Hasso-Plattner-InstitutSDG am HPI
Hasso-Plattner-InstitutDSG am HPI



HPI Study to Objectify the Blockchain and Bitcoin Debate

In the midst of the heated worldwide discussion on blockchain technology and its application in the system of the Internet currency Bitcoin, scientists at Hasso Plattner Institute (HPI) have published an extensive study objectifying the debate on this topic.

HPI’s study concludes that many of the expectations currently surrounding blockchain technology are “exaggerated.” In their report, “Blockchain— Hype or Innovation?” the Potsdam computer scientists, on one hand, draw attention to the still inadequate standardization and lack of cooperation between blockchain systems. On the other hand, emphasis is placed on the great promise of the new technology―originally created for cryptocurrency payment processing―to revolutionize many processes in business and society.

According to Prof. Christoph Meinel, HPI director and co-author of the study, many opponents of the technology see it as an opportunity to enable hacker tricks designed to facilitate criminal activity in the darknet. “Conversely, many proponents exaggerate its potential as a new, all-purpose weapon. In fact, the technology, which is still in its infancy, must first mature and undergo further development for additional applications,” said Meinel. Afterwards, it will then depend on the “right utilization.”

The institute’s study should help to realistically evaluate the possibilities and limitations from a neutral, independent viewpoint. First, an explanation is given of how the technology (which is often clouded in mystery) links existing approaches such as decentralized networks, cryptography and consensus models. In detail, the authors present the functionalities of the three systems that have so far established themselves as the most important on the blockchain scene: Bitcoin, Ethereum, and Hyperledger.

Based on Meinel’s sources, the computing processes in the Bitcoin network currently consume as much electricity per day as needed by a good 12,000 German four-person households throughout the year. In addition, there are strong fluctuations in the price of digital currency due to the high level of speculation. The study describes in detail the potential attacks on blockchains. Also explained is how hackers attempt to track transactions and gain access to private keys. According to the study, if completely new blockchain systems are developed, changes to the existing software technology could potentially lead to security vulnerabilities that could be exploited by attackers.

The study shows in detail what is required to successfully implement blockchain concepts in practice and the different options that are available. Above all, the HPI  scientists look at further developments in blockchain technology, which, with its programmable decentralized trust infrastructure, can facilitate not only currencies and values, but also complex contracts between several partners—so-called smart contracts. As reflected in the HPI study, promising fields of application include, in addition to the rental of apartments and vehicles, the trade in artwork, voting systems or the management of health data.

The advantages of blockchain technology extend to the management of digital identity, the secure exchange of information between devices on the Internet of Things (IoT), trade in locally produced renewable energy and increased efficiency in supply chains.