Hype: Banks will be disintermediated - the transaction is the settlement!
"The transaction is the settlement" only if you are on a private blockchain where you know your counterparties well. In order for you to wash your hands of post-trade settlements on a public blockchain, you would have to stop caring about AML and KYC regulations just as they are starting to care about you. There will also be new intermediaries-companies that will exchange cryptocurrencies among blockchains, companies that will provide a wallet, the ability to make payments, the ability to take loans and the ability to make investments. Most people-indeed, most regulators-would call the provider of those services a bank. Besides, cash will be with us for a long, long time to come.
Hype: Fraud is history!
Ten minutes of Googling will turn up at least five different implementations of laundering money on blockchain using a method called tumbling. It goes to show that exposing transactions is not the same as exposing counterparties or counterparty risk. Fraud can hide in plain sight. While there are ways to prevent this, especially in custodial and private blockchains, there is no inherent protection from fraud with a blockchain.
Hype: Everybody will be using blockchain in no time!
Most people write down their passwords on stickies attached to their computers. How can we expect those people to manage lengthy, cumbersome private keys? Since a lost phone is still an everyday occurrence, having apps remember keys is a surefire way to have your Bitcoin wallet cleaned out. Because there is still no safe, simple mechanism for verifying users at the endpoints today, we're relying on a leap of faith to provide trust in this system.
Hype: Blockchain will eliminate inequality!
Wealth and income disparity have more to do with power disparity than a new fangled database. Public blockchains like Bitcoin are amended by network nodes competing for cryptocurrency rewards to solve math problems in an arrangement called "proof-of-work". This incentivizes a computing power arms race among miners. No matter how clever their algorithms, the winners will be those with the most capital to invest in computing power. Proof-of-stake systems just cement unequal distribution of power with a strong advantage to whoever created it. All forms of explicit, concentrated power are susceptible to compromise or corruption.
But neither is entirely true. Although it has far more potential than practical use today, it does provide a new way of thinking about problems and that deserves serious consideration today. Blockchain makes it easy to create a shared, distributed database that's simple for any possessor to append to but nearly impossible to fraudulently change, making it particularly suitable as a "registry of truths".
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