What do land titles, marriage certificates, diamonds, ballots, aircraft parts and medical records have in common? They are all said to be managable in radical new ways "on the blockchain". But what does it mean to be "on the blockchain"?
To put a physical asset "on" the blockchain is a metaphorical way of saying that a thing is going to be somehow represented by a symbolic value or "token". We do this all the time of course. Almost every piece of data in every computer system stands for something else. To get a thing represented on the blockchain requires a mapping or translation. Actually it requires two.
Firstly, the asset in question needs to be represented by a blockchain token. For example, Everledger uses a public blockchain to record diamond movements. Each gemstone over a certain weight or value these days has a micrososcopic barcode etched into it; it is that barcode number which is inserted as metadata into an Everledger blockchain transaction, to represent transfer of ownership. Secondly, physical asset owners need to be registered with their respective account keys. This mapping can be pseudonymous, but buyers and sellers of diamonds for instance need to be confident that all counterparties really do control the keys they claim to.
What's unique about the native blockchain is that it works without any of these mappings. With Bitcoin, nothing matters off the chain. Bitcoins themselves don't exist off-chain. In fact they don't exist "on" the chain either; the blockchain itself only records subtractions and additions of purely abstract balances.
Furthermore, possession of the private key is the only thing that matters with Bitcoin. Control a wallet's private key and you control the wallet balance. The protocol doesn't care who is in control; it will simply ensure that a quantity of Bitcoin will be transferred from one balance to another, regardless of who "owns" the keys. It's an agreed property of the system that Bitcoin is like cash; if you lose your Bitcoin private key and the balance that goes with it, then there's nothing you can do about it. There is no regulator or reserve bank to look after you and your deposits. You're on your own.
So unlike any other serious cryptographic security system I can think of, the Bitcoin blockchain has no key management. Bitcoin wallet private key pairs need not be mapped onto any person, nor imbued with any extrinsic significance. They are not associated with (bound to) any real world attributes. Bitcoins have no symbolic meaning. They are what they are. And in fact that is blockchain's magic trick!
But make a blockchain token stand for anything in the real world and you break the spell. Symbols are defined by authorities, and, when physical goods are in play, keys and attributes can only be dependably assigned to individuals by third parties who vouch for who holds what. If you have administrators, like the folks that etch barcodes into diamonds and initially register specific stones to particular owners, you just don't need the additional overhead of the blockchain. The blockchain exists purely to realise Bitcoin inventor Satoshi Nakamoto's express assumption that nobody in this system of electronic cash was to be trusted. Nakamoto dispelled all third parties and agents who normally are needed to map real world things into digital codes; he/she wrote in the foundational Bitcoin whitepaper (PDF) that the "main benefits [of blockchain] are lost if a third party is still required".
Key management -- the administrative processes that make sure the right keys are in the right hands, and that they stay that way -- is simply not required by the permissionless blockchain.
Bitcoin is often said to be anonymous, but its really special property is that it has no meaning. It's truly amazing that such a thing can have value and be relied upon, which is a testament to its ingenious architecture. Blockchain was deliberately designed for an uregulated crypto-currency. It's brilliant yet very specific to its intended trust-less environment. To re-introduce trusted processes simply undoes the security architecture.
In short, blockchain's only unique proposition is for purely digital assets. It was expressly designed to enable people to exchange electronic cash without having to know anything about each other, and without relying on (trusting) any third party. That's why blockchain involves such extravagent computing resources - they stand in place of regular administration and oversight.
In applications where parties do need to know something about each other - like their permissions, credentials, identity, professional registration, financial bona fides, eligibility, rights to a physical asset, or even their simple uniqueness as in the case of voting - the proceses needed to establish those things trump the blockchain consensus algorithm. Wherever there is an off-chain process to tell us a user is authorized or permissioned, the on-chain consensus becomes academic. There is an easier way to work out the state of the ledger than crowd-sourcing the consensus process, pretending that there isn't an administrator in the background!
So apart from cryptocurrency, I just don't see how any use case for the straight blockchain stacks up.
