A version of this post was previously published on Medium. It has been condensed and lightly edited for clarity.

Everyone says the blockchain, the technology underpinning cryptocurrencies such as bitcoin, is going to change everything. And yet, after years of tireless effort and billions of dollars invested, nobody has actually come up with a use for the blockchain — besides currency speculation and illegal transactions.

Each purported use case — from payments to legal documents, from escrow to voting systems — amounts to a set of contortions to add a distributed, encrypted, anonymous ledger where none was needed.

What if there isn’t actually any use for a distributed ledger at all? What if, 10 years after it was invented, the reason nobody has adopted a distributed ledger at scale is because nobody wants it?

Payments and banking

The original intended use of the blockchain was to power currencies like bitcoin — a way to store and exchange value much like any other currency. Visa and Mastercard were dinosaurs, everyone proclaimed, because there was now a costless, instant way to exchange value without the middleman taking a cut. A revolution in banking was just the start: Governments, unable to issue currency by fiat anymore, would take a backseat, as individual citizens transacted freely outside any national system.

It didn’t take long for that dream to fall apart. For one thing, there’s already a costless, instant way to exchange value without a middleman: cash. Bitcoins substitute for dollars, but Visa and Mastercard actually sit on top of dollar-based banking transactions, providing a set of value-added services, like enabling banks to track fraud disputes and verifying the identity of the buyer and seller.

Blockchain was originally created to help power cryptocurrencies like bitcoin, but it has so far proven less efficient and far more energy intensive than traditional payment systems.

It turns out that for the person paying for a product, the key feature of a new payment system — think of PayPal in its early days — is the confidence that if the goods aren’t as described you’ll get your money back. And for the person accepting payment, basically the key feature is that their customer has it, and is willing to use it. Add in points, credit lines and a free checked bag on any United flight and you have something that consumers choose and merchants accept. Nobody actually wants to pay with bitcoin, which is why it hasn’t taken off.

Plus, it’s not actually that good a payment system — Visa can handle sixty thousand transactions per second, while Bitcoin historically taps out at seven. There are technical modifications going on to improve Bitcoin’s efficiency, but as a starting point, you have something that’s about 0.01% as good at clearing transactions. (And, worth noting, for those seven transactions per second, Bitcoin is already estimated to use 35 times as much energy as Visa. If you brought Bitcoin’s transaction volume up to Visa’s it would require 5,000 nuclear reactors to runas much electricity as the rest of the world put together.)

Freedom to transact without government supervision

The government-backed banking system provides Federal Deposit Insurance Corp. guarantees, the reversibility of ACH, identity verification, audit standards and an investigation system when things go wrong. Bitcoin, by design, has none of these things.

I saw a remarkable message thread by someone whose bitcoin account got drained because their email had been hacked and their password was stolen. They were stunned to have no recourse! And this is widespread. In 2014, the then-number one bitcoin trader, Mt. Gox, lost $400 million of investor money due to security failures. The subsequent number one bitcoin trader, Bitfinex, also shut down after a loss of customer funds.

Imagine the world if more banks had been drained of customer funds than not. Bitcoin is what banking looked like in the middle ages: Here’s your libertarian paradise, have a nice day.

At the same time, government policies are designed to disrupt terrorist financing and organized crime, and prevent traffic in illegal goods like stolen credit card numbers. The mainstream preference is to have transactions private, but discoverable. Ask “should the government have a list of everyone you’ve paid money to,” and most will say no; ask “should the government be able under warrant to get a list of everyone a child pornography collector has paid money to,” and most will say yes.

Micropayments and bank-to-bank transfers

It’s worth noting two particular use cases where people are particularly excited about blockchain-based currencies: micropayments and bank-to-bank transfers.

In terms of micropayments, people enthuse that bitcoin transactions are free and instant. Actually, they take about eight minutes to clear and cost about four cents to process. People have proposed that you will use bitcoins for micropayments — for example, paying two cents to a musician to listen to their song on the internet, or four cents to read a newspaper article.

Yet the infrastructure to do this — for example, advance authorization with the source of funds so you don’t have to wait eight minutes to read the article you just clicked — actually eliminates the need for bitcoin at all. If you’re happy to pay four cents an article or two cents a song, you can set it up to bill once a month from your bank account and read to your heart’s content. And in practice, people prefer subscription services to micropayments.

In terms of interbank payments, many people mention Ripple as a promising way to transfer money between banks. Over the last 30 days it processed two billion dollars (as of the original writing of this post) worth of interbank and interpersonal transactions — about 40 seconds’ worth of volume on the SWIFT interbank network — after three years of being available to banks to trade 90% of the world’s high-volume currencies.

This is like the proportion of U.S. GDP comprised by toothpick sales. Why haven’t banks preferred this new technology? The answer is that setting up a Ripple Gateway isn’t actually much different than using the existing corresponding-account system — except that a lost password or security token can lead to much larger and more instant actual losses — which, as a reminder, has happened to more leading bitcoin exchanges than have managed to avoid it.

The same features that make the banking system attractive to end users also make it attractive to banks. They already have ledgers, and they don’t need to distribute them, anonymize them, encrypt them, publish them or make them irreversible.

