12 Biggest Blockchain Problems Today (We Must Address These)


The blockchain is a public ledger that records all transactions in chronological sequence, is secured by a suitable consensus mechanism, and provides an unchangeable record. Immutability, decentralization, and better anonymity are among its standout features. But, even a perfect machine has limitations. So do blockchains. Let’s take a look at some of the major problems with blockchain technology:

  1. Environmentally unsustainable
  2. Limited scalability
  3. High latency
  4. Fake block generation
  5. Lack of true privacy
  6. Hidden centrality
  7. Critical size
  8. Lack of flexibility
  9. Lack of additional security measures
  10. Complexity
  11. Lack of legal acceptance
  12. Lack of user acceptance

Time waits for no one. Let’s dive and explore the above problems with gusto.

Ethereum symbol in front of a skyline showing powerlines.

1. Environmentally Unsustainable

Blockchain’s energy appetite is quite high. The Bitcoin network, for instance, is estimated to use as much energy as the entire country of Argentina. It is also estimated that energy consumption for each bitcoin transaction is equivalent to 100,000 times the energy consumption of processing a credit card.

The problem with blockchain is that it’s distributed. This means it’s not just one computer that stores all the data; instead, there are thousands, if not millions, of computers worldwide that store data about every transaction that’s ever taken place on the blockchain.

Every time a new transaction is made, every computer on the network updates its ledger to reflect this latest transaction. This process, known as mining, consumes a lot of energy because computers need to work hard to solve complex math problems to add the new transaction to the ledger.

2. Limited Scalability

The scalability of blockchain is limited by its design. The blockchain is a peer-to-peer system that aims to fulfill two objectives: first, it enables everyone to contribute new transaction data to the overarching history; second, it ensures that the historical transaction data is secure from tampering.

The blockchain can balance these two goals by using an immutable data structure that only allows new blocks to be added by solving a hash puzzle. In a proof-of-work consensus, solving the hash puzzle is meant to be time-consuming. This is an effective method to make attempting to alter transaction data history prohibitively expensive.

This security measure, unfortunately, comes with a price. Reducing the processing speed means that the scale is limited during the blockchain’s design process. This technology characteristic is considered a significant limitation for its use in settings requiring fast processing speed, high scalability, and large throughput.

Other crypto projects have designed other consensus mechanisms with higher scalability and low latency.

3. High Latency

The time it takes to add a new block of transaction data to the blockchain is called latency. The latency of the Bitcoin network is currently 10 minutes on average. That means your bitcoin transaction can take up to 10 minutes until it’s recorded, confirmed, and visible to everyone in the network.

This is considered slow compared to other payment systems such as Visa, which can handle around 1700 transactions per second. The slow speed of the blockchain is due to its design. As we have seen, the blockchain is a distributed system that relies on a consensus mechanism to protect the transaction data from being manipulated.

Ethereum classic homepage touting it's decentralization.

4. Fake Block Generation

Blockchain technology is based on the concept of decentralization, which means that no central authority is responsible for managing the network. Instead, the network is maintained by a network of computers or “nodes.” This decentralized structure has one major drawback.

The 51% attack problem occurs when a single entity or group controls more than half of the computing power in the network. This allows them to manipulate the blockchain, confirm fraudulent transactions, and double-spend coins. In theory, this could enable malicious actors to subvert the blockchain and wreak havoc on the system completely.

The good news is that, so far, the 51% attack problem has not been exploited on a large scale. However, it remains a serious concern for those looking to adopt blockchain technology.

5. Lack of Privacy

The blockchain is a ledger used to keep track of all the transactions that have ever happened. This includes the details of how much value changed hands, when the transaction occurred, and between who (somewhat). The blockchain is accessible to everyone so that everyone can see this information.

Because of this, the lack of privacy is a vital part of how the blockchain works. This is necessary so that everyone can see which wallets own what and to make sure that new transactions are valid. However, this level of transparency can be a limiting factor for cases that require more privacy.

Projects like Monero and Zcash were designed to protect the privacy of the transaction, but most other projects are pseudonymous, where identity can technically be traced. 

6. Hidden Centrality

A blockchain system is distributed, but in reality, it is not. 

The reason is that the requirement to solve a hash puzzle for each block being added to the blockchain is computationally and power-intensive in a proof-of-work model. Only a few people with sufficient financial resources can invest in this specialized hardware.

This, in turn, leads to a tiny group of entities that collectively maintain the system’s integrity and essentially centralize an intentionally decentralized system

This small group of entities, like oligopolies in other sectors, could abuse its power (e.g., by omitting specific transactions or discriminating against particular users). This impact creates a hidden centrality that erodes the overall system’s distributed nature.

