Challenges Associated with Blockchain

Even though the buzz around the blockchain technology has been gaining traction for a while now, like everything else, blockchain comes with its share of problems. It surely is a revolutionary technology which will change our daily interactions and upset the way businesses tend to work, some large organizations, especially CIOs, are turning away from it.

We already know what the technology has to offer, but, let us take a look at where it stands currently and what problems seem to plague it. Researchers and experts in the field have warned that it does not fit every business need and that a thorough analysis is always necessary when making the jump.

Fairly New Technology

The concept of blockchain was introduced to the world by Satoshi Nakamoto (which is probably a pseudonym for a person or a group). The major applications of blockchain revolve around two things: cryptocurrency and money related transactions.

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Even though the pace at which it is advancing is quite fast, only ten years have passed since its inception. There are two major platforms, Ethereum and Hyperledger, which have proven themselves to be quite effective at what they do.  That being said, we are still unsure of what issues might arise in the near future.

For example, considering Ethereum's script responsible for the smart contacts feature, Solidity, in its current iteration, lacks the support for dealing with decimals. To overcome this shortfall, developers might even need to start from scratch.

Data Storage Issues

The most prominent feature that blockchain has to offer is its write once, append many nature.  This makes it attractive to a lot of developers but can create issues in various scenarios.

To understand this better, let us take an example. Suppose if the user includes any type of graphics such as an image or something else in a transaction, the capacity required to store all the transactions will skyrocket.

This issue is that blockchain replicates every transaction or record to every system on the network.

Security And Vulnerabilities

There are two types of blockchain in general, public and private.

Public blockchains let anyone join the network. The most prominent example of this is Bitcoin. Anyone can purchase the cryptocurrency and start contributing to the network right away.

Private blockchains are generally used by large organizations such as IBM and unlike public networks require some sort of authentication to join.

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Even though every record on the blockchain is immutable, meaning they cannot be modified in any way, any exploit and vulnerability in the network can cause a massive financial or data loss.

In 2016, a Hong Kong-based crypto exchange named Bitfinex reported that around 120,000 bitcoins were stolen. This directly translated to a loss of approximately $68 million at the time.

When the system was analyzed, the culprit was believed to be the bitcoin wallet provider BitGo, which had some software vulnerabilities.

Scaling Problems

Blockchain makes use of various mathematical principles to create a distributed ledger amongst its users, making it computationally intensive to store and update records.

Since every new transaction is serialized, the rate at which it can be updated is much much slower when compared to databases, which offer the ability to update records in parallel.

Back in January this year, the Miami Bitcoin Conference refused to accept Bitcoin as a mode of payment because of network congestion and increase in fees incurred.

This was quite ironical considering that the conference was about Bitcoin itself and its ability to make a worldwide impact.

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However, it gave us a glimpse of the scaling and network problems regarding the technology.

The rate at which corporates and industries are adopting the technology is quite fast. Even though there are some fundamental problems with the technology at the moment, we should always keep in mind that every technology has its own set of pros and cons.

Various researchers are already working on the underlying mathematical challenges which come into play wherever blockchain is used.

As is the case with every new technology out there, Blockchain will eventually be able to solve this shortcoming with the increase in advancement and research.