Blockchain is Birthing a Brand New Beginning to Building a Better Digital Economy Despite Imperfections
Blockchain Is A Good Way To Start To Change The World
Blockchain technology has been expanding all over the world and calling the attention of many companies and governments. Decentralized ledger technology (DLT) has also been credited with the potential to change the world and disrupt several industries, including banking systems, supply chains or the health care system.
However, blockchain has been widely overhyped. This does not mean that the technology is worthless and that it does not improve many industries. It means that it is not able to completely change the world. Moreover, not all the problems that different companies have can be solved by implementing a blockchain solution. Indeed, if a project faces a problem and searches solution just implementing blockchain technology, it would for sure lose time in developing a working and simple solution.
One of the most important things that is related to blockchain technology is the ability to keep things private. Blockchain systems are very private and secure. But if consumers do not know how to deal with private keys, they, they could experience problems. This issue is worse in the blockchain industry because there is no way to recover private keys in case they are lost.
Of course, it is possible to use a solution to save these keys using traditional passwords to have access to them. But which is the sense to have private keys secured with traditional passwords?
Another problem that blockchain networks experience is a scalability issue. The most important blockchain networks and cryptocurrencies do face this problem. Transactions cannot be processed or the fees paid are extremely high. Since all these projects are growing everywhere, they also need to have a way to improve their scalability.
One of the many solutions that have been proposed to Bitcoin is known as Lightning, which is an off-chain system that allows Bitcoin to reduce congestion on its main network. The same is doing Ethereum trying to increase the number of transactions that it is able to process.
A third problem related to blockchain networks is the energy demand they consume. For example, in order to process Bitcoin’s transactions, miners need to process complicated formulas that protect the network. This is a very energy-consuming activity. The electricity used by these miners is much more than the electricity consumed by Nigeria, Iceland or Uruguay.
This is clearly unsustainable. It is not possible for the network to expand if it does not have a more efficient system. However, one of the many alternatives is known as Proof-of-Stake (PoS) which allows blockchain networks to process an important amount of information in a very efficient way.
As we are still in the early days of blockchain technology and its development, there is a lack of blockchain experts. If a company is able to find a specialist, then, the services are very expensive and the products built could not necessarily be efficient. Indeed, these services or products built could not even work.
Clearly, there are thousands of users that exchange Bitcoin and other virtual currencies. That means that blockchain is being used to exchange funds. Some experts believe that in the future cryptocurrencies could be used as a common means of payment.
But there is a problem. Cryptocurrencies have never been accepted in many shops and by many companies. And the number of major companies accepting it as a means of payment has been declining in the past couple of years. Additionally, according to a recent survey, just 8 per cent of Americans invested in virtual currencies.
It seems that blockchain technology offers marginal improvements compared to other traditional financial systems and centralized platforms.
Because blockchain networks use to be decentralized, traditional financial institutions do not trust them. And this is a very big problem since these companies control an important part of the market and the banking system. Nonetheless, there are some banks such as JP Morgan that are developing their own permissioned blockchain networks.
Blockchain technology should be used as a stepping stone in order to start to revolutionize the world. There is no single solution to improve current systems, but blockchain technology is certainly a good starting point.