A man sits on stairs on the street in front of an abandoned home in Camden, N.J. A nascent effort to use blockchain technology to track and transfer vacant and derelict properties in Baltimore demonstrates just one of the many potential applications of distributed ledgers.
Bloomberg News
BALTIMORE — A long time ago I did a podcast series about cybersecurity — you can listen to it here — and the final episode was about quantum computing. The gist of the story was that most of the efforts that have ever been made to make the internet more secure revolve around something called public key cryptography — passwords, essentially — and the thing that keeps that cryptography secure is the sheer bigness of the prime numbers that hold the mechanism in place.
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Normal computers, even very big and powerful computers, can't compute those gigantically huge numbers quickly — but quantum computers can. That is, in part, why so many countries and private companies are pouring billions into developing ever-more-powerful quantum computers and quantum-proofing the global public key cryptography infrastructure.
But the thing about quantum computers is that they're not necessarily faster or better at everything than "classical" computers — the ones we use all the time, with ones and zeros. In fact, for a lot of applications, classical computers outperform quantum computers. In other words, the advancement of quantum computers is not likely to make all classical computers obsolete — it's a cybersecurity threat, but one that can be managed so long as policymakers take it seriously, and it could have some very helpful applications elsewhere. But it's not a digital Vishnu, destroyer of worlds; it's just a tool.
The same can be said for blockchain, the indelible distributed ledger technology that powers the cryptocurrency names you know like Bitcoin and Ether. Not very long ago there was a great deal of hype around the potential applications of blockchain, most notably its potential to decentralize all manner of financial transactions and disintermediate banks and other financial institutions by making those transactions "trustless," or independently verifiable and unchangeable.
The hype around blockchain has ebbed considerably since November 2022, when one of the world's largest crypto exchanges, FTX, turned out to be a gigantic scam. So it was with some surprise that I read in my local newspaper that the City of Baltimore, where I live, is turning to this de-hyped technology as part of an initiative to address the persistent problem of vacant and derelict properties.
An even longer time ago, I did a podcast series about vacant housing and why exactly it is so hard to return vacant properties to productive use — especially at a time when housing supply is so tight and costs are so high. There is no short answer to that question, but rather it is the product of dozens of little obstacles and disincentives that make entire neighborhoods undesirable places to live. Just one of those problems is the challenge of identifying vacant and derelict homes and figuring out who they belong to — property records are partly digitized, but when owners die it isn't always apparent who rightfully owns a home or even if the rightful owners know that they possess a vacant house in Baltimore. Figuring out that requires expensive and time-consuming title searches, sopping up time and money that a prospective buyer was presumably trying to save by rehabilitating a vacant house rather than buying a house the old-fashioned way.
As with quantum computing and codebreaking, this is precisely the kind of thing that blockchain — if well-designed and executed — can do faster, cheaper and more reliably than the horse-and-buggy system than most cities use for property records. There are many ways that such a system can fail, for example by inputting false information into the blockchain, but at least the retrieval can be made simpler, and the longer the system is in place the more efficient it may become.
The point I'm making is that there is a kind of hype life cycle that tends to accompany new technologies — discovery, followed by irrational exuberance, followed by market correction, followed by actual application and widespread adoption. The discovery of radium in the early 20th century spurred a wave of health products aimed at harnessing the naturally invigorating power of radiation for commercial use, only for scientists to discover later that radiation is super dangerous — but it does have some limited commercial applications. Blockchain, it seems, is not so very different — and perhaps now that we aren't blinded by the prospect that crypto is the future of money, we can finally see what this technology can really do.
John Heltman is the Washington Bureau Chief for American Banker, leading coverage of federal bank regulators, monetary policy and Capitol Hill. John,... Read full bio
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