The Reasons Why Blockchain Is Not Quite Ready for Facebook's Dreams

Many people have heard of blockchain technology, but few know what to make of it.

NYU professor, former senior economist for international affairs in the Clinton White House's council of economic advisers and Nobel Prize winning economist Nouriel Roubini once compared blockchain to "An Excel spreadsheet" and proposed that the technology has "Absolutely no basis for success." The truth lies somewhere between these two poles.

Many proposed uses for blockchain will remain forever implausible: Blockchain will not bring peace to the Middle East, and today's blockchain solutions are inefficient.

The technology is improving and the ecosystem is maturing; tomorrow's blockchain may have a profound effect on the ways we lead our lives and conduct our businesses.

The United Kingdom Financial Conduct Authority earlier this year granted a license to a cryptocurrency investing firm, while regulators from groups like the Financial Action Task Force routinely engage with blockchain firms and blockchain media.

That's not to say that the road for regulator and business cooperation is an easy one: New technologies like blockchain force both parties to ask difficult questions.

Blockchain needs strong solutions in all three layers, and there's every indication that Layers 2 and 3 will blossom in the next few years.

The Lightning protocol, for example, speeds up Bitcoin transactions but does not allow crucial blockchain features like smart contracts and will not work with other blockchain protocols.

Microsoft has stated that it anticipates Layer 2 blockchain will move the technology from the niche to the mainstream, but such success seems unlikely if systems aren't interoperable.

Once the technology is better understood and the legal situation codified, we can expect early-adopter companies to make extensive use of blockchain.