Even in so-called mining pools where individuals ban together, the pool operators become a central authority.

Newer crypto projects are working to solve this problem.

7. Critical Size

The trustworthiness of the history of transaction data and the system’s resistance to fraud and corruption relies on the assumption that most system computing power is controlled by honest nodes and the design of the blockchain itself. 

However, for cryptocurrencies with low market capitalization and limited user adoption, it is challenging to reach a critical size that makes the coin project useful as a medium of value exchange in the real world. These smaller projects will fall by the wayside, having sometimes wasted the human capital during development time.

8. Lack of Flexibility

There is a difficulty with blockchain development that stems from its unchangeability. It’s tough to correct bugs or adjust the blockchain protocol when immutability is fundamental to technology. 

If, for example, there’s an issue with how transactions are checked, it’s difficult to alter the rules because all the network’s nodes must concur on the change. Otherwise, a fork in the blockchain occurs, and two separate versions of the truth emerge—one without the update and one with it.

In reality, there isn’t a standard procedure for upgrading or replacing major components of a blockchain after it has begun operating. These properties make the entire blockchain technology less adaptable than other technologies.

Hacker in hoodie and guy fawkes mask holding a bitcoin.

9. Lack of Additional Security Measures 

The asymmetric cryptography used in the blockchain is among the strongest forms of cryptography available. However, there is no additional safety net to protect blockchain users from losing or sharing their private keys with others.

For example, your credit card can be used if someone knows your PIN. However, the bank (being a central authority) protects your transactions from fraud or theft. Blockchain, being decentralized and trustless, has no safety net for token users.

Some consider the lack of additional security measures a limiting factor for the usage of the blockchain.

10. Complexity

The invention of new technology and its subsequent widespread commercialization is a lengthy process that takes several years. 

Because blockchain technology is relatively new, with most applications hosted by startups, there is a lot of heterogeneity in understanding it. This can act as a barrier to entry for new users and developers.

The second barrier to comprehending is understanding the concept and math behind the technology. Concepts like zero-knowledge proofs, digital signatures, and hash functions can be hard to grasp for people without strong math or computer science background.

Traditional fiat money stemmed from exchanging gold, silver, or other precious metal resources for food or clothing. Bartering has roots in the first human civilizations. This in-person, hand-to-hand trade is easily understood.

However, blockchain is a technological middleman, an ethereal shopkeeper that exists anywhere, everywhere, and yet physically nowhere. It’s tough to wrap your head around, which adds to the complexity, understanding, and thus adoption.

11. Lack of Legal Acceptance

Regulating blockchain and cryptocurrencies has been difficult for financial regulators because the technology is borderless.

To date, there has been no internationally coordinated regulation of blockchain and cryptocurrencies.

However, international bodies such as the Financial Action Task Force, Financial Stability Board, International Organization of Securities Commissions, and Bank of International Settlements have been working towards creating international standards and guidance.

There have been different reactions to cryptocurrencies around the world. Some countries have banned them, while others are still trying to understand them better.

Since cryptocurrencies are still a new financial instrument, their regulation is evolving. So, before starting a project related to blockchain or cryptocurrencies, you must consult the appropriate authorities in your jurisdiction to stay up-to-date on the latest regulations.

12. Lack of User Acceptance

Another major limitation of blockchain technology is user acceptance. The open legal status of blockchain causes uncertainty among its users, which in turn reduces their interest in using it.

A lack of uncertainty about whether something falls within certain boundaries can negatively affect how people deal with those things—in this case, cryptocurrencies and blockchains are alike.

An additional aspect of user acceptance is knowledge and education. The blockchain is a powerful but unfamiliar technology. It’s not uncommon for users to be skeptical of new technologies which they don’t understand at first glance or usefully integrate into their lives – this includes the digital economy as well!

Does reading about these problems leave you wondering what is the point of cryptocurrency? Read on.

Financial Disclaimer: This content is for educational purposes only and is not suitable as financial advice. Opinions and statements expressed herein are those of the author. They do not reflect the views of Data Overhaulers or its owner. Data Overhaulers is not a subsidiary of or owned by any ICOs, blockchain startups, or companies that advertise on our platform. Investors should do their due diligence and meet with a licensed financial advisor before making any investments in any ICOs, blockchain startups, or cryptocurrencies. Please be advised that your investments are at your own risk, and any losses you may incur are your responsibility.

Mike Chu

Mike is a web developer and content writer living as a digital nomad. With more than 20 years of devops experience, he brings his "programmer with people skills" approach to help explain technology to the average user. Check out his full author bio by clicking here.