BlockChain Technology was pioneered and invented by a person or people using the name of Satoshi Nakamoto, as part of the Bitcoin system, in its original reference implementation, Bitcoin Core (formerly known as Bitcoin-Qt). BlockChain Technology underpins Bitcoin.
Some businesses now show signs like the one below:
There is a very ingenious system of trust-logic embedded in BlockChain Technologies. The following references explain the process of “Bitcoin Mining”, and how it ensures trust is maintained despite anonymity being inherent in Bitcoin’s design (so for us the question is how can trust be maintained, if we want to develop a Secure, Private, Scalable & Auditable Enterprise-Strength BlockChain?)
The answers found more recently (best example being Ethereum tokens and smart contracts) have limited scalability. Our preferred choice (Elastos) provides scalability, as well as much increased security, and fundamentally delivers to enterprises an immutable audit trail for all enterprise transactions, as well as providing smart contract capability. Rather than reinventing the wheel, Elastos actually allows us to use Ethereum, and some other Smart Contract systems, as Sidechains off the Elastos Mainchain. The Mainchain uses the Bitcoin miners to guarantee Trust via “merged mining” for all Sidechains, at consumers’ (such as our) expense. In this fashion, Elastos allows indefinite scalability, something unattainable in Ethereum’s traditional Single-Mainchain Design (now slowly choking with the volume of data).
Although at the absolute beginning (2008), one Bitcoin had zero value, “the first real price increase occurred in July 2010 when the valuation of a bitcoin went from around (USD) $0.0008 to $0.08 for a single coin.1“
“what is a bitcoin worth”!
by Joseph Pham, A blockchain enthusiast
Written Jun 23
Blockchains as a technological innovation, provide a novel solution to a number of complex computational and cryptographic problems.
Chief amongst them is the Byzantine General’s Problem – basically, answering the question, how do I ensure the data consistency and integrity across a computer network? This relates to the corruptability of the data (data being manipulated by outsiders or untrustworthy insiders) in existing computer systems.
Other big issues that the blockchain was designed to solve include double spending – where you could pretend to spend money / tokens you have across multiple transactions (this is due to the ability to copy data) – and counter party risk – basically a social risk that someone does not fulfill their end of an agreement (or contract).
To understand the current limitations of blockchain technology, you need to understand how the technology solves some complex computation and cryptographic problems, and the limitations imposed by the design of these blockchain systems.
To simplify the discussion, we can limit the focus to the bitcoin blockchain, the first operational blockchain system.
Limitations of Proof of Work
One of the most innovative and often discussed aspects of the bitcoin blockchain is the Proof of Work protocol – a computational function, that requires computational resources to solve a complex mathematical puzzle by hashing (solving a cryptographic hash value) to verify that a series of data records have been correctly identified and added / recorded on a distributed ledger. This process produces a new “block” to a sequence of connected blocks, giving the blockchain it’s name.
The difficulty of the puzzle is automatically set by the system (complex maths formula), based on the available computing power across to produce an answer about once every 10 minutes.
This is probably one of the most complex aspects of the blockchain, and as such one of the most limiting. Depending on the parameters set within the blockchain protocol, there are various constraints that limit the usefulness of such a system.
In the case of the bitcoin blockchain, the speed of processing transactions – how many transactions the system can process & add to the blockchain – is limited. This means you cannot efficiently use blockchain technology for high volume transactions (ie requiring thousands or millions of transactions per second).
Similarly, due to the computational resourcing requirements of the network as a whole, to solve these mathematical problems, blockchains are designed to work best across a large pool of users that contribute their resources towards the goal of securing the network.
There are several economic and real world resourcing constraints that limit the commercial application of blockchain systems to current production environments, and limit the exposure blockchain systems have when interacting with other mature applications or systems on a network.
Due to the potential weakness and risk of external interference / attack (and hence potential influence, even control of the whole network) and subsequent distortion of a blockchain, the system is designed to be used at scale across a large number of distributed actors and devices constantly connected and participating in the process.
