One of the reasons why many businesses in the financial sector will be swept away by blockchain technology in the coming years is that they really don’t get it. This became crystal clear to me when I read an article written by Richard Lumb, Accenture’s group chief executive for financial services, published in the New York Times no less, under the title: Downside of Bitcoin: A Ledger That Can’t Be Corrected.
Rather than analyze the whole misguided piece, I’ll focus on what hit me as the most alarming sentence:
“By clashing with new privacy laws like the ‘right to be forgotten’ and by making it nearly impossible to resolve human error and mischief efficiently, the blockchain’s immutability could end up being its own worst enemy.”
In case you don’t know, a blockchain is a permanent ledger. Transactions that are recorded on it are immutable. That’s the whole point. It was Fra Luca Bartolomeo de Pacioli who first proposed double entry bookkeeping – which was quickly adopted across Europe and made a significant contribution, over centuries, to the growth of the modern economy. A blockchain mirrors an accounting ledger, except for one feature: the difficulty of changing an entry on the blockchain ledger is far, far greater than in any paper or software-based accounting system. It is impossible, at least with current technology. It is similarly impossible to change an entry on an accounting ledger that is properly managed.
But there’s no problem. If an entry is incorrect on an accounting ledger or on any blockchain, you simply reverse it.
I find it hard to believe that Lumb doesn’t believe in accounting, so I can only presume that he’s being ingenuous or he simply doesn’t understand the blockchain. I’ll assume the latter.
The other quibble Lumb seems to have concerns the “right to be forgotten.” The right to be forgotten has to do with individuals being able to “determine the development of their life in an autonomous way, without being perpetually or periodically stigmatized as a consequence of a specific action performed in the past.” (Wikipedia). This is an interesting legal idea, which was born in Europe and is evolving right now. It corresponds to a kind of statute of limitations on your past. It clashes, of course, with freedom of speech. So this will likely evolve for many years, as various legal precedents are argued over or set.
However, it has nothing whatsoever to do with the blockchain. If any data is added to a blockchain that might be covered by this, it can simply be anonymized. Technology for anonymization has been available for decades. Also there nothing devious in blockchain implementations. If a particular ledger is open, nobody pretends otherwise. Where you want privacy, avoid open ledgers.
Perhaps the most bewildering comment in Lumb’s article is this:
“At Accenture, we’re working with leading academics on a prototype that would enable blockchains to be amended or redacted where necessary — under responsible governance models potentially developed in cooperation with regulators.”
Really? That’s what Accenture is doing? I might be impressed were it not that such technology already exists and has for decades. It’s called a database. So good luck with that.
I am not, by the way, the only person whose jaw hit the floor when he read that article. Social media flared up at once. There was a Twitter storm and a Reddit storm and probably a series of lesser storms. So I suspect Mr Lumb is a little concerned by the hugely negative backlash. Perhaps he even wishes to exercise his right to be forgotten. That should be easy enough to achieve with a little bit of amendment and redaction. After all, he never posted that article to any blockchain.