10.1 Limitations of Blockchain Technology - Video Tutorials & Practice Problems

Welcome back. We will now start talking about how blockchain can actually benefit you. And how you can actually use blockchain technology in your business if it makes sense to you. To do so, I want to first start talking about some limitations of blockchain technology. Because you may have heard a lot of great things about blockchain and some people actually say it's like a silver bullet, that it will resolve everything. And the truth is no, in the case of blockchain there are some key limitations and you need to be aware of these limitations. I will go through them now so you can understand. For starters, blockchain is a new technology as a result there is not that many proven use cases. Yes, they are already appearing now and there are many use cases that we have covered. But it's really relatively early and the growth process of blockchain technology and it's not firmly established. As result and because it's such a new technology there is not that many proven business models that have already been established. Furthermore, because of this there is a lack of knowledgeable talent. In fact there is a huge shortage of blockchain developers right now and many blockchain applications are suffering from the fact that there is no enough developers to be able to develop these solutions. So this lack of knowledgeable talent is a big problem when it comes to blockchain. Another key thing is that it is immutable. Now, you may think that being immutable is a benefit and it's a strength. But in fact in some situations it's actually a limitations because in some businesses you require being able to change the history of an item and some key things when you are dealing with a specific regulations the right to be forgotten so all of these challenges and different regulations. Different requirements for different businesses and having a blockchain that is immutable is a key challenge and a limitation for blockchain technology. Also, there are no reversals or modifications this goes inline with the fact that it is immutable so as we said if you have to change the history of somebody's identity. For instance if somebody actually changes their name or changes their sex or becomes a completely different religion or whichever type of a private information for somebody you will always keep permanent record of that person past history. But sometimes people may just want to simply eliminate that or delete that or they may be some regulations that require you being able to remove those things. These are things that blockchain technology can't do because there is no reversals or modifications. Now there is a key challenge also with the management keys. And that's because one of the key issues with blockchain technology is that it's built on cryptography. And cryptography when we are talking about public key cryptography really relies heavily on the management of these keys. Because if somebody actually gets hold of these private keys you basically break the cryptography and this is a key challenge because when people actually owning a private key. They have full responsibility for that key. And if someones hacks and steals that privat key the cryptography is broken. Another key challenge with blockchain is scalability. And that is because your dealing with a distributed system and not only do you have to worry about having multiple nodes. And if you want to scale and add more nodes you need to increase the size of that operation but you also have to deal with all the nodes will need to have a permanent copy of that blockchain and that blockchain keeps growing permanently. So when you are thinking about the bitcoin blockchain I specify that is over 200 gigabytes in size. But it is not just one copy that bitcoin blockchain you are dealing with thousands of copies of that bitcoin blockchain all around the world. And that blockchain will keep on increasing permanently it's not like you are going to stop at gigabytes that blockchain will keep increasing as new transactions are added as a result scalability I a key challenge. The last one I want to talk about is time to process. because for instance in the case of bitcoin new blocks are added approximately every 10 minutes. Well, when you're talking about you have to deal sometimes with thousands of transactions being done per second, when it comes to financial institutions, waiting 10 minutes per block of new transactions does become a problem. So when you're dealing with these consensus environments, we have multiple nodes that need to agree on a version of the blockchain, being able to align all those in a scalable way that's quick enough so that the time to process is efficient, is very, very challenging. So when it comes to blockchain, this time to process issue is a big limitation.