Limitations and Issues of Blockchain

Current issues and limitations of the blockchain technology in terms of scaling, privacy, storage, security and consensus

We have already talked about advantages of blockchain and what is is used for, however, the question of its disadvantages is still open. In this article we'll provide an overview over the key problems and limitations of blockchain.

Blockchains are the new way of establishing decentralized trustless communication and interaction, and their potential is far from being fully explored. However, they are not perfect. They have their inherent limitations and issues that we have yet to find solutions for.

Scaling

Public blockchains, such as Bitcoin or Ethereum, need their every node to verify each transaction. This explains the overall slow processing of transactions and leads to occasional bottlenecks in the system. Relative to other common payment systems, cryptocurrencies are at a big disadvantage. Bitcoin, for example, can process as few as seven transactions per second, which is not at all comparable to Visa, Mastercard, and Paypal standards. There are, however, various solutions proposed and being implemented to address scalability issues, such SegWit, second-layer protocols, and blockchain sharding.

Privacy

It may seem as though public blockchains are private in a sense that no real identity is tied to an address. However, the transaction history of each address is entirely open for public examination. Thus, it is not at all impossible that someone can observe transactional patterns and link your identity to the address. Some cryptocurrencies, such as Monero and zCash, offer privacy by using stealth addresses, ring signatures, and zero-knowledge cryptography.

Storage

Another inherent limitation of blockchains is storage constraints. Most blockchain networks require their full nodes to have the entire history of transactions on their computers. And it has to be always up to date in order for the node to be able to verify new transactions. So if you want to become a full bitcoin node, you will have to have at least 165 Gb (as of July 2018) of space on your disk. And as blockchains grow, it is only going to be harder for regular people to participate. Hopefully, it is only a matter of time until we come up with a solution, which does not destroy the whole principle of decentralized control.

Security

No central point of failure proves to be the blockchain’s advantage over server-client architectures. However, blockchains are not without their own security flaws, such as the 51% attack. The truth in a blockchain network is established by the majority of nodes. If more than half the nodes collectively decide to tell a lie, the lie becomes the truth, and there is nothing the rest of the nodes can do about it. The threat of a 51% attack becomes only more potent, as major mining pools gain more computing power. According to blockchain.com, the four biggest mining pools have 60.3% of bitcoin’s total hashrate (as of July 2018). If they decided to join together, they could make a big mess and bring down the biggest cryptocurrency there is.

Consensus

Bitcoin, as well as many other cryptocurrencies, use the Proof-of-Work consensus. This means that their nodes have to expend a lot of electricity during mining. This raises big ecological concerns as there has to be a lot of coal burnt to serve the blockchain industry. Some blockchain projects are now coming up with new environment-friendly consensus algorithms, such as Proof-of-Stake, Proof-of-Capacity, Proof-of-Authority, etc. Ethereum recently has made a big step in this direction by adopting Casper, a hybridized Proof-of-Work, and Proof-of-Stake consensus protocol.

BTC

8,744 USD
-0.58%

ETH

272.72 USD
0.13%

ZEC

85.65 USD
0.31%

XMR

96.55 USD
3.03%

Related news

Bakkt Launches Futures Contracts, Bitcoin Price Falls

Bakkt, a subsidiary of New York Stock Exchange owner Intercontinental Exchange Inc (NYSE: ICE), launched its long-awaited physically backed Bitcoin futures Monday.  The first Bakkt/ICE futures contract changed hands at $10,115 and the number of contracts in the first hour stood at just five total, CoinDesk reported. It's widely belived in the ...Full story available on Benzinga.com
Benzinga

CME Group to Launch Bitcoin Options in Early 2020

Over the years, cryptocurrency has developed at a remarkable pace, and an investment instrument like Bitcoin options would have been unthinkable even a few years ago. However, the march of Bitcoin, blockchain, and cryptocurrencies has been relentless. Hence, it is not really a surprise that options are at last going to be launched for the biggest cryptocurrency in the world by market cap—and by CME Group no less. More Leverage for Crypto Traders In a new development, the Chicago Mercantile Exchange (CME Group) has announced that options are now going to be made available to traders ... ﾿ Read The Full Article On CryptoCurrencyNews.com Get latest cryptocurrency news on bitcoin, ethereum, initial coin offerings, ICOs, ethereum and all other cryptocurrencies. Learn How to trade on cryptocurrency exchanges. All content provided by Crypto Currency News is subject to our Terms Of Use and Disclaimer.
Crypto Currency News

Will The Binance.US Launch On Tuesday Inspire A Bitcoin Price Breakout After A Fail With The Bakkt Launch?

The Bakkt launch that went live a few hours ago has not had the desired result. Analysts have been predicting that its launch would bring in traditional investors such as Wall Street and trigger an upward move. In the first day, this has not been the case. With the launch failing, there is a new development that could potentially boost Bitcoin and see it Breakout, finally cementing its support above $10K. The launch of Binance.US. Its shortcomings could propel Bitcoin upwards, however, this comes at the cost of altcoins. Binance exchange has announced that its American arm, Binance.US, will commence trading on Tuesday.  Last week the exchange began registration and accepting deposits from the U.S. Residents will no longer be allowed to trade through the global platform as the exchange announced months ago. This has come at a cost for investors. Due to the regulatory framework in the U.S, the exchange will not be able to offer as many trading options as it does in its main platform. For now, Binance U.S will only offer Bitcoin, Bitcoin Cash, XRP, Ethereum, Tether, Binance Coin, and Litecoin. Regulatory Hurdles To Boost Bitcoin The U.S is one of the largest crypto markets and Binance one of the biggest exchanges. The limit on trading options is expected to have an effect on market dominance and price movement. In the face of it, it could lead to Bitcoin and the few coins on offer gaining more dominance and their prices soaring, leaving the other lot of altcoins in the wind. Hopefully, as the exchange has stated, more coins will soon be listed. This include, Stellar, 0x, BAT, and Ethereum Classic. Notably, limited trading options is not the only regulatory problem facing Binance US. The launch will be restricted in several states including New York. The other 12 states include Florida, Texas, Louisiana, Hawaii, Idaho, North Carolina, Connecticut, Alaska, and others. Bitcoin Price Update And Prediction Bitcoin at the time of press is trading below $10K, a support that has continually been breached by the bears in the last few months. The Bakkt launch was a potential catalyst that should have seen prices breakout. With Bakkt failing, the bulls now set their eyes on the Binance US launch that should see a change in trends and prices for the digital asset. The post Will The Binance.US Launch On Tuesday Inspire A Bitcoin Price Breakout After A Fail With The Bakkt Launch? appeared first on ZyCrypto.
ZyCrypto

Hot news

By continuing to browse, you agree to the use of cookies. Read Privacy Policy to know more or withdraw your consent.