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The Top 6 Problems With Blockchain Technology

As promising as the globalization of blockchain technology seems, it isn’t necessarily the antidote to all our business problems. Although Bitcoin is a household term and blockchain is poised to enter every possible industry, there are problems facing blockchain adoption.

What are the problems with blockchain? What challenges are holding back blockchain adoption, and how can they be overcome?


What Is Blockchain?

When we think of blockchain, the first word that comes to mind is Bitcoin, and most of us translate blockchain as cryptocurrency.

But these are two different things. Blockchain is the system, and cryptocurrency is a product that runs on that system.

The structure of this system is aptly represented by its name. Its main component is a chain of blocks that store data in time order. It is a distributed ledger technology (DLT), which means this chain is not stored in one central device but in every node connected to the blockchain.

Simply put, a blockchain is a network of nodes. Nodes are devices connected to that blockchain using the software. Nodes validate every transaction or exchange of data that occurs within the blockchain. Furthermore, most public blockchains allow anyone to create and operate a node, making blockchain a decentralized and transparent system.

While cryptocurrency may be the most common use of blockchain, it is not limited to digital coins. Some have developed blockchains that can circulate videos, pictures, documents, tokens, and many forms of data.

The whole system makes it hard for hackers to forge transactions. To alter one transaction, they will not only have to change the relevant block stored in every node in the blockchain separately but also the subsequent blocks in the chain if they don’t want the discrepancies in their links to be obvious (or rejected entirely).

What could go wrong?

Well, as it appears, A LOT!

6 Problems With Blockchain Technology

Blockchain systems have weaknesses in many domains, making mass adoption of blockchain a far-fetched idea. Below, we walk you through at least six different issues with blockchain you might’ve never noticed.


1. Security

As safe as they may appear, blockchains are only as secure as their weakest link. For example, if someone wanted access to data shared within an exclusive blockchain, they only need access to one node in it.

That means the device that is the easiest to hack in a blockchain is a threat to the privacy of the entire blockchain. Unfortunately, that is not the only problem with blockchains.

It may be nearly impossible to forge a transaction in a blockchain, but it is possible to get a fraudulent transaction approved.

Proof Of Identity

Blockchains are quite democratic. They use different methods of voting to reach a consensus. In this case, each node that has an identity gets a vote. Majority wins! There are issues with proof of identity consensus algorithms, such as minorities being sidelined or manipulating smaller blockchain networks.

It’s easier for groups of criminals to enter a blockchain with many different devices, consequently buying more votes for themselves.

Once they form a majority, they can get any transaction approved.

Proof Of Stake

This one concerns the stakeholders in a blockchain. The weight of your vote is directly proportional to the stake you hold in a blockchain. That means if you own a majority of the assets in a blockchain, you rule!

If a group of people buys more than 50 percent of the assets in a blockchain, they control the blockchain.

Both the proof of identity and the proof of stake methods can succumb to a 51 percent attack.

We’ll talk about the third method, proof of work, in a moment. For now, let’s talk about how transparency can backfire.

2. Transparency

There has been a lot of discussion over the integration of blockchain technology in supply chains. It looks like a great idea! After all, making supply chains transparent can provide the closure everyone needs to make ethical choices.

However, public blockchain (the most prevalent form) in a commercial environment isn’t always a good idea. Why? Because if a supply chain becomes transparent, so will the data of all the customers and partners dealing with that business.

When working in a commercial environment, complete transparency isn’t ideal, as it allows the participants to see what each member is doing in real-time.

There are private blockchains, which can restrict participants from viewing certain transactions, but they have their disadvantages. Since a private blockchain can restrict who can participate as a node, it isn’t truly decentralized; thus reducing public trust in the product.

Just like customers wouldn’t want all the businesses involved in supply chains getting any of their data, a business wouldn’t want their competition getting a whiff of their intellectual property, secrets, and strategies.


