Challenges the blockchain space from technology perspective

From a technical point of view, among the biggest problems that the blockchain space is currently facing, in my opinion, are scalability, privacy, security, interoperability, easy / convenient clients and governance.

A brief description of specified problems follows.

Scalability

The most widely used public blockchains of Bitcoin and Ethereum can process about 7 and 16 tps on average, respectively. This is very little compared to what is required with mass use of technology even when the blockchain is used only in a fairly narrow specialized area. This number is restricted mainly due to the fact that the structure of existing consensus mechanisms is adapted for security purposes (in particular, the Sybil resistance scheme) which causes certain time delays between the blocks containing the transactions.

Privacy

Even in the public blockchain both individuals and companies should have the right for information confidentiality, since privacy is a basic human right, and for companies the lack of privacy compromises competitive advantages. Quite big steps are already being taken to create private coins and apply encryption at existing blockchains, as well as to develop smart contract privacy and the infrastructure where total control over data and access to it belongs to the owner only.

Interoperability

At the moment, it is obvious that there won’t be a single blockchain to solve all the problems — the space will be filled with different blockchains, each of them adequate for a specific set of tasks. One of the advantages of blockchain space is the possibility of intermediaries elimination, i.e. the possibility to rely on trustless third party. Nevertheless, at the moment there is no universal way to exchange information between blockchains.

With enough blockchains performing their specific roles, transferring data between them implies either writing a new code each time (requires a lot of effort due to the differences between blockchains and their unsuitability for such operations) or the use of an intermediary. Thus, for complex problems, one of the main advantages of the blockchain technology — the absence of intermediaries, vanishes, as there still is a necessity to deal with the third party.

Simpler process of information or value transferring will be more convenient for the user and allow the blockchains to expand their functionality.

Governance

Blockchains and cryptocurrencies form around themselves a society with various interests and a necessity to take decisions for effective development and adaptation to a rapidly changing environment. The control mechanisms of the real world, apart from not being effective, as we see every day, are not always applicable, because the concept of personality on the Internet is vague and it is hard to prevent the creation of many new “personalities”. In this regard, the projects try different management and decision-making systems that are transparent, legitimate, feasible and effective.

Usability for end customer

The full size of many chains is already beyond the capacity of devices used in everyday life. This inhibits global adoption of the products, as it imposes certain technical difficulties in the use. One is forced to rely on third-party services and trust that their chains are valid.

Thus, the blockchain technology again loses the advantage of third party absence, since one has to trust the reputation of the intermediary instead of checking the chain on his own device and being more secure. Light clients that do not store the entire chain in their memory could be a solution to this problem. Unfortunately, at the other end of spectrum is safety. In the absence of direct access to a full chain it becomes more difficult to guarantee the authenticity of this chain.

Security

Technology is not perfect. The openness of the code, the openness of the chain, the irreversibility and the fact that money is involved, in addition to all their positive qualities, might have negative consequences. Frauds can study the code, its vulnerability, and try to use it for their own beneficiation. Thus, a small bug, typo, or incomplete description can lead to money loss for individuals and companies which shouldn’t have happened according to the system’s work logic. The irreversibility of operations makes this problem really serious and the work of people in the blockchain space thankless, since making mistakes is a part of the human nature.

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