Blockchain is Bad, and Here’s Why

Despite its novelty, blockchain managed to attract a huge following. Aside from developers and businessmen, the community quickly grabbed the attention of anyone trying to get rich quickly. That’s what usually happens when big money’s involved.

With every promising development, though, comes a bunch of negative side effects. Some of them are enough to render said technology dangerous. That’s pretty much what’s happening with blockchain and we’re here to figure out why.

At its core, Blockchain is merely tech that allows you to store and collect data in a secure way. But with great power come great risks.

Humans Make Mistakes

The main attraction of blockchain is its security features. It’s anonymous, impervious to retrospective changes, and sometimes impenetrable. But, no pun intended, it still has a weak link – humans. Smart contracts, a key element of any blockchain app,  are still written by people. In some instances, these people aren’t even professionals. Any error in the code can result in a vulnerability. Which naturally, leads to the possibility of exploitation. And there’s no shortage of hackers willing to quickly and painlessly drain a liquidity pool.

And that’s not all there is. Sometimes errors are made intentionally. A project is launched and making waves but one day users wake up to a deactivated website, Twitter account, and Telegram channel. All their money is gone and the only thing they have left is a memory of their riches. Needless to say, successfully tracking down a crypto-scammer is next to impossible. They rarely leave an ID behind.

But, What about Private Keys?

Fair question. Private keys have been advertised as pretty much the best way to protect your crypto assets. No one can guess 12 words, right? And even if they do, what are the chances they get access to all your accounts so they could double and triple verify access? Surprisingly, high. Its reliance on private keys and digital wallets introduces a high risk. Many a time third parties stood at fault for lost funds.

In 2022 alone, they were named among the largest threats to crypto exchange platforms. If that doesn’t scare you, note that in the same year, a sum of  $3.8 billion in cryptocurrencies was stolen from users, projects, and protocols. And it’s not exactly getting any better: 3 months in, 2023 already saw 40 over attacks resulting in $400 million stolen. But hey, at least the average size of an attack went down. Now it’s just $10.5 million as opposed to $30 million in 2022.

To Scale or Not to Scale

Blockchain isn’t just your good ole’ tokens. It’s a massive technology with tremendous potential and multiple applications, with healthcare, arguably, being the most impactful. But one of the primary concerns regarding blockchain is scalability. The number of daily transactions reasonably puts a strain on any network. Maintaining such throughput is proving to be a challenge. Due to its decentralized nature and the consensus mechanisms involved, blockchain can experience slower transaction processing time creating a bottleneck. Not only this can be inconvenient for users expecting high-speed transactions, but it can also result in an unpleasant experience if used in any customer-oriented industry.

Ethereum provides a good example of the issue: its limited transaction processing capacity leads to delays and higher fees during peak times.

It’s even worse if you compare Bitcoin with Visa. Bitcoin can process almost 7 transactions per second, while Visa’s average is around 1700. Enough said.

It’s All About Energy

The proof-or-work/proof-of-stake debate is as old as the youngest of the two technologies. And somehow, PoW never comes out on top in this argument. The process of mining, necessary for securing the network and validating transactions, consumes an immense amount of power. There’s a good reason environmental activists have negative outlook about blockchain:

According to the research conducted by the University of Cambridge, Bitcoin alone consumes 127 TWh every year. It’s higher than the consumption of several countries, including Norway.

And in the USA, crypto activities result in the emission of 25-50 million tons of CO2 per year which is equal to the emission of diesel fuel used by US railroads.

Either this technology goes away or we do.

Don’t Tell Me What to Do

If you still have a shred of faith in blockchain, let me pull the rug from under your feet: it’s a lawless chaotic world. Blockchain’s main schtick is being decentralized. And while it’s fun in theory and built on trust, it just doesn’t work. Blockchain right off the bat poses challenges for legal regulations. It’s hard to track down illegal activities there and if you lose, you lose. Liability – not big with the crypto crowd. Transactions occur directly between participants and enforcing, resolving disputes, or ensuring compliance with existing regulations becomes next to impossible.

At the same time, many governments are concerned by the challenges related to unregulated money rotation. It’s not just impossible to tax the operations properly, it’s unlikely to find out how and where the money is spent. Cryptocurrency operations often end up as convenient measures for embezzlement, tax evasion, and purchase of illegal substances and weapons. This doesn’t exactly paint the industry as a whole in the best way.

Nothing Works Together

Interoperability is a fancy word we use to describe the ability of different blockchain networks to communicate and share data seamlessly. But at this time, it’s more of a myth. There is a lack of standardized protocols and frameworks for interoperability, which often results in fragmented blockchain ecosystems. Potential benefits of the technology are limited by the exchange of information and assets across different blockchain platforms. Instead of getting big storage for all sorts of relevant information, we get more and more networks trying to hog the proverbial blanket.

Truth be told, this issue can be fixed with time and development. And it’s safe to say, that efforts are already put into fixing this. However, the problem still exists and poses concerns.

Conclusion

While blockchain technology continues to show potential and transformative capabilities, it is important to consider its limitations and drawbacks. All the aforementioned elements come together to warn us about adopting blockchain solutions. But instead of blindly discarding the innovation, we should take a moment and think about how we could improve it.

By acknowledging and addressing these challenges, the blockchain community can work towards creating more robust and sustainable blockchain ecosystems that eventually will unlock the technology's true potential.