The Unrealized Potential of Blockchain, and Its Limits
2017 was blockchains biggest year, marked by the rise in usage (and price) of cryptocurrency. The technology has created a great amount of excitement, showing potential to disrupt several industries.
It’s hard to argue against the promise that blockchain technology offers, yet it is very important to remember where the tech is in its lifespan.
January 1st of this year marked the 9th anniversary of the release of Satoshi’s creation: the bitcoin network. With blockchain technology first being outlined in the bitcoin whitepaper in October a few months before.
The next several years saw a young, yet sustained technology with lots of hope. It was 2016 by the time businesses, the media, and investors started paying attention. (If you don’t already know, read more about what blockchain technology is and does here!)
Now that blockchains are gaining wider adoption, excitement has followed. This excitement is reasonable, with blockchain use cases beginning to show that the technology has practical applications.
However, that excitement should be tempered. Blockchains are still in their infancy.
Challenges to overcome
While decentralized distributed networks offer solutions for privacy, storage, and security, the overall lack of computing power on the blockchain limits what blockchains can currently do. (Read more on decentralization here!)
We’re already seeing this occur on major blockchains. More users place more demand upon these networks, with the result being transaction backlogs and large fees.
The average bitcoin mining fee is now around $50, and it’s impossible to argue the bitcoin blockchain becomes cost prohibitive for many. Many point out that bitcoin is currently being used in a way that wasn’t described in its orginal whitepaper. While the asset is a viable store of value, the current high fees and ten minute block times make using it as a currency near impossible.
While Ethereum has been able to keep transaction times and fees lower, when more people utilize the network, it becomes congested. This occured when one of the hottest dApps, Cryptokitties, stormed onto the scene. At its height, the dApp was responsible for 16% of the traffic on the network, more than double that of EtherDelta, the previous most popular Ethereum-based dApp.
Scaling is the biggest issue facing these blockchains. We must recognize the limitations of the network if we are to ever improve it. The good news is that these networks running improperly has caused users to be very aware of these issues, and has forced developers to come up with solutions on the fly.
The value remains
While the technology is new and flawed, it would be a dire mistake to completely dismiss what blockchains can offer once we have had a little time to address these issues.
Blockchainers are one of the most innovative communities that I have been around. The problem has been laid out and several scaling solutions are currently being explored. Ethereum has dedicated millions to researching and finding a solution to this issue.
We can’t expect these issues to be solved overnight. That’s not fair or realistic. It’s also not fair and unrealistic to write off the prospect of mass adoption because a young technology is limited.
With the amount of research that is currently being done, and the players putting money behind the technology, it’s hard to foresee a future where the issue of scalability is still a problem. Advances in computing, innovation, and research will likely combine to solve for making a more scalable network.
This article was written by Jeremy Cogan, of Blockchain WTF. He graduated with a BS in Legal Studies and Policy Analysis. He has since worked in business development and as a consultant. The disruptive nature of blockchain technology is his favorite part about it! Jeremy is mastermind between Blockchain WTF’s animated series ICO or NO, and he is also a contributor to our site’s content. You can get to know Jeremy in this brief interview, read more of his stuff here, and check out his series here.