On Realism

It was only a matter of time before the payments industry, some of which had succumbed over the years to a flight of fancy over blockchain technology, returned to earth. To be fair, this episode never reached the level of hysteria, nor were enthusiasts entirely wrong in their expectations. The error was more one of character than of degree.

Distributed ledgers will one day deliver some significant benefits both inside and outside of the payments business. But, as our story “The New Realism About Blockchain” (this issue) shows, this day will arrive later than most enthusiasts expect and will likely yield fewer advances than many of them think it will.

Nor should this come as a surprise. The same has been true of most innovations believed to be transformative. It is easy, perhaps too easy, to blame inflated expectations on the human tendency to believe, and spread, hype. Hype is typically associated with ideas that were never built on anything but hot air from the start. Such ideas depend on hype for momentum, as they have little else to rely on for propulsion.

But blockchain isn’t hot air, and enthusiasm for it isn’t hype. This is a mathematically sophisticated system that can yield significant benefits in areas involving, for example, self-executing contracts, chains of ownership, and yes, payments. We called our story “The New Realism About Blockchain” because it points out, not how blockchain is a failure, but how expectations for it have been premature.

Critics like to point out, for example, how Visa can process tens of thousands of transactions per second while blockchain supporting Bitcoin can manage just seven. This is a fair point. But it is not dispositive in arguing that blockchain is a failure. It really means blockchain needs more innovation, and probably more time. Techniques like the fledgling Lightning Network, for example, may yet improve transaction capacity and speed by diverting volume in ways that relieve congestion.

This is what we mean by “realism.” To adopt a realistic point of view of something is not to dismiss or denounce it. It is, by contrast, a pose that accepts and respects an idea by investing it only with expectations that are reasonable, given its capacities and limitations.

We are a publication that follows and reports on digital-payments innovation, so it would be perverse were we to ignore something like blockchain, or dismiss it out of hand. What we are trying to do with this month’s cover story, by contrast, is to pay respect to the idea by recognizing clearly what it can reasonably do, and pointing out where users and experts feel it falls short.

We hope our readers will profit by the result.

—John Stewart, Editor, john@digitaltransactions.net