Despite the growing popularity of blockchain technology, it is hardly worth considering one as the panacea to all problems of humanity. Bitcoin and other blockchains platforms are not free of weaknesses and vulnerabilities. So, let us consider the major problems preventing the technology to become a miracle cure to all societal and industry ills.
Negative Effects of Blockchain on Environment
At least in the current implementation, it does. The blockchain technology uses cryptography to ensure security and consensus within the network, and the user needs to perform complex and expensive calculations to get permission to write to the blockchain. Complex algorithms require large amounts of computing power.
For example, it is estimated that that the computing power required to keep Bitcoin network running consumes as much energy as 159 countries consume in a year.
Of course, smaller blockchains are much more economical. Nevertheless, this is an important consideration — energy costs money, and its production harms the environment.
Lack of Regulation Contributes to High Fraud Risks
Of course, this claim is largely valid for cryptocurrency blockchain networks. Nevertheless, the fact is that during recent months, a lot of crypto investors have lost their money, it’s a very volatile environment.
The lack of regulatory oversight is leading to fraud and market manipulation. As in many other high-tech related areas, legislation often does not keep pace with innovation, which paves the way to new scam schemes.
Even if you chose for trading the relatively established coins, there is always a chance that the exchange or your online wallet will be hacked, shut down by governments or the owner will simply run away with your money. All this is a consequence of the lack of regulatory oversight in the sector.
Blockchain Remains Under-appreciated by Common Users
Although the breakthrough features of the blockchain is obvious, it takes a while, and a good bit of reading, before a common user can see what makes blockchains potentially so useful.
When tech experts talk with one voice about fraud prevention and replacing the middle-man facilities traditionally provided by the financial services industry, in practice banks provide this service adequately well.
It’s no coincidence that Bitcoin has been invented immediately after the financial crisis of 2008, against the backdrop of a growing distrust of existing financial tools and institutions.
Eleven years have passed since then, is there still demand for such radical changes as the complete restructuring of the financial industry? Of course, the 2008 financial crash was very unexpected, and we don’t know what is yet to come. Global turbulence could resurrect desire for change, but currently, blockchain remains a terra incognita for end users.
Blockchain can be slow and cumbersome
Complexity of blockchain based systems could cause blockchain transactions can take a while to process, compared to “traditional” payment systems, that is, with cash transfer or credit card payment. Bitcoin transaction processing can take several hours, so you can’t to pay with bitcoins for cup of coffee at the cafe.
Theoretically, the same applies to other blockchain networks, designed not to transfer value, but to store some other transactions. The fact is that the blockchain is just a computer file, access to which becomes slower as the number of computers accessing to the network grows. It’s possible that progress in data processing will solve this problem, but today it remains relevant.
Financial Industry to Gain from Blockchain Death
Despite the huge interest in the implementation of the blockchain within the financial industry, its representatives would be glad if it just quietly disappeared.
Banks make huge profits from intermediary services, earning their interest from millions of customers. Back in 2015, one of the former leaders of Barclays Bank called enthusiasm of financiers for the blockchain “cynical”, saying that it is related with the desire to control or even block the development of the technology.
Banks have enormous influence on governments and legislators, and if at some point they decided that the technology is out of their interests, they would probably be able to reduce its usefulness and limit accessibility.
However, despite the above challenges, the blockchain will develop in over the coming years. As technological progress is able to find its way around man-made barriers.