Blockchain/Cryptocurrency was touted to be the next big thing when it was introduced some years ago. Granted, it has had a high impact on the world. Its wide range of applications such as the Internet of Things (IoT), Smart Contracts, and other uses make it a great innovation.
Nevertheless, it is not yet Uhuru for this powerful innovation. Some problems are preventing it from achieving its full potentials.
This article discusses some of the top 10 problems crypto/blockchain must overcome to fulfill the dreams of its creator.
1. Slow Transaction
Blockchain works similarly with an accounting ledger. The difference is its mode of operation. Unlike the traditional ledger, it keeps records across a network. However, its transaction speed is one of its numerous challenges.
While some transaction processing software programs can handle thousands of transactions every second, blockchains can only manage a few transactions within that period. For instance, Bitcoin and Ethereum blockchains can handle between 3 and 15 transactions per second.
2. No Regulation
The lack of regulation of Blockchain makes it a risky innovation. This may expose an investor to market manipulation and scams that arise from the problem. According to Forbes, OneCoin, which was considered a genuine cryptocurrency, was actually a Ponzi scheme. Investors lost millions of dollars worth of investment to this problem.
The respected website wrote:
Among the high profile cases is Onecoin – recently revealed as a Ponzi scheme which is believed to have robbed millions from investors who believed they were getting in early on what would become the “next Bitcoin“.
If this trend continues, potential investors may lose interest in cryptocurrency.
3. It is Complex
While someone with a good technology background can easily understand how cryptocurrency works, you cannot say the same for an average person. People may not fully understand what the technology is now and how they can maximize its potentials. Inventors should work towards simplifying the concept for potential and existing users.
Satoshi Nakamoto, the alleged creator of Blockchain, envisaged a technology that will allow peer-to-peer exchange through digital currency. This may not happen because digital currencies keep changing in value. Blockchain‘s inconsistent value makes it a risky means of exchange. This is a massive problem that it must overcome if it hopes to sustain its original intent.
5. Huge Mining Cost
Cryptocurrency miners are aware of the enormous cost of mining a coin. Miners need intensive computing power to mine digital currency, and this doesn’t come cheap. This is the most common criticism of the technology.
While quoting the report of a study, CNBC wrote:
A study released by Elite Fixtures earlier this year said that it cost more than $26,000 to mine just one Bitcoin in South Korea, which is one of the world’s largest markets for cryptocurrency trading.
The enormous cost is a big problem that must be addressed for cryptocurrency and the blockchain technology to exceed its current acceptance level.
6. Financial Institutions
Banks and other financial institutions benefit immensely from playing the middleman role during transactions. They are gradually losing a substantial part of their profit to cryptocurrency-based transactions. Hence, they won’t fold their arms while this payment option runs them out of business. They will do everything possible to maintain their profit, including derailing Blockchain technology and cryptocurrency, if possible.
Bank of America said,
Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies.
The bank went on to explain the potential impact of people’s investment in cryptocurrency on its operation. It added that the investors’ decision would “negatively affect our earnings or the willingness of our clients to do business with us”.
Many banks and financial institutions share the bank’s view of cryptocurrency as a formidable competitor that is currently challenging their operations.
7. Criminal Connections
Forbes ran an article on the illegal connections between digital currencies and criminal activities. According to a former contributor to the high-flying website, Jason Bloomberg,
our primary areas of criminal activity lend themselves to cryptocurrency: tax evasion, money laundering, contraband transactions, and extortion – not to mention the theft of cryptocurrency itself, which is all too easy with Bitcoin.
Cryptocurrency‘s ease of use for funding crimes is one of the primary reasons why several governmental agencies and world leaders are calling for its regulation.
8. Limited Number of Coins
Unlike fiat currency, cryptocurrencies are limited to some coins. For instance, Bitcoin has 21 million BTCs. This implies that when the coins are fully mined by 2140, this number of coins will be in circulation worldwide. What will happen when each digital currency reaches its maximum number of values? Time will tell.
9. Insufficient Skilled Blockchain Developers
Never has there ever been a shortage of blockchain developers than now. As more investors want to leverage the power of this technology, the lack of sufficient experts to handle its development slows them down.
This will have a ripple effect on Cryptocurrency and Blockchain too. In his words, Sherman Lee, a Forbes contributor explained:
Projects are now directly funding those who have an interest in blockchain programming because there is a severe skill shortage in this space. …The average salary of a blockchain engineer in Silicon Valley is $158,000. Nevertheless, programmers who have experience in Solidity (language for creating smart contracts) is in short supply and high demand.
In the absence of sufficient developers, the industry can’t meet its expected growth and impact.
10. Security Challenges
The Blockchain idea was sold with a high-security system that makes it practically safe. A hacker must gain 51% control of the entire network before a successful operation can take place. Initially, that was impossible. However, recent events are proving otherwise. They are exposing the security loopholes in the Blockchain technology.
Recently, some hackers took over 51% of Ethereum Blockchain. Cointelegraph captured this attack and its implications in its article “Ethereum Classic 51% Attack – The Reality of Proof-of-Work”.
These are the enormous obstacles that Blockchain/Cryptocurrency has to overcome to achieve the desire of the creator. Without that, the technology may never reach its full potentials.