Blockchain has taken the world by storm. Whether it’s in the form of cryptocurrency or an application designed to cut out middlemen, people are very excited about the capabilities of the blockchain. But the talk of blockchain changing the world may still be a bit premature. We know that the technology is still in its infancy and faces significant issues that must be solved if blockchain is ever going to fulfill its massive potential.
Before blockchain can revolutionize currency and many other sectors, serious problems must be addressed. Jordan Lindsey, an early investor in crypto and the founder of the Bitcoin Growth Bot, is one of the rare few who is not afraid to take a hard look at the problems associated with blockchain. After all, that’s the first step to solving those problems. Here are five problems with blockchain that must be solved.
Blockchain Has an Energy Problem
As of Monday, November 20th, 2017, Digiconomist’s Bitcoin Energy Consumption Index discovered that Bitcoin uses more energy than 159 countries. This enormous amount of energy consumption presents a very real problem. Part of the problem is that every node in the blockchain network is required to verify each transaction.
This problem is compounded by the fact that Bitcoin relies on encryption to provide security and consensus across the network. For each node to prove that the transaction is legitimate, computers are required to solve complex mathematical equations. These computers must use a large amount of power in order to do so.
Smaller blockchains currently don’t have the same energy problem that Bitcoin does. But as any blockchain grows larger, developers will need to find a way to reduce the computational energy required. Otherwise, the economic and environmental toll will be unsustainable.
Lack of Regulation Brings Risk
When innovators innovate, regulators are usually left scrambling to play catch-up. The innovation in blockchain has given predators many easy targets to scam while regulators are catching up. Most ICO’s are legitimate, but nevertheless, some have been revealed as nothing more than Ponzi schemes.
Moreover, cryptocurrencies using blockchain have been at the center of a lot of illicit use cases. The anonymity provided by blockchain is extremely attractive to criminals engaging in terrorism, drug trade, and money laundering. Regulators also worry that cryptocurrency provides an avenue for additional tax evasion.
Many early adopters of blockchain technology and cryptocurrencies are currently railing against regulation since one of the central concepts behind blockchain is decentralization. In fact, coming regulation has a lot to do with the current downswing in the price of many cryptocurrencies. But regulation isn’t necessarily a bad thing. Regulation can bring legitimacy to blockchain technologies that allow their adoption to become more mainstream.
Moreover, while Jordan Lindsey is sure to advise the followers of his YouTube channel to always pay attention to new regulations, it’s important not to overreact. Instead, take the long view. Of course, it’ll take some time to figure out regulations, but the potential of the blockchain will never be completely stymied.
The Blockchain Isn’t User-Friendly
Chances are if you have even a basic understanding of blockchain technology you had to do a fair bit of reading and critical thinking to understand it. And we’ve all seen that blank stare on our friends’ faces as we describe the digital public ledger. This problem may seem trivial, but in order for blockchain technologies to have a big effect, they need widespread adoption.
Additionally, the actual interface of many blockchain technologies is not user-friendly. Cryptocurrencies require an e-wallet which is a concept many are not familiar with and don’t trust. The less technologically-inclined people will have serious difficulties using this technology.
Again, this is important because many blockchain technologies need widespread acceptance to be effective. People tend to choose the path of least resistance, and if they can’t see how blockchain technologies can make their life significantly easier they are likely to stick with the status quo. Investors like Jordan Lindsey are actively working to solve this kind of problem by educating the public on the new technologies, but more must be done.
As Blockchains Grow They Get Slower
In today’s society speed is king. People want things done quicker and quicker. However, the larger a blockchain gets, the more computational power required to solve the mathematical puzzle. This additional computational power also requires more time. Bitcoin, for example, requires ten minutes per block, and during peak transaction times it can take hours for your transaction to be accepted.
This means that there is no guarantee your transaction will be completed in a reasonable amount of time. With a smaller blockchain, the nodes can handle the number of transactions and therefore you’ll have a consistent amount of time until your transaction is posted. But as we see Bitcoin grow larger and larger, only certain transactions can be handled in a single 10-minute block. The result is large fees to get your transaction done quickly or a long wait.
Payment methods like cash and debit cards make transactions much quicker. People are unlikely to change systems when transactions are so inefficient. Developers must address these computational problems if the blockchain is to become more mainstream.
Banks and Government Have a Vested Interest in the Failure of the Blockchain
The simple reality is that big banking and governments have a vested interest in maintaining the status quo. Big banks have extreme lobbying power and can actively fight against changes that would cost them their power and money. Whereas the average citizen takes the path of least resistance, banks will likely fight tooth and claw to make sure they aren’t marginalized.
The government also benefits from the traditional system of currency which blockchain threatens to change. The Federal Reserve allows the U.S. government to print money and spend it before suffering the effects of inflation. This strategy works great for governments but not so great for the citizens. It will take a very active movement from the citizens for widespread adoption of blockchain technology.
To be fair, there are also blockchain technologies that can benefit the government. One example is data storage systems on blockchain that can streamline the large amount of data governments need to store. In fact, in a recent video on Jordan Lindsey’s YouTube channel, he pointed out a provision in a bill passed by Donald Trump that called for more research into blockchain technology.
Will Blockchain Live Up to Its Potential?
Just because blockchain has serious issues doesn’t mean that it isn’t going to be as impactful as people think. Innovation has a way of washing away problems that naysayers come up with. Blockchain and cryptocurrency technology are still in their infancy. While it is clear the blockchain is still far from perfect, there are very smart people around the world working hard to improve and fix those issues.
The issue with computational power could be solved with an advance in data processing technology. As the technology is perfected, developers will work to create more user-friendly interfaces. Some regulation could help mainstream acceptance of blockchain and cryptocurrencies by preventing illicit activity. Ten years from now these problems could be completely obsolete. That’s why investors like Jordan Lindsey will continue to invest and participate in the growing blockchain technology movement.