Since the introduction of Blockchain in 2008, technology has evolved rapidly. Today, innovators in various fields are exploring ways to use blockchain to disrupt and transform traditional business models. Many industry leaders have already achieved significant business benefits, including greater transparency, enhanced security, improved traceability, increased efficiency and speed of transactions, and reduced costs. There are numerous benefits that this technology can present to businesses in many different industries, through its distributed and decentralized nature. Even though blockchain is a world-changing technology in many ways, it isn’t necessary for it to clear all the problems.
Listed below are a few limitations and issues with blockchain that you need to be aware of.
- Excess Use of Power
Blockchain’s consumption of power is comparatively high. As in a particular year, the power of consumption of Bitcoin miners was alone more than the per capita power consumption of 159 individual countries. Every time it creates a new node, it communicates with each and every other node at the same time. Keeping it a real-time ledger is one of the reasons for this consumption.
- Transaction Costs
Bitcoin is one of the famous cryptocurrencies. The transactions were nearly free in the first few years of its existence. Nowadays, the transaction cost has been increased notably resulting in serious blockchain issues. Currently, the average transaction cost of the blockchain is 75$ – $160. As the network continues to grow, it is clear that at this rate, using Bitcoin will not be the most cost-effective option of transferring money due to rising transaction costs in the network.
One of the notable security flaws in Bitcoin and other blockchains is the 51% attack. This means, if more than half of the computers which work as nodes to service the network tell a lie, the lie ultimately becomes the truth. This flaw was even highlighted by Satoshi Nakamoto when he launched the Bitcoin. Bitcoin mining pools are monitored closely by the community to ensure nobody gains such network influence.
- Human Errors
If a blockchain is being used as a database, the information going into the database needs to be of high quality. When it comes to users, the blockchain provides inalterable protection against manipulative attempts. The inability to change data will serve as blockchain limitations. The data at the blockchain is not inherently trustworthy. Hence it is important to record the events accurately in the first place.
- Network Size
Blockchains require a large network of users. It is necessary for a blockchain to hold a robust network with a widely distributed grid of notes to get a full benefit from it. There are some ongoing debates and discussions about whether this is a serious flaw or not for some blockchain projects.
- Vague Regulatory Status
Every part of modern money has been created and controlled by the central government. As blockchain lacks regulations, this has become another major problem with Bitcoin and other value-based blockchain networks. There is a possibility of market manipulations due to the lack of regulations. Earlier, there were several Ponzi schemes that robbed millions of dollars from the investors. And as this technology is very new, the legislations are struggling to keep up the pace with the innovators.
Also, as there is no such law to save the money from the investor’s pocket, this might be considered as a huge threat for investors in case of hacking of the Bitcoin or other cryptocurrencies. It becomes a hurdle for blockchain to get accepted by many industry leaders as this is a consequence of the lack of supervisory oversight across the sector.
Despite these flaws, blockchain has enormous potential as a way to link, store and track data. The technology presents some unique advantages and it is definitely here to stay. In the years ahead, we are most likely to see businesses and governments experimenting with new applications to find out where blockchain technology adds the most value. Blockchain is at the cusp of revolutionizing all forms of data transfer including music, video streaming, and data backups.