- Blockchain networks, especially those using proof-of-work consensus mechanisms, require vast amounts of electricity, raising significant concerns about their sustainability and environmental footprint.
- Most blockchain networks can process only a limited number of transactions per second, leading to issues with network congestion, slower transaction times, and higher fees during periods of high demand.
- While blockchain offers transparency, this can compromise privacy as all transactions are visible to the public. Additionally, blockchain is vulnerable to attacks such as the 51% attack and smart contract bugs, which can undermine network integrity and security.
Blockchain technology is known for its power to change industries with systems that are secure, open, and not centralised. But it also has many problems. To understand blockchain fully, it is important to look at its limits and risks.
1. High energy use
Environmental impact
One big problem of blockchain, mainly in coins like Bitcoin, is high energy use. Networks that use proof-of-work need huge computer power to solve hard problems and confirm deals. This uses much electricity and causes worry about the effect on nature.
Sustainability issues
The power use of large blockchain networks makes people ask if they can last. Bitcoin mining can use more power than whole countries. This adds to carbon release and makes people question if the system can keep growing in the future.
2. Scalability issues
Limited transactions
Scalability is another problem. Most networks like Bitcoin and Ethereum can only handle few deals each second. Bitcoin can do about 7 per second, and Ethereum about 30. Visa can do thousands per second.
Network load
When demand is high, networks can slow down. Deals take longer and cost more. This makes blockchain weaker than normal central systems when fast service is needed.
Also read: Craig Wright: Self-proclaimed bitcoin inventor accused of extensive lying
3. No clear rules and laws
Uncertainty and risk
Blockchain runs outside normal rules. This lack of control brings risk for firms and investors. Fraud, scams, and crime are harder to stop without strong rules.
Legal problems
Blockchain works across borders, so laws are hard to apply. It is not easy to enforce deals and contracts. Without clear laws, many firms do not want to use it.
4. Irreversible deals
No room for error
The ledger in blockchain cannot be changed. Once a deal is made, it stays. This adds trust but also means mistakes, like sending money to the wrong address, cannot be fixed.
Consumer issues
This makes it hard to protect users. In banks, wrong or fake deals can be reversed. Blockchain has no such system, so users can lose money with no help.
5. Complex use and poor fit
Technical complexity
Using blockchain with old systems is hard and costly. Firms need experts to build and keep it. Many firms cannot manage this.
Interoperability issues
Different blockchains do not work well together. They often stand apart, which causes waste and slow growth. Rules and shared tools are needed, but progress is slow.
6. Privacy problems
Open vs. private
Blockchain is open, so all deals can be seen. This can show private details. Even if names are hidden, it is still possible to track deals back to people.
Confidentiality issues
For those who need private systems, this is a problem. Private blockchains and tools like zero-knowledge proofs are being made to solve this, but they are hard to use and not common yet.
Also read: How do AI and blockchain work together?
7. Security risks
51% attack
Blockchain is safe in many ways, but not perfect. A big risk is the 51% attack. If one group controls over half of the power, they can change the chain, spend twice, and break trust.
Smart contract bugs
Smart contracts are deals in code. They are useful but can have mistakes. Code errors can lose much money, like the DAO hack in Ethereum.
8. High starting costs
Setup costs
Making blockchain systems costs a lot. Firms need money for tech, staff, and upkeep. This is hard for small firms.
Cost for users
Joining a blockchain can also cost much. Mining in proof-of-work needs strong machines and high power use. This means only rich players can join, which can give power to a few.
9. Barriers to use
Cultural resistance
To use blockchain, firms must change how they work. Many prefer old central systems. To change, they need proof of gain and learning.
Lack of understanding
Many people and firms do not know much about blockchain. Wrong ideas and little knowledge stop its growth. Training and clear info are needed to help more people use it.
