1.7 What do we need to be aware of with Blockchain?

Majority of the information contained in our previous blog posts have presented Blockchain in an extremely positive and useful light. Our latest content, 1.6 What is Blockchain used for? highlighted a handful of areas Blockchain can add value and create a positive impact into your daily life. However, as with everything, Blockchain also has its issues and we want to make sure we shed some light on these drawbacks, so you understand Blockchain from every angle. Below, we have pulled out some of the key issues’ users experience and we believe it is essential for you to understand all the information shared before opting to implement Blockchain.

Blockchain has some hidden costs

Theoretically Blockchain is a free network. Once all the complex algorithms have been created and the system is finalised, you don’t have any outgoings connected to the network to keep the system live. However, it seems we are easy to forget the amount of electrical energy it needs to ensure the network never goes down and is continuously live (remember, one of the benefits of Blockchain is that it is available 24/7). The electricity used to power the devices that are supporting your Blockchain network are both a financial cost and a cost on the environment and this is something you may not have thought about. But it is worth nothing that a Blockchain network the size of the ever-famous Bitcoin, needs a lot more electrical energy compared to a smaller scale Blockchain that a business may deploy for securing and monitoring business activity and therefore the power consumed would be a much smaller fraction. But a cost is a cost and the environmental impacts all need to be recognised.

Take Bitcoin as an example, it has been claimed that the Bitcoin network used more energy in the year of 2019 than the entire country of Switzerland in that same period.

BlockUno, 2020

Lack of regulation creates a risky environment

A topic we have covered previously, exposed the fact that no one controls a Blockchain network. In some instances, this can be seen as a positive, however we want to highlight the risk involved. Many Blockchain users in the finance industry, including Bitcoin and other value based Blockchain networks have already become a victim due to this drawback. Because no one is controlling the network, regulations aren’t put into place and therefore malicious acts(scams, hackers, manipulation) are common and create a volatile environment. If you don’t utilise the safe wallet for your transactions, hackers will be able to steal your digital currencies in many different ways.

Furthermore, technology is innovating at a rapid rate but so are scammers and they are opening ways and means of operating malicious acts to steal from others. Legislators are falling behind with the pace of both and consequently can’t implement laws in time before people are becoming victims of such crimes. Users are too quick to get sucked into the latest technology (largely because they have the fear of missing out), and they are putting themselves in a vulnerable position to be exploited by criminals (and there are a large number of criminals out there, so be careful!).

Onecoin is one of the many high-profile cases, where many users were led to believe that a ‘Ponzi scheme’ was going to become the ‘next Bitcoin’. Understandably, a large amount of people started to invest and jump on the opportunity of being involved as early as possible, but this was all a scam and combined costs investors millions.

BlockUno, 2020

Its complexity means end users find it hard to appreciate the benefits

Something we are aiming to support at BlockUno is simplifying the entire topic around Blockchain. Without investing time into reading about the technology and understanding the details that create such an advanced network, you are never going to implement and use Blockchain in a way that can add value (benefiting from the endless list of positive impacts it can bring). 

The 2008 financial crisis is a timeframe we frequently cast our minds back to, but in this instance, it is the best example for you to understand our point here. Blockchain was introduced as the answer to the widespread dissatisfaction we experienced from all financial institutions back in 2008, but we are now 12 years on, and majority of the world’s population hasn’t opened their minds to Blockchain, consequently putting their trust in the financial companies again. The only explanation for this is that no one has taken the time to understand Blockchain and appreciate what it has to offer. However, what you do need to be aware of is the last financial crisis was largely unexpected and who knows what is around the corner. So, it may be better to move yourself into the pool of people who understand Blockchain and future proof your knowledge and resources before it is too late or taken out of your hands. 

Blockchains can be slow and cumbersome

Blockchains can operate quite slow and transactions can take a while to process. However, this is heavily related to the extremely complex and encrypted nature of the networks.  The time it takes to complete a transaction through a Blockchain network can take from 15 seconds to several hours to finalise. But this all depends on the number of transactions being processed at one time and if the network is taking longer than anticipated it may not be the best system for specific scenarios. A coffee shop wouldn’t want to implement Blockchain just yet, as transactions need to be settled at the point of purchase, unless they are going to build a different level of trust with their customers. For businesses like this it is understanding why they would want to stick with traditional methods of payment for now. But don’t forget this is only one example and we have shared other examples of where Blockchain is better than traditional methods, dependent on the scenario.

Blockchain Summary

At our current point in the blog, we believe all areas of Blockchain have been discussed across the last 7 posts and before we lead into our next discussion (keep an eye on our social media for more news on this), we want to leave you with a summary, which is why we are launching 1.8 Blockchain Summary on 25/04/2020, to finalise this section.