In this world of technology, blockchain is widely used in various start-ups, industries, cloud storage etc. As we know every coin has two sides, similarly along with advantages there are some limitations. There are successful scenarios, but some do face failures, limitations, and various challenges. There are some concerns while using the blockchain technology which lowers its adoption rate. Blockchain challenges: [IV][V][VIII]Some of the challenges are,
Cost: The technology is expensive to purchase and even if purchased, to do the complete required setup as per organization needs makes it costlier. The soft wares required other than blockchain for the setup is expensive. Just the setup of the technology won’t help. Along with that required talent needs to be hired to handle and maintain the same. Talent hunt is again a big challenge. The technology keeps on updating and the market with updated talent groups is like a treasure hunt. Due to this, small-scale industries cannot prefer or bear the expenses and do not afford to use them at all.
Integration with the Legacy system: Even if the organization sets the complete setup for blockchain technology, integrating the technology with the existing one is a tedious task. For smooth transitions, the integration should be in a proper place. However, many times it becomes a difficult task to integrate as per needed as many changes arise while doing so. The organization then will have to spend ample time, money and human expertise to ensure that the integration is possible.
Energy Consumption: Bitcoin network uses a proof-of-work mechanism to verify the transactions made on block chains. Cooling down mechanism needs to be used because to compute the complex computational complex mechanism, high computers potential is needed. To keep the blockchain operation running a huge amount of energy consumption is happening. Business is further trying to fix this issue but meanwhile, the consumption is high.
Public perception: The public is still not convinced as to why we need to use this technology. It is limited to only those organizations using it or who are totally into it. The benefits and the difference between the other present technology need to explain well. This can help in resolving the misconceptions between the people. In short trust, the factor can be improved in the people by explaining the exact difference and its use.
Privacy and Security: As we know the transactions made using blockchain are visible to all this cannot be used in the system where sensitive data is transmitted.
For an example: the transactions done by the government cannot be made visible as this can be risky. Customized block chains can be used where the only particular required access is given to the user. However, this again becomes a tedious job.
Blockchain Limitations: [VI][VII]Following are some limitations of using blockchain technology, Complexity: There is a more complex formulation which is a tedious job while setting up the transaction network. Cryptography is used which is difficult to understand while setup.
Network size: Network size keeps on growing and making changes as per the growth is more challenging further. It gets difficult and complex to reap the benefits of the technology too.
Transaction cost/Network Speed: The transaction cost is high. Bitcoin was first free but then it was charged an amount. There is some politically charged concept too which again limits its use within minors. Human error: If while using the technology the blockchain data is stored in databases then it must be of a very high quality. The events need to be recorded correctly because if anything missed out can lead to a big headache to the organization. In short, not a single step should pass by without being recorded.
Security flaw: “51% attack” is what was stated by Satoshi Nakamoto when he launched bitcoin. This means that when computer nodes to service the network tell a lie, at a point it becomes truth. Hence the network is monitored closely then onwards.
Politics: There are many new policies opening in blockchain which will be beneficial for the government. There are some disagreements going on regarding the same which limits its adoption at the government level.
Storage Constraint: If using a database, the blockchain data is stored than the complete node data is stored of every network. The data is again immutable and is append only so it keeps increasing. Storage of data and maintaining is complex and expensive. Ethereum blockchain is growing at the rate of 55 GB/year.
Access to external data: Blockchain interaction is limited. For an example, if a service is used by blockchain outside its network to retrieve some data, the retrieval of data needs to be done separately by every node. It may happen that the response from the outside service may not be the same it can differ after a period which further makes it more complex and there is no such guarantee that external data can be used further.
