The world is becoming digital day by day. With the rise of new technologies like IoT, AI, machine learning, blockchain, and many others, we are witnessing a fundamental change in how people interact with each other and their environment. Blockchain was the most talked about technology at last year’s World Economic Forum – it was mentioned in 40% of all sessions – but what does it mean for us? And more importantly, is blockchain the ultimate solution for all our technological woes?
Blockchain is a distributed ledger technology that underpins cryptocurrencies like bitcoin. It allows for digital records or blocks that cannot be modified once they are recorded. Moreover, it ensures data integrity and security because every user on the blockchain has access to the same information. No wonder this makes blockchain ideal for maintaining permanent records of transactions, contracts, assets, etc. Since no single person controls any data stored on a blockchain network – all users have equal rights to manage it. Blockchain networks don’t rely on centralized servers, creating greater transparency and trust between parties.
Blockchain’s decentralized nature makes it less vulnerable to hacks than centrally managed databases. Blockchain networks use advanced cryptography and consensus protocols that allow nodes in the network (individuals, organizations, etc.) to validate transactions without compromising their security. By eliminating the need for third-party intermediaries, blockchain technology provides greater efficiency while also reducing transaction costs significantly. It was no surprise that over $12 billion was invested into blockchain startups last year alone, and according to PwC, this figure will double by the end of 2022. But, despite its many benefits, there are some concerns about blockchain that we should all be aware of.
Blockchain is not quite the green technology it’s made out to be. At present, bitcoin mining alone consumes more power than 159 individual countries put together. This number will only grow as cryptocurrencies become more widely used in everyday transactions. A recent report by Morgan Stanley estimates that blockchain-based currencies could use up to 140 terawatt-hours of electricity by 2025. That would represent an almost 20% increase in global energy consumption. Currently, one transaction requires 215 kilowatt-hours (kWh) of electricity. And if bitcoin power consumption increases at its current rate, it would cost $8 billion per year in electricity costs. This amount exceeds Ireland’s annual energy bill! As a result, researchers are concerned about how much environmental damage is caused by bitcoin mining.
Lack of regulation creates a risky environment
A lack of clear data protection and privacy laws around blockchain is another big concern, especially as the technology becomes more widely adopted. Regulations that govern cryptocurrencies and blockchain transactions are still in their infancy. No country has yet crafted a regulatory framework for digital currencies, which means there’s little to stop malicious actors from exploiting these technologies for illegal purposes like money laundering or tax evasion.
Blockchain is incredibly complex and difficult to use and understand
The learning curve for understanding how blockchain works can be pretty steep, so many companies are turning towards experienced third-party app development firms to help them get up to speed with the new technology. The lack of an industry standard makes it hard for businesses to use the technology. Since blockchains mostly rely on software rather than hardware, they’re also more likely to crash and fail because their underlying infrastructure is less stable and secure than stable servers. This was painfully evident when Ethereum suffered what was described as “one of biggest DDOS [denial of service] attacks in history,” with the network going offline for a brief period.
Blockchains can be slow and cumbersome
Finally, a fundamental drawback of blockchain is that it can be slow and cumbersome. Every transaction on the network has to be independently verified by each node means transactions take time to process. This becomes particularly problematic when you’re trying to complete high-value deals at scale. And although new technologies like sharding are expected to improve speeds over time, for now, blockchains will always lag behind more conventional databases.
Blockchain technology may be promising, but it’s not the ultimate solution for all our technological woes just yet – and this is something we need to keep in mind as its popularity continues to grow exponentially around the world. Just because blockchain transactions are immutable doesn’t mean they cannot be hacked. There’s no such thing as perfect security, especially when dealing with digital information that can potentially fall into malicious hands. The environmental impact of cryptocurrencies needs to be brought under control before people start adopting them everywhere. By that point, it would already be too late to implement environment protection standards, and blockchains will end up causing more problems than they solve.