Main Issues Delaying Blockchain Technology’s Global Expansion Takeover
Issues Stopping Blockchain From Expanding All Over the World
Blockchain and distributed ledger technology (DLT) have been expanding and reach an important number of companies and governments everywhere. The appeared in the market as a very useful tool in order to change the way in which we live and conceive decentralization. But there is a major problem: which decentralized solution already implemented has already substantially changed an industry?
Advantages Of Using Blockchain Technology
DLT has several advantages and that developers take into account before starting operating with it. It makes it very simple to verify the integrity of the database, it allows for timestamping all the changes, it is possible to have a back up in real time, it provides consensus to a decentralized environment and, finally, it is very easy to audit the records in real time.
These advantages can help different areas, but there are some disadvantages that are worth to mention and explain. We are talking about governance issue, responsibility issue, constantly growing volume of data, capacity issue and confirmation time issue.
The Governance Issue
If there is a group of individuals trying to implement blockchain technology, is because there is something that must be accomplished. A key point to mark is that participants in the network do not trust each other, and there is a special need to find a consensus in the community. But it is very difficult to determine which are the conditions for it to happen. But these conditions are very important because they would allow the network to have an accurate decision making process in a decentralized community.
Let’s put an example. Ethereum and Ethereum Classic are a great way to show what it means to have a decentralized governance system. In the past, hackers were able to steal 50 million dollars in Ether. Ethereum’s co-founder, Vitalik Buterin, proposed a solution that upgraded the protocol in an artificial way without the ‘bad transaction’ on it.
In order to do so, it was necessary for the community to decide on the matter. They were able to reach an agreement, and the Ethereum network split into Ethereum (ETH) and Ethereum Classic (ETC). Those who did not accept the change remained in the ETC chain, and the ones that preferred to recover the funds moved to ETH.
This is a very controversial situation. Of course, the decision has been made by the community, in a decentralized environment and mechanisms, but there are still lots of problems around this situation. And we move to the next issue, responsibility.
In general, individuals are very used to centralized governance systems. Indeed, politics works in that way, mostly everywhere around the world. And it helps people find always who to blame if there is a problem or conflict. The same happens with bank accounts, or financial institutions. If there is a problem, it is possible to go to the bank and solve the situation.
But there is a big difference with decentralized networks. In this case, the user and individuals take the full responsibility. More freedom is always related to more responsibility. Each user is involved in the process of managing the state of the network. All the participants verify the activity correctness of others, and it is not possible, even for a court, to decide on how the protocol works. So far, the management of digital assets is beyond the power of any authority or court that could decide on it.
Responsibility in decentralized systems is quite complicated and vague. All the participants involved have to accept their own risks and governments should start to adopt new behaviour models that include such decentralized systems.
Volume Of Date Constantly Expanding
Another important thing to mention is that there is a constant growing volume of data in each of these decentralized networks. The centralized ledger only stores the the final condition of the database, while decentralized systems the decentralized ledger stored the whole history of transactions, changes and information that has been moving since the very beginning.
Because there is a very big amount of data, it is a key point to mark that there should be a different approach applied. New rules should be created and taken into account for the future.
Decentralized network have lower capacity than centralized ones, and this is a very important issue. MasterCard or Visa are able to verify thousands of transactions per second, while the decentralized system needs to spread the data across all the participants in the network. Moreover, all the participants need to reach consensus on this data.
In order to store such data, it is necessary to use a lot of resources, which reduce the performance of the system (Bitcoin can only process between 4 and 7 transactions per second).
What About Confirmation Times?
This is also a very important topic to discuss about and mention. Participants need to reach consensus among each other, and this affects the response time of the whole network. For example, a fully confirmed transaction in Bitcoin can be processed after an hour, meaning that 6 blocks have been mined after and individual sent a transaction.
At the moment, there are some solutions that may be ready to be applied in the near future. We are talking about Lightning Network (LN) which will certainly solve the problem of low transactions and confirmation delays.
Some consensus protocols are not able to solve the very problem of the network throughput but increase the performance factor.
Blockchain technology expanded all over the world, and indeed it keeps doing it. But there are some issues related to it that must be addressed if the technology wants to completely change the way we conceive systems.
There are many issues around decentralized ledger technology that must be controlled, understood and improved.