You've probably heard that blockchain technology is the next big thing, underpinning anything from age-old institutions like banking, to new and unproven technologies like the Internet of Things (IoT). But is it the right solution for you? I hope to debunk some myths here and explain the pertinent points about blockchain so that you're able to make that decision.

Also, as a deep enthusiast of the underlying framework of blockchain, I hope to serve up some alternatives that act in a similar way, but without the issues that blockchain faces over the coming years. I'm not going to delve into cryptocurrency other than using Bitcoin as a few examples.

So Dave, ELI5 please.

For those not conversant with tech talk, ELI5 means "Explain it like I'm five years old" and anybody in this industry will need to solve this common challenge across a range of different technologies. So Dave, ELI5 please.

Blockchain is a digital ledger of transactions, duplicated across a network. So you get $5 from me every Friday, $2 goes in your savings, you spend $3 on sweets, everything you spend or save gets noted down in your spends book and every time you spend, you give a copy of the amount you spend to your mum, to me, to your sister and your brother. That way, if you ever lose that book, it doesn't matter, we all have a copy and can see how much you spent and when, as well as what you've saved. No one person can lie and say you didn't save $2 this week because all the other copies say you did. That's called a consensus, where the majority agree or disagree that something happened.

That's blockchain in a simple and easy to understand way, it's used to gain consensus over transactions where there may be multiple untrusted parties entering the transactions

Now, a transaction could be a multitude of different things, as an example, a transaction could be the sale/purchase of a bitcoin, this is how we traditionally think of transactions. But it could also mean the execution of a process in a chain of processes i.e. like in a computer program or application.

One really interesting use case is in property conveyance. There are lots of different intermediaries all wanting to get involved and take a chunk of the sale price for doing so, none of these parties particularly trust the others, and so, you need to jump through numerous hoops just to get the property changing hands. Blockchain technology allows all of these steps to be completed automatically and cost-efficiently.

Now, before we can look at whether or not blockchain would be the solution you're looking for, we need to be very clear about the limitations of it.

Power and storage consumption. Power first, the computational power needed to deliver blockchain is massive. Various studies at the end of last year equated Bitcoin to using the power consumption of the whole of Ireland, and another calculated that one bitcoin transaction requires the power usage that it would take to power an average house for a week. This is not an insignificant matter, the world simply does not have enough natural resources to allow such usage in the long term. I'm not going to go into the consensus mechanism in any depth other than to say it's known as "proof of work". But it's proof of work that most blockchain cryptocurrencies are built on and it's proof of work that's driving the excessive consumption of energy. For it to evolve, blockchain needs to be built on more sustainable protocols. By a similar measure, as you've got a ledger of every single transaction multiplied en-masse across all network nodes, the need for adequate storage is growing exponentially and we need to look for ways in which the requirements are able to be reduced i.e. through de-duplication. Scaleability. I was reading a whitepaper maybe 5 or 6 months ago, which I can't find now, so apologies to the author that I can't give you credit, but she said that the 5G mobile network will do for internet connected devices what 4G did for connecting humans. It really resonated with me at the time as I was researching the potential impact of the Internet of Things on marketing, Things like smart refrigerators, cars, wearable devices or TVs. Here's where I see major issues with using blockchain to build the infrastructure of the IoT. The expected number of internet connected devices is expected to be 6 times the number of people online today. This kind of scale is unfeasible with the current iteration of blockchain. Transaction speeds and delays. This also feeds into the previous point. Currently, using a proof of work model, transaction speeds are, in my opinion, the main sticking point in the short-term. Bitcoin can roughly handle 3-4 transactions per second, Etherium around 7. This is great if that's all you need, however, what most people talk about when discussing blockchain is changing the world. To put this into some kind on context, the Visa network currently processes an average of 2,000 transactions per second with a peak capacity of 50,000. Different consensus models are going to need to be implemented to achieve the transaction numbers required. Think of the IoT, your gas supplier wants to talk to your gas meter to find out the consumption for your next bill, that's a transaction, your meter calculates the consumption, that's another transaction, it sends it back to the supplier, that's another transaction. Multiply this by all the connected devices across all the houses in your street and you're already talking about huge scale, multiply it by all the streets in your town, all the towns in your country and all the countries of the world and you'll understand that 7 transactions per second (604,800 per day) is absolutely not going to help to change the world. It may, however, help your company reduce your expenditure by 20%. A final edition to this is that using a traditional blockchain can take upto an hour for transaction confirmation, so for near real-time requirements, again, traditional blockchain is a no-go.

So we now know the three core issues with blockchain, we know what questions to ask:

Do we need to deliver at a scale that's unmanageable?

Do we need transactions to be near real-time?

Do we need to transact >10 per second?

If you answered yes to any of these questions, then right now, blockchain is not the answer.

There are, however, very similar answers to blockchain that use the underlying distributed ledger technology, and remove or mitigate the concerning aspects of it, so that you're able to gain consensus at scale.

The first on I have come across, and probably the most exciting, is Hashgraph. This consensus model builds on blockchain's gossip protocol (a node sees a new piece of information and tells everyone in the network) to offer a new protocol, gossip about gossip. With this protocol, a node sees a new piece of information and instead of telling all the other nodes, reduces that energy consumption to tell one, then another, then another, the gossip is then spread from the other nodes. It also tells them how it found the new information so that this can be held within the chain and as this data is passed between nodes, consensus can be mathematically proven automatically, thus reducing the time factor.

At this stage, this is only available for permission-based execution i.e. nodes within the same network that know each other (while not necessarily trusting each other), however, in the confines of its own network, it's capable of 250,000 transactions per second, far outperforming the Visa network.

Another one to watch is BigChainDB, with all the functionality of blockchain (immutable, decentralised assets) as well as distributed databases (high throughput and capacity, low latency and the ability to query) it's definitely one to watch.

Both of these options could replace blockchain right now, or blockchain could evolve into something new, but it's a very exciting technology to watch.

Feel free to leave any feedback, have I misinterpreted something that needs changing? Leave a comment and I'll fix it up with a reference back to you.