Smart contracts

“Smart” contracts are contracts written as software, rather than written as legal text. Because you can encode them directly on the blockchain, they can involve the transfer of value based directly on the cryptographic consent of the parties involved — in other words, they are “self-executing.”

In theory, contracts written in software are cheaper to interpret. Because their operation is literally mathematical and automatic, there are no two ways to interpret them, which means there’s no need for expensive legal battles.

Yet real-world examples show the ways this is problematic. The most prominent and largest smart contract to date, an investment vehicle called the Distributed Autonomous Organization (DAO), enabled its members to invest directly using their private cryptographic keys to vote on what to invest in. No lawyers, no management fees, no opaque boardrooms, the DAO “removes the ability of directors and fund managers to misdirect and waste investor funds.”

And yet, due to a software bug, the DAO “voted” to “invest” $50 million, a third of its members’ money, into a vehicle controlled by very clever programmers who knew a lot about recursion issues during balance updates.

Some said this was a hack or an exploit because the software had not functioned as intended, while others said that there was no such thing as a hack — the whole point was that the software made decisions autonomously and there were no two ways to interpret it.

In the end, everyone got together and voted to retroactively amend the software contract and move the money back to its original owners.

What’s the takeaway? Even the most die-hard blockchain enthusiasts actually want a bunch of humans arguing about the underlying intention behind a contract, rather than letting the software self-execute.

The enthusiasm about smart contracts is based on confusing contracts being implemented as software versus written as software. Amazon’s pricing agreement is published in English but scales automatically and bills directly. If they replaced their billing agreement with the source code for their billing software, it wouldn’t actually be helpful to me.

Distributed storage, computing, and messaging

Another implausible idea is using the blockchain as a distributed storage mechanism. On its face, this makes sense: You break your document up into “blocks,” encrypt them and put them in a distributed ledger replicated immutably across ten thousand servers.

As it happens though, blockchain is just a terrible way to store data. It’s one-factor auth, you can’t unshare it or track who is accessing it, and the bitcoin blockchain has consumed almost a billion dollars worth of electricity to hash an amount of data equivalent to about a sixth of what I get for my ten dollar a month dropbox subscription.

Stock issuance

It was much-heralded when Nasdaq launched an internal blockchain-driven exchange for privately held stocks. But wait. Correct me if I’m wrong, but the whole purpose of Nasdaq is that it has a ledger of who owns what stocks. Were they nervous that their systems, absent blockchain, would soon be unable to keep track of who owns what?

The reason Nasdaq is the right home for a blockchain-driven exchange is that they’re expert in the compliance and security aspects of trading stock. Cut out the middleman (here, Nasdaq itself) and the government, and you’ll ultimately be limited to companies that choose to make an end-run around the legal, compliance and tracking systems common to the mainstream market. As people who trade in unlisted stocks will tell you, that’s a recipe for getting your money stolen.

And we’re already seeing this. New companies have also begun creating blockchain-based “coins” convertible into company stock, and selling them to the public in initial coin offerings, or ICOs, as a cheaper and more flexible way to raise money than a traditional initial public offering of stocks on an exchange.

It will be interesting to see how long this craze lasts — among other things, offering tokens convertible to stock counts as a securities offering, and so the SEC rules presumably apply to these securities offerings just like any other. Either the “coins” are just less-secure electronic stock certificates — protected by however carefully you store your password, rather than by the laws and protections of a securities exchange — or it’s another attempt to do an end-run around the law.

Authenticity verification

Another plausible use of the blockchain is that if you want to make a public, unalterable, undeleteable signed statement, you can “publish” it to the blockchain — thinking of the distributed ledger as more like a diary than a way to buy and sell. In theory, you could use this for recording vote tallies, verifying the origin of diamonds or brand-name gear, verifying people’s identity, resolving the ownership of domain names, keeping items in escrow, disclosing provisional patents under seal, notarizing documents and so on.

Without diving too thoroughly into the details of each of these, it seems the use cases all fall apart pretty quickly. For voting, paper ballots and election monitors are a remarkably good solution to ensuring that there’s one anonymous vote per voter. For handbags, you can look up the certificate number online in a non-decentralized database. For patent disclosures, tweet an md5 of your document.

So, what’s left?

Blockchain enthusiasts often act as if the hard part is getting money from A to B or keeping a record of what happened. In each case, moving money and recording the transaction is actually the cheap, easy, highly automated part of a much more complex system.

Which leaves us where we started — currency speculation and illegal transactions — along with, perhaps, a lesson.

In the conversations I’ve had with bitcoin entrepreneurs and investors and consultants, there was often a lack of knowledge or even interest in how the jobs were being done today or what the value to the end user was.

With all the money spent on bitcoin cash registers, nobody went out and did a survey about whether most credit card users would be willing to give up their frequent-flier miles in return for also losing the ability to dispute a transaction.

Presumably, they thought, the reason IPOs are so expensive or venture fund formation paperwork is so onerous is because all those lawyers and accountants are just getting rich sitting around pushing paper. A bunch of smart engineers in their 20s with no industry experience could certainly do their jobs, automatically, in a matter of months, with just a few million bucks of venture capital, right?

So far, not so much.

Kai Stinchcombe

Kai Stinchcombe

Kai Stinchcombe is CEO and co-founder of True Link Financial, a banking and investment service for seniors.

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