Blockchain : technology is improving but regulation still inadequate

With gro­wing inter­est in various cryp­to­cur­ren­cies, blo­ck­chain tech­no­lo­gy has seen a meteo­ric rise in recent years. Yet blo­ck­chain still has plen­ty of room for impro­ve­ment, so what prac­ti­cal appli­ca­tions can we fore­see for the future ?

Seve­ral scan­dals have ulti­ma­te­ly ham­pe­red its deve­lop­ment. “There was so much enthu­siasm that cryp­to­cur­ren­cies were obvious­ly in the news,” says Daniel Augot, Direc­tor of Research at INRIA and head of the Blo­ck­chain Chair. “There has been spe­cu­la­tion, fraud, mani­pu­la­tion, and exor­bi­tant amounts of money being rai­sed in a com­ple­te­ly unrea­so­nable way.” This has had the effect of dis­si­pa­ting the enthu­siasm gene­ra­ted, whe­reas, for the resear­cher, we need “a bet­ter unders­tan­ding of the tech­no­lo­gy to be less sedu­ced by it.”

This tech­no­lo­gy is not limi­ted to cryp­to­cur­ren­cies. “Blo­ck­chain is a tech­no­lo­gy that enables decen­tra­li­sed infra­struc­tures to be deployed,” explains Xavier de Bois­sieu, co-foun­der of Qua­dra­tic, a consul­tan­cy and engi­nee­ring firm spe­cia­li­sing in data science, appli­ca­tion deve­lop­ment and Web‑3. “For example, bank tran­sac­tion data is sto­red on a ser­ver belon­ging to an enti­ty, usual­ly a bank, which has free rein to modi­fy or delete it.” This means that you must trust this enti­ty. “In a blo­ck­chain sys­tem, this infor­ma­tion is held by a mul­ti­tude of enti­ties,” he adds. So, by decen­tra­li­sing the infra­struc­ture, this sys­tem itself creates trust. 

Accor­ding to Daniel Augot, enthu­siasm for blo­ck­chain is jus­ti­fied. “This tech­no­lo­gy has the poten­tial to revo­lu­tio­nise our tran­sac­tions. Howe­ver, it can be consi­de­red as still being in its infan­cy, and seve­ral limi­ta­tions have been dis­co­ve­red in recent times. First and fore­most, a blo­ck­chain pro­vides an unfor­geable regis­ter that can be used to sup­port cryp­to­cur­ren­cies. The pur­pose of the famous Bit­coin, for example, was to keep a record of mone­ta­ry tran­sac­tions,” he says. “This is what banks do with each other, but they do it in a way that can be alte­red. They can can­cel a pay­ment, or sim­ply alter what has been done. This is impos­sible with blo­ck­chain, because we want it to be sea­led and the­re­fore impos­sible to modify.”

The bene­fits are signi­fi­cant, but there are still a few limi­ta­tions. In par­ti­cu­lar, the num­ber of tran­sac­tions per second remains low. Tran­sac­tion laten­cy is slow, so costs are high. The ans­wer to this limi­ta­tion could be rollups. “Rol­lups allow users to batch pro­cess ope­ra­tions for a large num­ber of tran­sac­tions,” conti­nues Daniel Augot. “Only a mini­mal trace is writ­ten on the chain. This saves space in the regis­ter.” These rol­lups are out­sour­ced to the blo­ck­chain but have the advan­tage rein­for­cing blo­ck­chain secu­ri­ty. “We have an asym­me­tri­cal situa­tion, with a user with very limi­ted com­pu­ting resources (a smart­phone) who doesn’t total­ly trust the ser­ver that does the cal­cu­la­tion for him,” he explains. “So, we need a veri­fiable cal­cu­la­tion that can force the ser­ver to pro­vide cryp­to­gra­phic proof through the rollup.”

A second limi­ta­tion is the need to ensure the confi­den­tia­li­ty of its use. Once again, a tech­no­lo­gy has been put in place to address this issue. “Zero-know­ledge is a mira­cu­lous tech­no­lo­gy,” says the resear­cher, “that allows you to make entries in a hid­den, blind way, while pro­ving that these entries cor­res­pond to valid ope­ra­tions.” This makes it pos­sible to vali­date an ope­ra­tion without actual­ly seeing what is being done. 

