re getting a dotcom-like bubble. Supervisors and the government are now waking up to the bigger picture. More monitoring will be introduced to protect citizens, so that not everyone who randomly invests in new coins risks falling victim to fraud.”
Is this justified?
“Absolutely. We desperately need regulation. Not necessarily new rules, but better application of existing rules. In the past, we never thought that cryptocurrency would disrupt the economy, but look what’s happening now. We really need to protect investors, but also the companies using this technology. Since 2012, Dutch companies like Bitonic have been doing their best to prove to the government that they are bona fide service providers. For example demonstrating that their security and customer checks are in order.”
“Besides cryptocurrencies, ICOs (Initial Coin Offerings) are the most successful application of blockchains at the moment. They provide a low threshold way for everyone to collect money for a (blockchain) business. Useful, but also risky. Some companies raise a lot of investment funds, despite having nothing more than a good white paper and a nice website. Like other tech start-ups, many of these ICOs will not ultimately manage to build their product successfully.”
How do you see the future of blockchains and cryptocoins?
“There are currently many kinds of blockchain applications which are all good at something different. One is good for smart contracts, the other is more privacy friendly, a third is more efficient … With new technologies, it’s important to consider reach, so I don’t feel that it’s useful to have thousands of different blockchains. I feel that the blockchain has the potential to become a basic infrastructure, on which many other applications can be built.”
“The altcoins market shows signs of a bubble – it may burst or there’ll be a significant adjustment. It’s difficult to predict which start-ups will come out as the winners. However, the underlying technology will always be important, just like during the dotcom bubble. The value of companies collapsed, but the Internet is obviously still here. The same applies to the blockchain. That will remain, even if it’s under the surface.”