What Blockchain Can’t 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, far beyond the cryptocurrencies universe. However, to fully understand a technology, it is also necessary to know its limits and boundaries, which it cannot…

Blockchain: history

In 1991, Stuart Haber and W. Scott Stornetta first came up with the concept of Blockchain. It was two researchers who were looking for a new system that allows the non-forgery of document timestamps. For example, they conducted the first scientific study of cryptographically secured blockchains. The first concrete application of this concept dates back to 2008 with the Bitcoin blockchain by an individual (or team) known as Satoshi Nakamoto.

Blockchain: definition

The blockchain (or block chain) is a technology that makes this possible store and from pass along information in a certain way transparent, secure (by cryptographic processes that prevent their modification a posteriori), deintermediated and decentralized (it is not hosted by a single server). We can relate the blockchain to a gigantic database that contains the history of all exchanges between its users since its creation. In concrete terms, the blockchain is used for this transfer of assets (cryptocurrency, securities, stocks, etc.), traceability (assets, products), to theautomatic execution of contracts (them smart contracts). However, to really understand the concept of blockchain, it’s important to understand what it can’t…

An example of last mile problem

To understand this concept of last mile problemcan we take the example cited in this article from theHarvard Business Review. Imagine that a hospital ward decides to develop a system for tracking babies so as not to confuse them at birth. All parents are afraid that their newborn will be exchanged with someone else during the transfer to the incubator. Although anecdotal and often never discovered, cases are revealed every year. Therefore, intra-hospital infant tracking, linked to the blockchain that keeps track of all data in an immutable and instantly verifiable way, seems like a cost-effective solution. However, this solution has a big 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 exactly where the blockchain often fails! This limit has a name: the last mile problem “.

the last mile problem : the main limitation of the blockchain

the last mile problem is a fundamental blockchain challenge. It is mainly this limit that explains why the blockchain is not (yet) used en masse by companies. To fully understand this concept, it must first be remembered that all blockchain use cases involve 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 refers only to physical assets. It refers to the bridging the gap between a physical asset and its digital translation on the chain. The blockchain cannot automatically link the stored data to the individual or physical object to which the data refers. She therefore needs a trusted third party to “explain” her where or who the data refers to when entering data. This trusted third party takes care of the “Last Mile Connection”. It could be the company’s staff, a third party, an electronic tag, an electronic implant… So the blockchain urgently needs a trusted third party to provide the link between the physical assets and the digital data. It’s quite paradoxical for this disintermediation solution!

The Last Mile problem in our baby example

In our example, the blockchain would have to rely on humans to correctly and fairly implement the matching between the baby and the digital file. And if people 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 stores and retrieves this false data by taking it as true. Baby X of couple X will be confused with baby Y of couple Y, if there was a reversal in the input of baby X and Y initially. The blockchain solution cannot solve this problem…

Conclusions of the Capgemeni Research Institute study

An excellent 2018 study from Capgemini addressed this issue. It’s titled “Does Blockchain hold the key to a new era of transparency and trust in the supply chain? 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 research shows that, even as more and more companies are designing blockchain solutions:

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

In particular, within this research, Capgemini recommends that companies establish strong security controls before developing a fledgling blockchain project at scale. A company usually creates a blockchain solution because it wants immutability of its data. But before this immutability is achieved, it must ensure that the data entered actually corresponds 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 changed, the blockchain loses all value.

Two adages to understand forever “Last Mile Problem”

Speakers, politicians, great professors, writers, philosophers are unanimous: a short pithy 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, the security, efficiency, usability and scalability of a blockchain project is at the level of its greatest weakness within its chain, usually the last link (the last mile connection), the link that connects digital data to its real meaning.

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

Another limitation of the blockchain is worth mentioning. It’s 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 based on the number of views. However, the advertiser does not know whether the person who has seen his advertisement is actually a potential customer. For example, the advertiser may think that he paid the website to show his ad to a well-to-do person in their late 40s who is 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 ad. However, it cannot be used to verify the humanity or fairness of a buyer’s intentions. To verify who is actually behind the digital ID, offline verification is required. Verifying the honesty of apparent purchase intent may be beyond any technology we have today.

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

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