6 disadvantages of blockchain

Blockchain depends on encryption to create consensus over a distributed network and to offer security. This effectively implies that complicated algorithms must be conducted, which requires a lot of computer resources, in order to “prove” that a user has the authorization to write to the chain. Clearly, all this comes with a substantial bill.

In 2017 it was claimed the computational power needed to maintain the network uses as much energy as 159 different countries do. And this data is only for Bitcoin.

In addition to that, according to another poll, it is estimated that by 2018, 0.3 per cent of the world’s electricity has been used in the verification of transactions made using blockchain technology, which is a problem because it takes a lot of energy to validate every transaction.

It’s a very volatile environment, as many people who have just invested in Bitcoin or other cryptocurrencies for the first time have discovered it to their detriment. Scams and market manipulation are widespread as a result of the absence of governmental control.

Even some high-name examples were recently exposed as Ponzi schemes. In this way millions were stolen from investors who thought they were getting in on the “next Bitcoin” when they actually were not. Legislators have mostly failed to keep up with innovators in recent years, as has been the case in many fields of technology (or scammers).

It would be unfair not to take into consideration that there is always a possibility that the exchange or online wallet where you store your coins will be compromised, closed down by governments owing to dubious activities, or just disappear with your funds.

No matter how many benefits the experts list, as with all concepts too complex, it is hard to appreciate them when they are hard to understand.

All right, let’s say one has taken the effort to comprehend the fundamentals of encryption and distributed ledger blockchain is based on. And let’s say its potentially revolutionary uses are clear. However, it takes some time and reading before the “ordinary man” can appreciate what makes blockchains potentially so helpful.

The middle-man services that the financial services sector has historically supplied, such as payment clearing and fraud protection, are being discussed as a replacement by IT experts. However, many believe that banks offer this service reasonably effectively and at what appears to be more or less a reasonable cost to the customer.

Since miners must compute nonce (“number only used once”) values several times in order to add the next block to the chain, this time-consuming procedure needs to be sped up in order to be employed for commercial purposes.

The concept that you would be able to use bitcoin to pay for a cup of coffee during your lunch break has fundamental limitations because transactions can take several hours to complete unless the merchant is prepared to assume some risk.

Due to various environmental concerns, several nations have outlawed the use of blockchain technology applications like cryptocurrencies. These nations do not encourage the use of blockchain technology in the commercial sector.

Also, banks benefit greatly by acting as a middleman, and since the expense is shared across millions of their clients, end users often pay relatively little on an individual basis.