The implementation of blockchain technology is being explored in many sectors ranging from financial services to shipping. However despite the excitement surrounding the technology the mass adoption of blockchain is going to take a while due to the fact that there are still a couple of challenges bedeviling it.
One of the limitations that blockchain technology faces is scalability. Currently the technology is facing problems supporting a big number of users on a network. This has been exemplified by the two leading blockchain networks, Ethereum (ETH) and Bitcoin (BTC), experiencing higher fees and slowed transaction speeds due to the substantial increase in the number of users. To solve the problem of scalability a lot of research has been conducted and this has led to widely varying proposals meaning that it will take a long time before there is agreement on a solution.
While unfair and not representative of the whole picture blockchain technology has long been associated with the criminal underworld. This is because initially one of the places where Bitcoin (BTC) was widely used as a means of exchange was in the dark web and the black market. Since this is how many people came to learn of Bitcoin they have tended to associate blockchain technology and cryptocurrencies with criminals.
While this is not the whole story matters are not helped by the fact that research continues to show that digital currencies are still favored by criminal elements as a money-laundering tool, in purchasing restricted materials and a means of payment in ransomware cases.
Though all these illegal activities can be carried out using fiat currencies digital currencies are especially convenient for criminals. Blockchain technology must therefore shake off this association with crime if it is to be widely adopted.
Some blockchain networks are also suffering from inefficient technological design and this is hampering the adoption of the blockchain technology. The smart contract platform of Ethereum for example allows the development of decentralized apps (DApps) for a variety of use cases. Though the leading virtual currency is Bitcoin the network of Ethereum lets users integrate real-world applications in the blockchain. But reports demonstrate that some smart contracts deployed on the platform of Ethereum are coded poorly and thus suffer from vulnerabilities.
In the case of the Bitcoin network, there is a tendency to include a lot of information some of which is not essential and making the blockchain heavy and slow. For blockchain technologies to find more users there is need to streamline and optimize their design with a view to minimizing the inefficiencies inherent in them.
Since most blockchain implementations apply the proof-of-work concept with a view to achieving consensus, this technique results in massive energy consumption. It has been estimated that Bitcoin ‘miners’ use up around 0.2% of the electricity in the world annually.
While that would be manageable at current levels, the consumption is increasing rapidly and by 2020 the network of Bitcoin will require more electricity than the world’s total generation capacity.
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