What Blockchain Cannot Do: The Last Mile Problem

We regularly hear well-deserved praise for blockchain technology. Indeed, this new technology has the potential to do amazing things. It offers new opportunities in many sectors, well beyond the universe of cryptocurrencies. However, to fully understand a technology, it is also necessary to know its limits, its borders, what it cannot do…

Blockchain: history

In 1991, Stuart Haber and W. Scott Stornetta first came up with the concept of Blockchain. They were two researchers looking for a new system allowing the non-falsification of document timestamps. Thus, they carried out the first scientific study on cryptographically secure blockchains. The first concrete application of this concept dates back to 2008 with the Bitcoin blockchain by a person (or team) known as Satoshi Nakamoto.

One minute to understand what blockchain is. Source: Lisk Academy.

Blockchain: definition

The blockchain (or block chain) is a technology allowing to store and of to transmit information in a way transparent, secure (by cryptographic processes preventing their modification a posteriori), disintermediated and decentralized (it is not hosted by a single server). We can relate the blockchain to a gigantic database containing the history of all the exchanges carried out between its users since its creation. Concretely, the blockchain is used for transfer of assets (cryptocurrency, securities, shares, etc.), traceability (assets, products), to theautomatic execution of contracts (them smart contracts). However, to truly understand the concept of blockchain, it is important to understand what it cannot do…

An example of last mile problem

To understand this concept of last mile problemwe can take the example cited in this article from theHarvard Business Review. Imagine that a hospital department decides to develop a system for tracking babies so as not to confuse them at birth. All parents fear that their newborn will be exchanged with another during their transfer to the incubators. Although anecdotal and often never discovered, cases are revealed every year. Therefore, tracking babies within the hospital linked to the blockchain which keeps all the data in an immutable and immediately verifiable way seems to be an advantageous solution. However, this solution has a major problem: the link between a blockchain entry (data) and a real baby. How do you know which digital data is linked to which baby? To do this, each baby must be given a physical identifier linked to the blockchain (a kind of physical tag), or in a more futuristic world, a small chip linked to the digital record. This is precisely where the blockchain frequently fails! This limit has a name: the last mile problem “.

The Last Mile problem
The last mile problem

the last mile problem : the main limitation of the blockchain

the last mile problem is a fundamental blockchain challenge. Indeed, it is mainly this limit that explains why the blockchain is not (yet) used massively by companies. To fully understand this concept, it must first be remembered that all blockchain use cases relate to two types of assets:

  • Digital assets (such as cryptocurrencies and smart contracts)
  • Physical assets (such as gold, food, real estate, a physical event, or babies in our previous example).

the last mile problem relates only to physical assets. It refers to the bridge between a physical asset and its digital translation on the chain. The blockchain cannot automatically link the data it stores to the individual or the physical object to which the data refers. She therefore needs a trusted third party to “explain” to her what or who the data refers to when entering data. This trusted third party ensures the “Last Mile connection”. It can be the staff of the company, a third party company, an electronic label, an electronic implant… Thus, the blockchain badly needs a trusted third party to make the link between the physical assets and the digital data. It’s rather paradoxical for this disintermediation solution!

The Last Mile problem in our babies example

In our example, the blockchain would have to rely on humans to correctly and honestly implement the matching between the baby and the digital record. And if humans mess up or manipulate the data when entering it, the integrity and immutability of the blockchain becomes useless. The data entered was false and the blockchain retains and retrieves this false data by considering it to be true. Baby X of couple X will be confused with baby Y of couple Y, if initially there was a reversal in the entry of baby X and Y. The blockchain solution cannot solve this problem…

Conclusions of the Capgemeni Research Institute study

An excellent study of 2018 from Capgemini addressed this issue. It is titled “Does Blockchain Hold the Key to a New Age of Supply Chain Transparency and Trust? How Organizations Have Moved from Blockchain Hype to Reality ». Which means “Is blockchain the key to a new era of transparency and trust for the supply chain ? How companies are adopting blockchain, from hype to reality”. This study finds that, even if more and more companies are designing blockchain solutions:

  • They find it difficult to develop them on a large scale (we are closer to the prototype or the Proof-of-Concept);
  • They struggle to get a return on investment (ROI).

Within this study, Capgemini recommends in particular that companies establish strong security controls before developing a young blockchain project on a large scale. A company usually creates a blockchain solution because it wants to have immutability of its data. But, before reaching this immutability, it must ensure that the data entered actually correspond to reality. It should focus on connecting the last mile (last mile connection) between a real event and the digital recording of that event. If these data entry points are altered, the blockchain loses all value.

Two adages to understand forever the “Last Mile problem”

Speakers, politicians, great professors, writers, philosophers are unanimous: a short punchy sentence can have more effects (of persuasion and memorization) than a long monologue. In the case of the blockchain and the “ last mile problem », two adages deserve to be remembered:

  • “The quality of the output is determined by the quality of the input”. In other words, capturing the right data is the challenge for organizations developing a blockchain solution.
  • “A chain is only as strong as its weakest link”. That is to say, the security, efficiency, usefulness and scalability of a blockchain project is at the level of its greatest weakness within its chain, generally its last link (the last mile connection), the link that connects digital data to its real meaning.
Like a chain, the strength of a blockchain or blockchain project depends on its weakest link, usually the last mile connection connecting digital data to the real world.

The other limit of the blockchain: verification of the honesty and humanity of users

Another limitation of the blockchain is worth mentioning. It is about verifying the honesty and humanity of buyers. It is less frequent and less known than the last mile problem.

Let’s use an example again to address this limitation. In marketing, an advertiser pays a website by the number of views. However, the advertiser does not know if the person who saw his ad is actually a potential customer. For example, the advertiser may think that he paid the website for showing his ad to a wealthy individual in his late forties looking for a Lamborghini. However, the ad may have been shown to a broke student, who likes to admire nice cars. Even worse, the ad could be seen by a robot! Blockchain technology can then determine which digital identifiers are associated with viewing an advertisement. However, it cannot be used to verify the humanity or honesty of a buyer’s intentions. Verifying who is actually behind the digital ID requires offline verification. Verifying the honesty of apparent purchase intentions is perhaps beyond any technology we have today.

Within this article, we have discussed the limitations of the blockchain; its scope of use. These limits are the difficulty in linking the blockchain and the real world (the last mile problem), as well as the lack of discernment of the honesty and humanity of the users behind the data. Another interesting and similar topic could be blockchain issues. For example, we can cite the environmental cost (even if some blockchains are very energy efficient or run on renewable energy), the legal vagueness and the lack of regulation, the problems of slowness, congestion or breakdowns on certain blockchains, integration issues with existing systems.

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