Failure of a Blockchain technology – Bitcoin Gold (BTG): Blockchain technology is mutable or immutable? [I][II]Bitcoin and other cryptocurrencies are produced by miners who used their computing power/ hashpower to the network. As blockchain is run by consensus mechanisms in which there is no centralized power/ owner to control. Even though most cybersecurity experts agreed that blockchain is the most secure technology that the world has ever seen due to decentralization, but it is vulnerable to attacks like 51% attack, double spend attack etc. So, 51% attack is when individual miner or it can be a group of miners who manage to control more than 50% of networks hashing power, which empower them to disrupt the network and rewrite the history if he desires so. It makes blockchain mutable. Attackers can create their own blockchain privately and since they have more than 50% of hashing power blockchain will grow much faster and can be much longer and as soon as those attackers present their blockchain to the public consensus mechanism, it would automatically accept it due to the majority of 51% acceptance. So, attackers can also use this power to double-spend their cryptocurrency. 51% attack is very difficult to implement on massive networks like Bitcoin because it is practically impossible to control more than 50% network’s cashing/hashing power.
If you think practically, in order to gain more than 50% of the hashpower of such a massive network, an attacker would need a huge sum of money for mining hardware and electricity to do mining. So, even though a bunch of attackers spends billions and billions of dollars on computational hardware and electricity consumption, in the end, they would be able to devalue the cryptocurrency which would leave them with no money and their money investment on computational power and electricity would be a waste. So, there is no financial incentive to carry out such attack on massive networks. As Bitcoin Gold network was not large as compared to Bitcoin network, gaining 51% hashpower were easy for attackers. Bitcoin hard fork – Bitcoin Gold [III]Bitcoin Gold is a cryptocurrency created through the hard fork of a Bitcoin. Bitcoin Gold is different than other Bitcoin hard forks like Bitcoin Cash, Segwit 2X as it supports a different way to mine the coins. Traditional Bitcoin mining uses custom-built-application-specific integrated circuits (ASICs) whereas Bitcoin Gold decentralized the mining industry by using an alternative algorithm which is not exposed to ASICs. This hard fork works on Equihash proof-of-work algorithm. Equihash enabled a new mining process which does not require to purchase specialized equipment. Bitcoin Gold supports different consensus rules than other hard forks of Bitcoin like Bitcoin Cash.
The new rules came into effect on block 491407. From this block onwards, Bitcoin Gold miners were beginning creating a new branch of the Bitcoin Blockchain. As the new branch is also a cryptocurrency with same transaction history as Bitcoin at the fork block, the person who holds Bitcoin has an equivalent amount of Bitcoin Gold. 51% and Double Spend attack on Bitcoin Gold [I][II]A malicious miner successfully executed a double spend attack on the Bitcoin Gold network in May 2018. Malicious miner was using the exploit to steal funds from cryptocurrency exchanges. To execute this attack, the miner acquired at least 51% of the network’s total hashpower, which provided them with temporary control of the blockchain. Obtaining this much hashpower is incredibly expensive even on smaller networks like Bitcoin Gold but it can be monetized by using it in tandem with a double spend attack. After gaining control of the network, the attacker began depositing Bitcoin Gold coins at cryptocurrency exchanges while also attempting to send those same coins to a wallet under their control.
Ordinarily, the blockchain would resolve this by including only the first transaction in the block, but the attacker was able to reverse transactions since they had majority control of the network. Consequently, they were able to deposit funds on exchanges and quickly withdraw them again, after which they reversed the initial transaction so that they could send the coins they had originally deposited to another wallet. So, in this way, an attacker could have stolen around $18.6 million worth of money from exchanges. As a solution or precautionary measures, Bitcoin Gold developers advised exchanges to increase the number of confirmations required before anyone can credit deposits to the customer account. As attackers were able to reverse the transactions, Blockchain community advised Bitcoin Gold developers to raise confirmation requirements to 50 blocks. Attackers have been utilizing many services i.e. the control of more than 50% of the Bitcoin Gold network. This allowed the attacker to modify details of blockchain transactions and gave them an ability to perform the second attack called double spend attack. So, in this case, attackers have been utilizing a combination of 51% and double spend attack to defraud the currency exchange services. The blockchain is not in fact immutable. However, the chances of 51% attack on a major network are smaller as compare to such kind of attacks on smaller/ minor networks.
Conclusion: Even though Blockchain technology has great potential in creating trustworthy decentralized applications but it is not perfectly immutable in nature. Small sized blockchain based cryptocurrency networks are easily prone to network attacks like 51% ownership attack, double spend attacks etc.
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