Blockchain Problems Exist, Or are They Just Limitations
Whenever a new technology emerges, expectations skyrocket as to what it accomplishes and how it changes the world. Personal computers brought digital technology to the masses, yet large corporations continue to depend on mainframes. The internet connected everyone, but as a result, no one keeps their privacy.
In The Beginning
Satoshi Nakamoto invented blockchain in 2008 as the technology underlying Bitcoin. Blockchain provides a decentralized mechanism where transactions occur without any of the parties needing to trust each other. Asymmetric cryptography ensures security and privacy.
Even in the context of the Bitcoin network for which it was created, blockchain problems exist. The rigid monetary policy of Bitcoin limits transaction completion to once every 10 minutes. Modern business demands faster results.
Vitalik Buterin identifies scaling as a primary concern that needs to be addressed in blockchain technology. He made the following comments in September 2017 in an interview with Naval Ravikant at the Disrupt SF 2017 conference:
“Bitcoin is currently processing a bit less than three transactions a second; and if it goes close to four, it’s already at peak capacity. Ethereum over the last few days, it’s been doing five a second. And if it goes above six, then it’s also at peak capacity. On the other hand, Uber on average — 12 rides a second, PayPal — several hundred, Visa — several thousand, major stock exchanges — tens of thousands. And if you want to go up to IoT, then you’re talking hundreds of thousands…”
Show Me The Money
Consequently, the purpose of Bitcoin evolved from Satoshi’s original vision. He titled his white paper “Bitcoin: A Peer-To-Peer Electronic Cash System“, but these days you hear more talk of Bitcoin being a store of value like gold rather than electronic cash. A store of value does not require the speed of electronic cash transactions.
This also introduces blockchain problems in the form of tribal warfare. One tribe argues for the purity of Nakamoto’s original vision, and another tribe argues for innovation. Consequently, various blockchains proliferate. This blockchain does this, and that blockchain does that, and another blockchain does something else again. All this creates a mass of confusion about who knows best and which way to go forward.
Assume the future holds a multitude of various blockchains you use, just like you currently visit a variety of different websites. The decentralized nature of blockchain demands you host some version of a network node on your computer or device. How many nodes will you need? When will the storage requirements burden your system? What other pitfalls await you in this scenario?
Peter Picked a Peck of Wallets
And cryptocurrencies require wallets for storage, but no single wallet stores every cryptocurrency. You need multiple wallets. How many wallets will you need to keep track of? You lose a wallet, and you lose your money. What if your wallet crashes but you lost the seed? What happens if you die but your heirs have no way to access your wallets?