If there were only a few participants, and one or more bad actors in the network had a majority proportion of computing power (over 51%), there is greater opportunity for the bad actors to take over the network. That is why smaller and private blockchains are not seen as securely immutable (unchangeable), and thus have less perceived value than a well established and long time running publicly distributed blockchain like Bitcoin.
What this means is there’s more risk to a blockchain in it’s early stages, greater vulnerability to attacks / external manipulation and less certainty when there are only a few active people or machines (nodes) that participate in the network.
Furthermore, while there is an inverse relationship between cost and network processing power, the overall cost of running, growing and sustaining a blockchain system can grow to be quite large over time – mainly due to the large storage space required for each copy of the blockchain, the greater energy consumption and uptime costs of maintaining online computing systems, and the overall processing power needed to process new transactions / blocks.
While bitcoin has been proposed as digital money, the key design strengths of blockchain technology does not make it an effective digital money (because blockchain works like a vault locked with a key – if you lose your private key or someone discovers it, you will no longer have access to your money).
Since long and complex sequences of numbers and letters are not easy to remember, people have trusted external parties (online wallet services and exchanges) with their private keys (the keys to their bitcoin tokens), which is why they have been hacked and stolen or lost (when no one can access the tokens).
Another important limitation is the fact that the data on the blockchain is not editable. It is a write once, read only computer system by design (in order to be immutable). This means that there is no way to clear faulty, or incorrect / corrupt entries from the system.
There’s a lot more to discuss on this topic. I hope this gives enough of an insight to answer the question about the limitations of blockchain technology.
Overall, blockchain systems are best as a final, archive and store of data that is designed to be irreversible and useful referenced over time. Something like a big encyclopaedia or log book of data transactions.
In my opinion, the best future use cases for blockchain will capitalise on its strengths, and use it’s weaknesses / limitations as opportunities to explore development opportunities with complementary technologies.
- We are now developing Enterprise Accounting Systems on a new Blockchain System. Enterprise-Strength, Blockchain-based Technology.
- Examples will be: Secure Financial Transaction Ledgers, Land Title Registers, Rental Bond Transactions, etc.
- There would be possibilities for Blockchain Systems to centralise and guarantee other (often Multi-Party) validation processes external &/or internal to single- or multi-department/branch Organisations.
- There is an Open Source Project; Elastos ELA (currently v1.0).
- As secure and fast Blockchain Networks are developed that allow communication with existing external Databases, Blockchains will replace current means (less convenient, and more susceptible to fraud as they are) of recording and reporting in central Registries and Transaction Journals, both Public and Private.
- Conditional Validation of transactions, where Multiple Parties are required to participate, is happening. These are the so-called “smart contracts”.
- The uniqueness of each Block Address, guaranteed by a single-threaded “timestamp server”, enables unique Public/Private Key pairs to be generated as each block is recorded. Addresses and Keys are highly encrypted.
- Each participant in every transaction recorded on the blocks receives (machine-machine) their own private key.
- It is the role of our application, on our customers’ behalf, to store and associate keys to transactions safely and reliably.
- Transaction records on SideChains can not be changed (edited) by anyone at all, without exception, after completion of original transactions. This is the real Anti-Fraud value of Blockchains.
- Your own Accounting procedures are triggered automatically.
- With the Elastos System, subscribers to a DApp (Distributed Application) may only connect securely through the Elastos P2P Carrier Network to other DApp users in their Business Network, and to permitted websites and services. Less secure email and website activity can be minimised as the Elastos System works like a “closed-circuit” internet, with “distibuted web pages”
- “Distributed” also refers to the fact that “servers” for storage of Documents, Images, Audio and Video files are distributed InterPlanetary File System (IPFS) devices within the Elastos Network. Other than this most things happen on your or your network neighbours’ devices. However, we still need to store most actual bulk transaction data records on a traditional Relational Database (also connected via Elastos P2P Carrier system)
- The Blockchain itself is “Merge-Mined” by existing BitCoin miners as the means of guaranteeing trust and validating each transaction