part0019

I t can be said without exaggeration that it is a masterpiece of the genius mind. However, blockchain is not perfect or not limited. Therefore, this step highlights and explains the major limitations of the blockchain and explains why these restrictions create significant barriers to its commercial use.

Blockchain is a purely distributed point-to-point system that allows everyone to read transaction history and add new transaction data to the data collection. The opening and absence of any form of centralized control or coordination are at the heart of the system, as it enables its nodes to act as independent witnesses and clarify owner issues. However, openness and lack of central control can have undesirable consequences that limit the use of the system. The challenge is to recognize and understand the consequences of the system by ordering strategies to overcome them.

The most important technical limitations of the blockchain are:

• The security model

• Limited scalability

• Hidden centrality

• Lack of flexibility

The Blockchain is a large, cleanly distributed peer-to-peer book that stores the entire history of transaction data. All details of the transaction, such as the assets and the amount transferred, the accounts involved, and the date of the transfer, are available to everyone. This is necessary to allow each party to clean up the entity and check for new transactions (for example, identifying a double-spend incident). Therefore, lack of privacy is an integral part of the blockchain. Without this level of transparency, the blockchain would not be able to fulfill its duty. However, this level of transparency is often considered as a limiting factor for filing cases that require greater confidentiality.

The blockchain uses asymmetric cryptography to identify, authenticate users, and authorize transactions. Blockchain account numbers are actually public cryptographic keys. Only the person who owns the appropriate private key can access the entity associated with the account. Only transaction information that contains a digital signature created with the appropriate private key and can transfer ownership from one account to another is relevant. The private key is the major security instrument that enables the rightful owner. As soon as a private account key is handed to another person, intentionally, accidentally, by mistake or theft, the security of that individual account is compromised.

No additional security measures protect the assets associated with the account number. It is important to remember that asymmetric cryptography used in blockchain is considered one of the best available cryptographic methods. Therefore, the concept of blockchain security, as such, is neither faulty nor deficient. However, there is no additional security network to protect blockchain users from unwanted loss or sharing of their private key with others. They are similar to how real-life security keys are used to protect homes or cars, or how PINs are used to protect credit or debit cards. Once you give someone a key, no matter what the circumstances or reason, security is broken, and anyone with a PIN or key can withdraw money from your credit card or drive your car. The blockchain account's private key does not avoid this. However, some believe that the lack of additional security measures is a limiting factor for the use of blockchain.

A blockchain is a system that has two goals: one above the other, it allows everyone to add new transaction data to a shared managed history. On the other hand, it protects transaction history information from unauthorized access or forgery. Blockchain balances two goals using an immutable data structure composed solely of sums, which requires a puzzle solution each time a new block is added. Solving this puzzle voluntarily takes a long time. Insisting on a puzzle is a convenient way to make expensive attempts to manipulate transaction history data. Unfortunately, this security measure results in a reduction in processing speed, and hence limited scalability. This blockchain feature is considered a major barrier to use in contexts that require high processing speed, high scalability, and high performance.

The issue of high costs is linked to the problem of limited scalability. Solve a hash puzzle or take a quick labor cost test to calculate. This is a security measure that makes transaction history unchanged. Calculation costs can be expressed on various scales, such as the number of cycles of calculation, physical time, electricity, and money. However, the result is always the same: proof of work is expensive. As a result, the entire blockchain has costs. The size of these costs depends on the weight of the hash puzzles.

The necessity to comprehend a hash puzzle for each square being added to the blockchain-data-structure and the principles for circulating prizes for contributing to the integrity of the system cause a race of arms among the peers. The individuals who have the essential budgetary assets put resources into specialist hardware that makes settling the hash puzzle and thus contributing to the system rewarding. Then again, the endeavor of approving and adding new exchange data to the system comes unfruitful for those without access to specialist hardware, which as a result, makes them pull back from contributing computational assets to the system. Accordingly, the apparently huge and different group of peers keep up the integrity of the system, in the long run, turns into an extremely small group of entities that each possesses colossal computational power as specialist hardware. The rest of the group of peers forms an oligopoly that partitions the duty of keeping up the integrity of the system among themselves. Like oligopolies in different businesses, this small group of entities could manhandle its capacity (e.g., by precluding explicit exchanges or segregating explicit users). This impact builds up a sort of concealed centrality that undermines the circulated idea of the entire system. From a specialized perspective, such a system is as yet an appropriated system, yet it is a system whose integrity is kept up by just a small number of entities.

The blockchain is a complex technological construct that is comprised of a variety of concepts and procedures that are optimized and adapted to one another. Altering that fine-tuned ecosystem can be very challenging. Essentially, there is no established procedure for how to change or upgrade major components of a blockchain once it has begun its operation. This implicitly creates a long service life for the technologies that make up the blockchain. For instance, the cryptographic procedures have to be valid for the lifetime of the blockchain, which is potentially centuries. This is also true for the blockchain-algorithm and how conflicts are resolved. There is also a problem for people developing the blockchain further due to immutability, in that it is hard to fix bugs or make any modifications to the blockchain protocol. These characteristics make the whole blockchain-technology-suite less flexible than other technologies.

The strength against manipulations and hence the trustworthiness of the collectively maintained history of transaction data rely on the premise that the majority of the system’s computational power is controlled by honest nodes. Still, in small peer-to-peer systems with restricted computational power, that majority can still be very small, which in turn could make it possible to execute a 51 percent attack. This problem is, in particular, relevant for cryptocurrencies with low stock market value and limited user adoption. Therefore, any blockchain will require a critical mass of honest nodes to support it and make it resistant to attackers with a lot of computational power. Reaching a critical size that makes 51 percent of attacks impossible is a challenge that every new blockchain has to face.

The most important nontechnical limitations of the blockchain are:

• Lack of legal acceptance

• Lack of user acceptance

Lack of Legal Acceptance

Blockchain is a technology that offers its users the ability to manage and transfer ownership in an open and cleanly distributed peer-to-peer system. How independent peers jointly manage assets through distributed consensus has raised doubts about the legal consequences of transactions executed and managed in the blockchain. Questions about the legal implications and acceptance of blockchain transactions need to be discussed regarding the security and sophistication of their technology. This is a question of incorporating a new approach to property management into the established legal system. Those who have witnessed the emergence and development of the Internet can see the similarity of blockchain legal statuses today and the lack of legal acceptance of online commerce in the 1990s.

User acceptance, or a lack of it, is another limitation that cannot be underestimated. An open legal status of the blockchain will cause uncertainty among its users, which in turn will reduce their interest in using it. An additional aspect of user acceptance is knowledge and education. It is unrealistic to expect that customers will use and trust the blockchain when its fundamental functioning is not understood.

Technical and non-technical constraints are considered important barriers to the adoption of blockchain in real-world applications. As certain constraints are overcome, there has been and remains an area of active research and further development. A detailed discussion of these activities goes beyond the scope of this book. However, the following sections explain how to overcome blockchain restrictions.

Overcoming the technical limitations of the blockchain may require interventions at all components and at all technical levels. One of the major challenges to overcome the technical blockchain is the difference between improving its technology and its fundamental change. The next step will address this issue in more detail.

The non-technical limitations of blockchain can be considered as social, economic, legal, and psychological aspects of adapting to new technology. Educational and legal initiatives can be considered as appropriate measures to control blockchain adoption. The example of the internet and e-commerce has already shown that it takes time to answer legal questions posed by new technologies and that it takes time for users to understand, trust, and use them. Fortunately, the case of the internet and e-commerce has also shown that educational initiatives on the work of new technologies increase user acceptance and adoption and help to solve legal problems.