The bad news that the Internet once encountered is now happening to blockchain

As the term ‘blockchain’ begins to enter the mainstream mindset, many reports and articles have come out to try to explain Bitcoin, Ethereum and all the other corporate-issued altcoins. Some of these analyses seem to have forgotten that disruptive technologies tend to go through a volatile development process. Financial Times reporter Izabella Kaminska cited some of these reports in her latest article, continuing to portray blockchain as an overhyped tech freak. Some of the reports she cited dismissed the technology as incapable of meeting the needs of the financial industry. This is undoubtedly a short-sighted analysis that shows these authors are out of touch with the blockchain technology itself and the industry.

Blockchain technology is often compared to the Internet Protocol. Although this comparison is overused, it is still relevant. Irving Wladawsky-Berger wrote a great article discussing the technical and implementation problems that existed in the IT industry during the early days of the Internet:

Some serious problems . In the early days of the IT industry, the proprietary products of different IT vendors did not work very well together. Just sending an email or exchanging information between systems based on different vendors' networks and applications was a pretty painful chore. By the late 1980s, the IT industry was facing serious problems in integrating the growing number of proprietary products from different vendors, a problem that threatened the industry's continued growth.

Technical solutions to this problem have emerged and are being deployed by the academic and research communities, such as the Internet, based on the TCP/IP protocol; Internet email applications based on SMTP, MIME, POP, and IMAP; the World Wide Web (www), based on a set of open standards (HTML, HTTP, URLs) and easy-to-use, graphical web browsers. The use of open standards and open source software has made it easier to send emails or share information between different systems and organizations.

The private sector, government, and academia are coming together to collaborate on leveraging the Internet, the Web, and other promising technologies to solve the IT industry's serious integration problems. These various organizations are now working together to develop a common Internet architecture, which -- based on Internet applications such as email and the Web -- they are all beginning to deploy.

Much like the early days of the internet, blockchain technology faces numerous obstacles that limit its potential mainstream adoption. The blockchain industry began with Bitcoin, an open source project that initially attracted a variety of cypherpunks, anarcho-capitalists, and talented decryptors/developers. These early adopters supported Bitcoin throughout its incubation period (both for ideological and economic reasons), and Bitcoin eventually became too large to be ignored by the mainstream community.

Today, as ‘blockchain’ is breaking through the hype cycle, some are portraying it as a panacea to all our world’s problems. In fact, many reports have refuted the hype, arguing that there are too many insurmountable problems that will prevent the mass adoption of blockchain.

Clearly, there are problems, but are they insurmountable? Some of the reports cited in Kaminska’s article demonstrate a clear misunderstanding of blockchain technology and the industry. I don’t mean a deep understanding of math and code, but an appreciation that this technology is not a static or rigid entity. It is diverse and capable of rapid evolution, as the Ethereum protocol has clearly demonstrated. For every insurmountable problem, you can list projects with talented developers actively working on solutions:

Capacity expansion solution:

1. Proof of Stake (POS)

2. Bitcoin Lightning Network

3. Ethereum Raiden Network

4. Permissioned or consortium blockchains

Privacy Policy:

1. Zcash

2. Hawk

3. Enigma

4. SNARKs & Zero-Knowledge Proofs

5. State Channels

Security and Identity Solutions:

UPort by ConsenSys

Today, one cannot predict whether these projects will crack the code, however, this shows that there is an active ecosystem that is aware of these issues and is trying to solve them.

Another issue cited is regulatory hurdles. The financial industry is heavily regulated and financial services companies must follow complex national and international rules. If one assumes that blockchain technology is something that fits into the existing regulatory paradigm, then yes, it seems unlikely.

At this point, we need more regulatory clarity for companies that want to use blockchain technology, and then significant regulatory reform is necessary to promote mass adoption. With that said, the great thing about a decentralized and peer-to-peer protocol is that, to some extent, it is everywhere. For a central government or organization that wants to 'bring it down' (through malicious or poorly designed regulation), it is a difficult task. If the user demand and technical ability to participate in the network exist, then they will do so.

It is important for the blockchain industry to support insightful and critical commentary. However, one should be careful about assumptions about the technology. Commentators must recognize its versatility and appreciate that such paradigm shifts will not happen overnight, nor can we predict how they will unfold.

Bitcoin started as an idea shared by an anonymous group or individual on a cryptographic mailing list 8 years ago. The technology has now grown into a thriving ecosystem that has attracted over a billion dollars in investment and numerous companies, protocols and projects. Despite this rapid expansion, we continue to see some commentators fail to recognize the resilience and adaptability of the technology and the people behind it.

The Internet Protocol also had some technical issues that had to be overcome. At the time, critics were quick to point out these issues and conclude that the Internet was doomed to fail. Disruptive applications, such as Amazon, Netflix, and Twitter, did not immediately ‘go live’ in the early days of the Internet. These breakthrough applications required higher bandwidth, mobile Internet, and other improvements that were not available in the early days of the Internet. Additionally, when many of these applications were first launched, they looked very different than they do today.

One could argue that the evolution of blockchain technology and the multitude of applications built on top of these protocols could follow a similar path. An erratic and unpredictable path, but one that could be disruptive.