Blockchains for non-cryptocurrency applications (still) don’t make sense
Author’s note: originally published in 2019, revised January 2026. Having witnessed the NFT and crypto boom and bust of 2021, these arguments have only grown more relevant.
Why blockchains work for cryptocurrencies #
Blockchains work for cryptocurrencies because the asset being traded is the blockchain record itself. When you “own” Bitcoin, what you actually own is a cryptographic entry on a distributed ledger stating that your private key controls a certain amount of Bitcoin. This record is signed by the previous owner, verifiable all the way back to the block that originally minted those coins.
This system is self-sufficient because we’ve collectively agreed that the blockchain record is the thing of value. When you sell cryptocurrency, you sign a new record transferring control to someone else’s key and publish this on the blockchain. The buyer verifies this record and its acceptance by the blockchain (more confirmations reduce the risk of double-spend attacks), and the transaction is complete.
The trouble begins when people try to use this technology for anything else, like many startups have attempted (burning billions of real-world money in the process) and are still attempting in some parts of the world that appear to have missed the memo.
Introducing the oracle problem #
When an asset exists in the real world rather than purely on a blockchain, someone must bridge the gap between digital records and physical reality. This intermediary - called an “oracle” in industry jargon - must be trusted to accurately report real-world state to the blockchain and enforce blockchain state in the real world.
This single point of trust breaks the core promises of blockchain technology: decentralisation and trustlessness. It doesn’t matter how tamper-proof your blockchain is if the last link in the chain is a fallible (or corruptible) human institution.
The oracle problem invalidates all the guarantees typically associated with a (well-implemented) blockchain and has no universal solution - here’s how it impacts certain asset classes that companies have attempted to tokenize:
Physical goods & energy #
Precious metals, physical items and commodities: if you’re buying a gold bar, what matters is whether you receive the physical gold - not what any blockchain says. The seller could transfer a perfect blockchain record while handing you a gold-painted brick. Conversely, someone with no blockchain presence could hand you genuine gold. The blockchain adds nothing except an extra system to maintain.
Energy: imagine a smart meter that accepts payment in “energy tokens” and controls power delivery based on blockchain state. Nothing prevents it from rejecting valid tokens, accepting invalid ones, or consuming your tokens without delivering electricity (whether intentionally or because the upstream power source has defaulted). The meter is the oracle, and you have to trust its manufacturer and operator. The blockchain offers little benefit compared to the energy company issuing a conventional stored-value card.
Government-issued documents #
Some companies have proposed putting driving licenses, vehicle registrations, or national ID cards on a blockchain. But these documents derive their value from government enforcement. When a police officer pulls you over, the only thing that matters is whether the government’s systems recognize your right to drive.
If the government doesn’t recognize your blockchain-based license, it’s worthless. If they do recognize it, they’re the oracle, and you’re trusting them completely anyway. The blockchain again becomes a redundant layer - the government could achieve identical results with the conventional database they already maintain and public-key cryptography for verifying the document.
Product authentication & anti-counterfeiting #
Brands have experimented with blockchain-based authentication for luxury items, wines, or pharmaceuticals. The idea is to scan a tag, verify it on the blockchain and confirm authenticity.
The problem is that you cannot cryptographically bind a physical object to a digital record. A counterfeiter can duplicate a legitimate authentication tag and attach it to a fake handbag. The blockchain can tell you whether the tag is valid, but it cannot tell you whether it’s attached to a genuine item.
Traditional solutions like holograms, serial numbers, certificates of authenticity, etc have the same limitations but don’t require maintaining a blockchain. If anything, they’re superior: a simple serial number database is cheaper, faster, and doesn’t pretend to offer guarantees it can’t deliver.
Intangible rights #
Copyright: the 2021 NFT boom revealed a fundamental misconception. An NFT doesn’t grant ownership of artwork - it’s typically just a blockchain record pointing to a URL where an image is hosted. Anyone can view, copy, and display that image. The NFT grants you nothing except the token itself.
NFTs could theoretically represent copyright assignment, but copyright is a legal construct enforced by courts. If a dispute arises, judges rule based on contract law and copyright statutes - not blockchain state. The court’s decision is final regardless of what any blockchain says. The blockchain is, at best, one piece of evidence among many; at worst, legally meaningless.
Real estate: property rights are fundamentally about enforcement. Your home is yours not because of a deed alone, but because that deed guarantees the state will send police to remove intruders and courts will uphold your claim.
A blockchain-based land registry still requires government recognition. If the government doesn’t enforce blockchain-recorded ownership, it’s worthless. If they do, they’re the oracle - so why not just use the land registry database they already have?
How blockchains make things worse #
Even setting aside the oracle problem, applying blockchain to real-world assets introduces new failure modes that don’t exist with traditional systems.
The key recovery problem #
With cryptocurrency, losing your private key means losing your coins forever. This is unfortunate but internally consistent - those coins simply exit circulation, marginally increasing the value of remaining coins. This is a risk users of cryptocurrencies accept; though low adoption suggests most people don’t actually want to take this risk when the conventional banking system successfully shields them from it.
For real-world assets however, this creates absurd scenarios:
Lost property ownership keys: if property ownership is blockchain-based and you lose your key, what happens to your house? Does it sit vacant forever? Do we auction it and distribute proceeds to other token holders? There’s no good answer.
Inheritance: when someone dies, how do heirs access their blockchain-recorded assets without the deceased’s private key? Traditional systems have probate courts and death certificates. Blockchain systems don’t have a good solution.
Theft/coercion: if someone steals your key or forces you to sign a transfer, traditional legal systems can void fraudulent transactions. Blockchain transactions are irreversible by design.
Technical issues: a software bug, corrupted backup or compromised computer could permanently sever you from assets you legitimately own.
Every proposed solution to key recovery involves some trusted authority that can override the blockchain - which defeats the entire point. Using such a “blockchain” reinvents traditional registries with extra steps and new failure modes.
Immutability as a bug, not a feature #
Traditional record-keeping systems are “mutable” for good reason. Courts can correct errors, reverse fraudulent transfers, and update records when circumstances change. This flexibility is generally accepted as a feature, not a bug.
Blockchain immutability would prevent correcting mistakes, reverting fraud and enforcing legal judgements.
For purely digital assets immutability is a philosophical choice and something users can factor in their decision whether to participate in the system. For real-world assets however it’s a major liability.
The real reason behind the blockchain boom #
Considering the above dealbreakers, you might be asking why companies have attempted (and still do in some regions) to use blockchains for unsuitable use-cases?
The real reason to use a blockchain is because the buzzword attracted massive investment during the hype cycles of 2017-2018 and 2021, and still keeps getting uptake in some legacy industries who appear to have not gotten the memo such as banking.
Often those projects involving real-world assets aren’t even using blockchains in any meaningful sense: a true blockchain like Bitcoin’s derives its security from decentralized consensus. Thousands of independent & competing miners validate transactions, making the ledger practically impossible to falsify because no single party controls majority mining power.
“Enterprise blockchain” or “private blockchain” solutions typically have a single company or small consortium running all the nodes. This provides zero decentralization benefit - the company could write whatever they want to the ledger. It’s a database with extra complexity and worse performance.
Most blockchain projects are merely mechanisms to capitalize on clueless investors who invest based on hype rather than an understanding of the technology and the business’ fundamentals, and quietly fizzle out when the hype cycle is over, moving on to the next grift like AI.
Blockchains solve a genuine problem: creating a trustless ledger for purely digital assets. The moment you link blockchain records to the physical world, you reintroduce the trust that blockchains were designed to eliminate. Seven years after the original version of this post, nothing has changed - and likely nothing will.