Blockchain enables new ways of exchanging value securely while ensuring a reliable transaction. It enables people to meter excess capacity and facilitates non-traditional ways of generating income. Despite all the benefits, there are some challenges that the technology needs to address.
- Because of all the hype surrounding Bitcoin and other digital currencies, blockchain started appearing like a pyramid scheme.
- The technology is yet to mature and is susceptible to capacity problems, system failure, unanticipated bugs, and perhaps most damaging, the huge disappointment of technically unsophisticated users.
- The bitcoin blockchain lacks transactional capacity. Some suggest that the way to mitigate this is by using other consensus algorithms. Another way is to use a sidechain which is a fork of a larger blockchain like bitcoin, while using the parent blockchain’s infrastructure.
- Transactions on the blockchain are immutable which creates a system that is a bit sociopathic. Immutability is a double edged sword.
- Much work needs to be done in basic interface and experience. A bitcoin address is an alphanumeric code. You don’t type an IP address to access a website, why would you then type an alphanumeric code to access a bitcoin wallet.
- There is a rule of thumb: for every dollar a computer burns electricity, it needs fifty cents to cool down. The bitcoin network consumes vast amounts of energy. Many argue that this computation and energy could be diverted to much nobler pursuits like curing cancer or solving world hunger. Beyond a point, the energy consumption will be unsustainable. To manage this, we will have to move away from proof of work or hardware would improve. Access to renewable energy could also mitigate this.
- In the short run, it’ll cut jobs. In the long run, it’ll put Uber out of a job.
- If everything is recorded, it leaves no room for serendipity.
- Blockchain after all is a tool and can be used for nefarious purposes. Closed blockchains which are secure and essentially unhackable could bring us back to the problem of lack of transparency and trust in institutions. It might fall into the same trap of concentration of power that the internet did.
- Realization of quantum computing looming in the distance might require us to completely revamp the cryptographic infrastructure which is the foundation of blockchain.
- Blockchain revolution by Alex Tapscott and Don Tapscott
- Who Owns the Future? by Jaron Lanier
- Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopiaby Anthony M. Townsend
- The Laws of Simplicity by John Maeda
- How the blockchain is changing money and business by Don Tapscott (TED Talk)
- How the blockchain will radically transform the economy by Bettina Warburg (TED Talk)
P.S. A lot has been talked about the opportunities and possibilities of this technology in the domain of finance, viz . micro-payments, currency conversions, remittances, insurance, Blockchain IPOs, Altcoins etc. I have tried to stray away from these topics as much as possible.
All views are personal.