As you know, blockchain technology offers a stable, error-free, low-cost and scalable decentralized data processing mechanism. The only problem is that none of the characteristics are absolute. Many of the shortcomings of blockchain can be seen by looking at the most famous cryptocurrency, Bitcoin. The problems with Bitcoin do not directly apply to all versions of the blockchain, however, many systems have the same philosophical limitations.
Decentralization is expensive
The Bitcoin blockchain is based on an algorithm that requires users to solve time-consuming and costly mathematical problems, the so-called proof of work. It is necessary to ensure the integrity of the process. However, the amount of electricity required for these calculations is often outrageously high, which not every user can afford.
Some blockchains use cheaper mechanisms, but they still have other complexities in software, the development and adjustment of which is expensive.
Decentralization is hard to guarantee
As the price of Bitcoin has risen, a number of companies have developed expensive specialized equipment to mine it. These groups are the only ones who can create these custom devices. And although, in theory, the algorithm is still decentralized, and anyone can try to participate in mining, in practice only those who have the right hardware make a profit. And this significantly narrows the circle of network participants.
The complexity of privacy
On most blockchains, users verify their identity with a cryptographic key. Therefore, for their own safety, the keys should be kept secret. If someone gets a copy of the key, they can impersonate the so-called owner and get their hands on the coins, a danger that has led many cryptocurrency users to store their BTC on flash drives.
Losing a key is a big problem
There are situations when a user loses their keys and, as a result, loses control over the assets in the blockchain. Forever and ever…
Many people wonder how many coins on the blockchain are frozen under the control of a certain key, which was not backed up correctly. It is very frustrating when the condition disappears due to the fact that the owner simply lost his keys.
Conventional dispute resolution mechanisms don't work
If in the traditional financial world someone loses in a lawsuit, the court can order the bank to transfer money to the winner. But if the user owns the assets on the blockchain, no one can do anything, as control over the assets depends on control over the key.
Of course, an authority could be created to deal with lost keys or failed transactions, but that would violate the philosophy of the blockchain and make all mining and update algorithms simple rituals. The person with power ultimately becomes the final arbiter - just as in the current system.
A striking example is the situation with the theft of capital from investors in the DAO. When the scale of the theft became clear, the programmers who dominated the Ethereum code decided that they couldn't just ignore the fraud. Therefore, they decided to return the stolen coins to their previous owners by canceling the transactions. They "fixed" the problem by adding exceptions to the blockchain update routines to ignore old transactions.
So, if this has already been done once, then in the future anyone can do it. Whoever controls the code has the right to rewrite the past.