First of all, there are two main para­digms for deploying blo­ck­chain : pri­vate blo­ck­chain and public blo­ck­chain. “In a pri­vate blo­ck­chain sys­tem, access to the infra­struc­ture and the role of vali­da­tor are both res­tric­ted,” notes Xavier de Bois­sieu. “With a public sys­tem, it’s strict­ly the oppo­site. Access is glo­bal, and anyone can access the infor­ma­tion and write to the sys­tem.” Pri­vate sys­tems are gene­ral­ly used bet­ween com­pa­nies. By limi­ting access, they offer grea­ter control and confi­den­tia­li­ty. On the other hand, public sys­tems have the advan­tage of trans­pa­ren­cy of ope­ra­tions. They are often used for cryp­to-cur­ren­cies and the issue of tokens, such as Bit­coin and Ethe­reum illustrate.

Busi­ness-to-busi­ness blo­ck­chain enables a sha­red, trus­ted infra­struc­ture to be put in place. Once this com­mon infor­ma­tion base has been esta­bli­shed, com­pa­nies will be able to build appli­ca­tions, which are often digi­ti­sa­tion appli­ca­tions, to improve ope­ra­tio­nal effi­cien­cy. “When tech­no­lo­gy enables poten­tial­ly com­pe­ting players to coope­rate, we talk about coope­ti­tion,” adds the co-foun­der of Qua­dra­tic. “It the­re­fore enables this type of appli­ca­tion to be deployed not on the scale of a single com­pa­ny, but on the scale of seve­ral com­pa­nies, or even an entire sector.”

This tech­no­lo­gy is alrea­dy begin­ning to shape the future of our tran­sac­tions. This can be seen in the power that this tech­no­lo­gy is begin­ning to pro­vide to Decen­tra­li­sed Auto­no­mous Orga­ni­sa­tions (DAOs). Xavier de Bois­sieu explains : “There are DAOs that have a few bil­lion dol­lars in cash and are going to use gover­nance to manage ope­ra­tions that can gene­rate hun­dreds of mil­lions of dol­lars in annual pro­fits. So, we’ve real­ly moved on from the research and expe­ri­men­ta­tion stage to set­ting up large-scale coor­di­na­tion protocols.”

Public blo­ck­chains, on the other hand, enable decen­tra­li­sed sys­tems to be crea­ted without the need for a cen­tral autho­ri­ty. This improves trust and secu­ri­ty in a varie­ty of areas, inclu­ding finance, heal­th­care and sup­ply chain mana­ge­ment. A clear example of this increa­sed trans­pa­ren­cy can be found in the role of vali­da­tors. “One of the func­tions of cryp­to­cur­ren­cies is to pay the vali­da­tors of public blo­ck­chains,” says Xavier de Bois­sieu. “This incen­tive ensures that the num­ber of vali­da­tors on these chains increases. The aim is to have as many people as pos­sible, so that their inter­ests are as varied as pos­sible, and to ensure that the blo­ck­chains are pro­per­ly vali­da­ted.” This type of sys­tem is not infal­lible when a majo­ri­ty of vali­da­tors, whose role is to vali­date and secure an immu­table chain, work in their own interests.

The main uses of public blo­ck­chains the­re­fore include cryp­to­cur­ren­cies, smart contracts, and tran­sac­tion tra­cea­bi­li­ty. “This involves two aspects,” he adds. “The first is that we have trus­ted public infra­struc­tures in which we can keep unal­te­rable records. These regis­ters of infor­ma­tion can the­re­fore be regis­ters of values, regis­ters of who holds what. The second is the pre­sence of sys­tems for imple­men­ting tokens, which enable this value to be trans­fer­red almost imme­dia­te­ly and secu­re­ly.” This type of blo­ck­chain is known as the Inter­net of value, giving rise to the suc­ces­sor to Web2, Web3. “Today, beyond the Inter­net of infor­ma­tion that we know [Web2],” he says, “there is a new layer [Web3] that gives the pos­si­bi­li­ty of conveying value on public networks”. 

“As soon as we can move value from one end of the globe to the other almost ins­tan­ta­neous­ly without per­mis­sion, we can see the pro­blems this can cause,” he concludes. “We the­re­fore need a fra­me­work to regu­late this tech­no­lo­gy, des­pite the dif­fi­cul­ties that this entails in view of its rapid evolution.”

Pablo Andres