3. Scalability

The larger a blockchain grows, the more vulnerable it gets. If that isn’t enough to convince you, there’s more we need to talk about before you plan on introducing blockchain to your business.

The redundancy of blockchains makes them hard to scale. Every device in your network must have a copy of every transaction made, right from the genesis block to the most recent transaction. That means hundreds of copies of the same data!

It requires massive storage, and the bigger the blockchain, the more power the nodes need to process everything.

And even if you have all the digital, software, and hardware needs met, regulating your blockchain will be almost impossible.

4. Regulation

Decentralization of authority means there’s no one power to enforce law and order in the network. No moderators, no leaders, not even a regulatory body!

Not to mention how contracts made on a blockchain (known as smart contracts) are not legally recognized as substantial agreements or proofs in most countries.

Moreover, since every user can be from a different country, and blockchain surpasses all borders, which laws should apply to smart contracts, agreements, transactions, and cases?

The lack of universal standards opens up vulnerabilities and challenges for developers as they try to create blockchain-based products on various platforms.

5. Transaction Speed

The unsolved problem of sluggish transaction speed is emerging as a major challenge in blockchain adoption for practical applications. Due to the decentralized nature of blockchain, each transaction must be verified by the nodes before it’s accepted as a block. In centralized systems, trust is put in a central governing body (government or bank), which allows them to process millions of transactions per day.

For comparison, consider Bitcoin’s transaction speed with businesses like Visa. Right now, Bitcoin can only guarantee 4.6 transactions per second. Visa, on the other hand, handles around 1,736 transactions per second on average (calculations based on the official claim of 150 million transactions per day).

There are several projects and startups working to expedite transaction speeds on blockchain, but all these solutions come with limitations.

6. Energy Consumption

Blockchain technology consumes more energy than any centralized system. Not only does their redundancy cause them to consume more power than an average centralized cloud-based system, but their transaction validation method plays a great role too.

First, they require more storage than any other system. The electricity required is multiplied by the number of nodes added to a blockchain. Each node stores and processes almost as much data as a central body in any other system.

But that’s not even our major concern here. Remember the third method of validation we were going to talk about? It requires major resources to run.

Proof of Work

In proof of identity, every device has equal weight. In proof of stake, the largest stakeholders rule. But proof of work requires effort on the part of the users and their devices.

When a miner uses proof of work to validate a transaction, they are given a complex mathematical problem that requires a great amount of computational power to solve.

The complex mathematical problem has more to do with verifying the transaction through its hash. Why is it hard? Because a hash is merged with another hash upon each transaction.

To make sure a transaction is authentic, one has to track the hash and its history all the way to its origin. Cryptocurrency miners solve these complex algorithms and hash matches, receiving a cryptocurrency reward for each block they validate.


As the number of competitor nodes increases on a blockchain, there is a fight for more computer power, which consumes more energy. This subtle complex confirmation mechanism is extremely inefficient as only one node wins the race to confirm the next block.

The point of all of that work is to secure the blockchain by making it harder and unfeasible for any criminals to validate fraudulent transactions—all at the expense of high electricity bills and enormous amounts of energy consumption.

It is estimated that Bitcoin alone consumes as much energy as whole countries like Malaysia and Sweden.

With all that in mind, the question remains, is blockchain a sustainable technology?

Is Blockchain the Solution You Need?

Blockchain is a distributed ledger technology meant to form transparent and decentralized systems. It may look safe, exclusive, democratic, and a geeky hipster’s utopia, but it is not exactly foolproof.

If you think transparency is blockchain’s strength, wait till your medical records are stored in a blockchain-based medical facility.

You can’t scale your blockchain without exhausting your resources, nor can you regulate it because there are no standard laws regarding it. Data and proofs stored within a blockchain aren’t even considered substantial in courts.

And you can save anything but energy when it comes to a Proof of Work blockchain. You’ll only be harming the environment if you switch from a centralized system to a blockchain unless your former system was an old-school waste of paper and fuel of a business.

With that in mind, know what you’re getting into when you join a blockchain.

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