We have learned so much about cryptocurrency and blockchain technology. It all actually started since 2009, when “Satoshi Nakamoto” declared these terms to the world via a whitepaper. There were experiments on digital and cryptocurrency prior to 2009, but bitcoin and the blockchain technology on which it is based turned out to be fascinating to the audience and gained immense popularity till date.
As we know, nothing interesting is ever completely one-sided. Everything comes with its own flaws. Cryptocurrency and Blockchain Technology do have flaws hidden under their benefits. Many people have claimed the loopholes in this newly emerged technology. It has been also considered as “Bubble” and “Ponzi Scheme”. Some have praised whereas some have criticized. Let’s get some insight into what the actual flaws are.
Increase in Transaction Costs
The blockchain’s financial pillar is the investors who trade and invest in the cryptocurrency. Initially, the transaction cost for bitcoin was comparatively low, but with increasing transactions, its time and cost have increased. As the bitcoin reward fee halves every four years, the transaction fee will increase. Because the miners need to earn the cost they spend for mining. The trading speed will drop down and as mistakes are irreversible, it is likely to bring huge losses.
Insufficient Acceptance
As stated above, not all the people believe in the concept of blockchain and cryptocurrency. For a new technology to be successful, its 100% acceptance is necessary. It is still difficult for some people to understand what it is and how it works. And many governments are afraid of its implementation and have thus declared it as an illegal tender. There is politics behind its acceptance and unacceptance. It’s dubious that blockchain and cryptocurrency will ever enjoy worldwide acceptance.
Too Dense to Understand
Understanding the blockchain technology and the cryptocurrencies based on it is not everyone’s cup of tea. In order to recognize, one need to do tremendous research. It is not as simple as it looks from the top. The deeper you go, the more complex it is. The trading resembles that of the stock market but is unpredictable and highly volatile. If anything goes wrong, the system is likely to get more complex.
Performance Issues — Slow and Cumbersome
As per the rule, a transaction can be accomplished only when all the parties connected to the network give a thumbs up. Now, you can imagine when the number of nodes and transactions increase, how long it will take to accomplish one transaction. Thus, the system will be slow and a time will arrive where there would be no considerable difference between centralized and decentralized currency. All the respective ledgers have to be updated as they have to record each and every transaction occurred till date. This turns out to be cumbersome on a longer run.
Irreversibility is not a Boon
Whenever a transaction occurs, no one can undo it. So, in case if you transfer your cryptocurrency to someone by mistake, you cannot generate a refund request as in PayPal. You can get your cryptocurrency back only if the receiver is generous and gives you back. This feature is irreversibility was introduced to avoid tampering with data but it does not turn out to be favourable for every case.
Privacy
The blockchain technology thrives to prove that a person’s identity will be anonymous. But, after analysing the situation, the anonymity isn’t really accurate. If you know the public address of someone, you can easily track the entire transaction and get an insight into the cryptocurrency balance held by a particular user. Hackers and web trackers are successful in tracking the identities based on sessions and cookies. Thus, it is not private as it is supposed to be.
Not really used as a Currency
Bitcoin, the most popular cryptocurrency based on blockchain technology was introduced as “Peer to Peer Electronic Cash System”. It means to be used as a currency in place of our centralized currencies. The countries which have accepted bitcoin as legal tender see some use as a currency. At rest of the countries, it is considered as a stock and traded over. People invest their funds for short-term or long-term and expect good returns. This isn’t a technical issue, but it does not serve its purpose of the invention.
Lie Becomes Truth
I’m damn sure that you would be unaware of this flaw of blockchain technology. There is no central authority in the blockchain, hence the validity of transaction depends on the assessment of all the nodes connected to the network. If any one of the nodes denies the validity of the transaction, it will be terminated. But, what if the transaction is actually invalid and more than half of the nodes in the network give it a pass. The lie will become a truth and this flaw was highlighted as “51% attack” by Satoshi Nakamoto while the bitcoin release.
Thus, blockchain technology and cryptocurrency possess too much room for improvement. We should not underestimate its usability till now and hope for the elimination of its flaws as far as possible.
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