The blockchain will not save the world. At least not this year

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It is surprising that this new and not quite understandable to the layman, the technology, the blockchain, has received wide coverage in the media. The blockchain is spread like wildfire, because it is the basis of the most popular digital currency — bitcoin. The explosive growth of the cryptocurrency in 2017 sparked the interest of many people to crypto-industry and blockchain technology in the hope of easy and quick earnings. The magic word «blockchain» is in the minds of the masses associated with the solution to all problems. Is it really so? The blockchain is a technology, not a source of income. And technology, yet, alas, have not found large-scale application.

The reality check

The story bloccano illustrates many of the problems normally associated with the introduction of new technologies. If excessive expectations of the market do not correspond to the real actual possibilities of technology. For example, developers argue that these 187 global and not very problems can be solved with the help of technology a distributed registry. Sounds implausible. In addition, many consider the blockchain as an end in itself, when it is simply a tool used to achieve certain goals.

And it is those two factors which is most detrimental to the future of this technology, despite all the promise in the field of streamlining all operations, and improving interactions between people.

At its core, the blockchain is a form of digital trust, which has a number of potential applications in a business where trust is a key factor in smooth functioning. However, some of the characteristics of this technology that make it so valuable, is not as good outside the virtual reality. In real life, solving any problem is a compromise. And there is no single universal algorithm for solving divergent tasks.

So before you blindly jump in any sphere of activity on the blockchain technology, it is important to create an environment in which professionals from this sphere I would get an idea about the block chain, as well as its opportunities and challenges associated with the use.

Limitations and drawbacks of the blockchain of the first generation

To trust the data of the blockchain is possible because the algorithm increase the number of blocks. Unlike other data management practices, the blockchain is a decentralized (peer-to-peer) network. There is not a single monolithic structure, which would be run and owned all the data. This eliminates the risk of temptation to manipulate information. And even if someone will have an idea to affect the data, then this would be quite difficult, because you have to make changes to all N nodes of the chain at the same time, which is almost impossible.

The second aspect of the blockchain, which makes it such a safe option for data management is the uniqueness of the record forms. Miners must reach a consensus to add a new block to the chain. In addition, each new entry contains a reference to the previous block, meaning we cannot edit or remove a block without editing the entire chain. That’s why the data is immutable. And this is one of the key advantages of a distributed registry (although immutability and a new General EU regulation on the protection of personal data GDPR is not yet compatible).

Considering the above process, we can conclude that the introduction of new data into the block chain takes more time than traditional way in a centralized system. Many nodes involved in the procedure of verification of transactions and protection from hacker attacks, a serious impediment to the process. Thus, in its present form, the blockchain is a slower technology compared to existing ones. For example, Visa processes the transaction in 3500 times faster than it happens in the payment system of bitcoin.

Another problem is that all the blocks stored the complete data chain. This means that as you increase the block chain becomes more and more cumbersome, unwieldy and difficult to manage. In some real scenarios business processes involving the use of a large data set, the chain can just explode and become uncontrollable.

There are other threats related to the use of technology. The blockchain technology largely depends on cryptography and peer-to-peer networks that make it very reliable and stable. However, history has shown that absolute reliability doesn’t exist. And someone, well-motivated, having the right tools and, perhaps, in one point, will cope with the task of hacking. The interest of hackers grows in direct proportion to the rising popularity of blockchain technology. And even if we accept the fact that it is completely inaccessible for intruders, it is impossible to tell about the systems and programs associated with it. In General, the blockchain technology is not a magic universal solution to all problems.

Like any other technology, it is viable due to the existence of trade-offs. In this case, a compromise must be made between scalability, decentralization and security. That is almost an impossible task.

A new generation of blockchain as a guarantee of the viability of the technology

The lack of scalability is probably the biggest drawback of the block chain. Despite numerous improvements of the software created for bitcoin mining 8 years ago, the main code is still the same. He just is unable to match the significantly increased number of users, reducing the throughput in General. From the solution of this problem depends the life or death technology. The first generation crypto-currencies such as bitcoin, do not massturbate and even somewhat dangerous to the environment, if we consider the index of energy consumed.

The next generation solve this problem, implementing new projects and concepts. For example, they are moving away from the consensus algorithm Proof-of-Work (in which miners must carry out increasingly complex calculations, increasing the energy consumption) and introducing a new algorithm PoS — proof of stake, do not require the use of computing power.

Another example of the updating of the blockchain can serve as a radical change in the design of the chain itself. In the new concept design departs from linearity, where the units are linked singly, and transformed into a network model, allowing for multiple entries in different branches of the circuit.

Too bad to be true?

All the above problems innovative technology must be considered in its implementation and transition to the form of digital confidence (when software has to trust more than anything else). However, in many cases, the benefits of the blockchain to compensate the problems and make the block chain a better alternative. Recent real — world example, using the blockchain to solve problems of identification in the refugee camp under the auspices of the UN in Jordan.

So, do not trust too much hype around the blockchain. Instead, it is necessary to be aware of what to bring or not to bring a new technology. It certainly is powerful and exciting but not yet Mature and somewhat limited. What explains the fact why the blockchain is still not universally applied, despite the mass media coverage. It is hoped that the new and future generation technologies will become more viable application than what’s available at the moment. These new generation as the old ones, would not be a panacea, but would provide a unique chance to create a new framework (Protocol) for the overall development and growth.

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