Last Updated on April 5, 2021 by cryptocreed
What is the regulatory framework of cryptocurrency in different countries? Blockchain is one of the greatest buzzwords both in the finance sector as well as technology in this dynamic world.
From storing its data in a tamper-proof way to being an asset to a wide range of businesses beyond finance and tech, there is no doubt that this revolutionary change would greatly impact the world. However, there are several hurdles that tend to hinder the growth of blockchain. Slow transaction speeds, lack of conventional standardization, and anonymity, which threatens data privacy, are some of the key issues. The following hurdles have to be overcome to realize the full adoption of this technology.
1.) Criminal connection
The anonymity feature of blockchain is not only an attraction to experts but criminals as well. No one can know your true identity since the nature of the network is decentralized. This decentralization is one of the primary targets of the black market, as well as the dark web. It’s natural for people to stay away from any criminal association, and those who know that they would make a fortune out of it would rather utilize this anonymity to run their illicit business dealings. Criminals now use bitcoin and other altcoins to buy illegal items and ask for crypto coins as an exchange for illicit dealings. The only way to bring this to an end would be to look for better blockchain implementation.
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2.) Energy consumption
One of the greatest challenges of bitcoin is its colossal consumption of electricity triggered by its carbon footprint. For each transaction made on the blockchain, the miners have to validate their transaction and update the ledger: this tedious process is called proof of work. During this mining period, electricity is one of the pillars, and a whopping 90% of this cost is incurred by electricity. One of the contributors to this high cost of electricity is the use of a GPU rather than a central processing unit. The instruction rate given to the computer by the GPU is transferred at a very slow rate, hence the high cost of electricity. This major drawback is pushing away experts who prefer using this technology.
3.) Legal uncertainties
It is a shame that regulations have not kept the pace that this blockchain technology is moving with. Any regulation that would appreciate and protect blockchain applications would be a big break in this adoption. This body would also need to deal with the problem of smart contracts,
which differ substantially from the traditional legal contractors since they are autonomous, and execute independently. The legal recognition of blockchain, on the other hand, is a great challenge. There is no central location that would rule on such matters, and the complexities of international laws have hampered the jurisdiction of this technology. Even if the legislation is brought on board, there could arise challenges that would affect the court’s ruling, and worse still, there could be a possibility of pulling down data stored on the blockchain. Such regulatory uncertainties tend to discourage blockchain users.
4.) Little awareness
Many finance experts have very little knowledge of the operability of blockchain, and many consumers have fears of the unknown and non-tradition transactions. The success of any financial institution largely depends on numbers, and this particular factor is crippling blockchain. A huge mass of individuals and firms willing to steer blockchain to the next level is vital in making this a viable financial solution.
5.) Privacy concerns
Privacy is a whole new thing in the blockchain. The two don’t go well with each other since the public ledger fuels the system, and so privacy is not a primary concern. This whole idea of privacy and whether or not companies can function well without it is becoming a paradox. Well, an organization that has no well-defined boundaries is highly unlikely to thrive in the business. Most clients would not entrust such firms with their data since sensitive information could be exposed. If all the client records are stored in a public ledger, there would be no privacy. Federated blockchain should be used to enhance privacy to ensure there is limited data access on the blockchain.
6.) Insufficient standards and best practices
Uniform and conventionally agreed-upon standards are crucial for the operability of global revolutionary technology. Blockchain is still evolving, and this means that there is a lack of uniform standards meant to define an ideal adoption. Conforming technological elements and areas such as asset ownership and transfer are needed for blockchain. Also, there are limited production environments though there has been reported a rise in numbers. To solve this drawback, there is a need for the integration of blockchain with legacy and existing systems.
7.) Scalability
Each additional transaction piles up an extra block to the chain of transactions. Each block subsequently increases with data since it also stores the information about the blocks that came before it. When more people join the network, the transaction histories of individual coins grow, and the susceptibility of collapse is extremely high. One other challenge faced by blockchain scalability is the low speeds for volume in bitcoin transactions. A few POS protocols which are faster than visa and PayPal would be a solution to this problem. This would create lightning
speed networks that could be powered by new technologies, which would upscale the speed of blockchain and its usability
8.) Flaws in technological design
Blockchain technology is still in its growth stage and has several perks, as well as several cons. It lacks in many ways technologically, which is often associated with coding flaws or loopholes. Even though bitcoin was the pioneer in this, it had an inefficient design, which ethereum tried to cover up, but it was still not enough. For instance, Ethereum’s decentralized application allows developers to implement dApps based on their system. This design has been incorporated in Ethereum to the latter. However, most of them have false coding and loopholes that could be utilized by unscrupulous hackers to access the system. Such flaws are a great compromise and liability to blockchain in terms of security.
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