It is no secret that cryptocurrency has taken the financial world by storm. The underlying basis of cryptocurrency is blockchain technology. Blockchain is a ledger-based system with network nodes authorizing multiple exchanges giving unique hash transactions. The important word here is “network” as cryptocurrency is sometimes referred to as “digital money” across an entire network without a central authority regulating the exchange. Cryptocurrency runs on a decentralized exchange across a common network…the Internet. In a very interesting article in Forbes by John Villasenor, he outlines five possible drawbacks that could ruin blockchain technology’s chances of becoming mainstream. We will review each item and provide some insight into each one.
Drawback 1: Too Much Hype Around the Technology
John writes that too much hype and overpromising of blockchain’s value could make the technology lose credibility. He mentions that there are some areas that would not benefit from blockchain but he does not give any concrete examples. This would have been nice to see where he is coming from. He goes on to add that once credibility is lost, those entrepreneurs who have something good to contribute to blockchain will make it more difficult for them to flourish. Honestly, my thought that since this technology is relatively new, there will be more mistakes at first but once an established system is put to the test and succeeds, all the promises will be fulfilled in time. I would not be so concerned about this drawback.
Drawback 2: Blockchain Can Lose Integrity Over Time
John states that the same network of nodes managing a blockchain may not stand the test of time and problems could arise to interfere with the blockchain the longer it exists. If you look at the Internet in its early days, many thought that the web would die as it could not be tested or connections could not last remotely. Well, we sit here 25 years later and connection to the internet has vastly improved over the years. Blockchain just needs to mature itself and non-believers will see the benefits in due time.
Drawback 3: Too Much Money Raised Through ICO’s Based on Little Information
As I agree wholeheartedly with John’s points, I believe this can be easily explained. Most, if not all, cryptocurrency applications are at the beginning stages so it is unknown whether certain ideas can be tested against some sort of standard since there are none. Investors are buying in on the idea rather than an actual product. Once ideas are proven, there will be more than just a “whitepaper” to convince the world that cryptocurrency can compete with other assets.
Drawback 4: Regulation
As mentioned above, blockchain is based on a decentralized ecosystem. John’s only valid point in this section is that there should be more done by folks within blockchain to be in touch with regulators to help them understand the technology better. Regulation of blockchain will arrive it is just a matter of when.
Drawback 5: An Increase In Cyberattacks
This one is probably the least valid of all of John’s points. Online cybersecurity will always be a threat no matter the platform. The risk is escalated because cryptocurrency is involved which will naturally lure cyberattackers.