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Unravelling Blockchain Issues

Blockchain brings forth a world of decentralised possibilities. However, there lies a realm of challenges to be conquered.

Are these hurdles mere bumps in the road or stepping stones to an even more secure and innovative future?


The Blockchain Scalability Trilemma

Coined by the founder of Ethereum, Vitalik Buterin, The Blockchain Scalability Trilemma is one of the biggest issues with blockchains.

There are three important features of a blockchain: decentralisation, scalability, and security.

But a blockchain can simultaneously attain only 2 at once, not all three. Some trade-offs, hence, are inevitable.

Blockchains like Bitcoin and Ethereum have chosen side C - Security and Decentralisation- and more or less given up on scalability. The continuously increasing sizes of popular blockchain networks such as Ethereum, and the various applications of blockchain, which include finance, IoT, healthcare, supply chin, etc, escalate the blockchain scalability challenge.

Factors affecting the Scalability:

  1. Hardware limitations - as the number of participants increase, it will become difficult to set up the hardware required for the nodes to operate. besides, it will become tough to source the vast computational energy required to fuel the blockchain processes.

  2. Block Size - The increasing number of transactions in blockchain networks leads to a time-intensive process for executing transactions. the growing number of transactions in the network has led to increasing block size thereby affecting scalability.

  3. Latency - Latency in the blockchain is referring to the processing time for a transaction measured starting from getting an input till the transaction is completed at the output. When a transaction is carried out, every node verifies and stores the data. The number of transactions are increasing, and so the transactions are buffered in a queue waiting to be verified, thus logically causing increased latency.

  4. Cost Issues - Users have to pay a specific fee for the verification of their transactions. If the transaction fees is more, the transactions are verified faster by the nodes. The transaction with a small fee may suffer massive confirmation delays. many other transactions remain in the queue without processing for a long time.


  • on-chain solutions

  • off-chain solutions

  • alternative consensus mechanisms

Cryptocurrency and the Energy Consumption Conundrum

source: Photo by geralt on Pixabay

To add a transaction to the blockchain, each node needs to validate if the transaction is true or not. This is done using consensus mechanisms. The most famous one- used in Bitcoin- is the Proof Of Work (PoW). If you want to add a transaction to the chain, you need to solve a numeric puzzle. Solving this puzzle is tough, but verifying is easy.

If you solve a problem, other nodes can easily verify the solution and once it is verified it is added to the block. This process of solving the puzzle and verifying requires significant computational power, and therefore energy. This makes gaming the system less appealing, while the element of luck in completing Proof of Work renders adding fraudulent data nearly impossible.

Blocks can be added to the chain only at certain intervals. For Bitcoin, it is every 10 minutes. So with more nodes joining the network and trying to solve the hard puzzle so they can add the transaction to the block, the puzzles get harder and harder. Therefore, it takes the same amount of time to add a block of transaction to the chain; it takes more energy to complete the same problem.

The environmental implications of cryptocurrency energy consumption are twofold: the direct energy usage and the associated carbon emissions.

Bitcoin, the world’s largest cryptocurrency, currently consumes an estimated 150 terawatt-hours of electricity annually — more than the entire country of Argentina, with a population of 45 million.

Energy demands of cryptocurrency mining have led to concerns about the strain on local power grids and potential disruptions to energy supply. In regions where mining operations are concentrated, such as China and the United States, the increased energy demand from cryptocurrency mining can overwhelm existing infrastructure, leading to power outages and grid instability.

The energy relies heavily on fossil fuel-based electricity generation, which contributes to greenhouse gas emissions. The carbon footprint of Bitcoin mining alone is estimated to be between 25 and 50 million tons of CO2 each year, equivalent to the emissions from diesel fuel used by US railroads.

Ways to Decarbonise:

  1. Transitioning from Proof of Work to Proof of Stake (PoS). The energy consumption of PoS is low and is a more green blockchain when compared to the PoW blockchains.

  2. The energy required to verify the transactions and solve the numeric puzzles can be supplied using green energy, for instance, wind mills. However, it is essential to note that the supply of green energy is limited and will be difficult to scale to a large level.

  3. Other important factors that can be improved are the design, location of the mining facility, and hardware. Efficient cooling systems, advanced mining equipment, and sustainable infrastructure aid to a cleaner and greener energy.


Blockchain technology has sparked a revolution in various industries, offering decentralised and tamper-resistant data storage with enhanced security. However, vulnerabilities exist in this digital landscape

51% Attack: The infamous 51% attack severely threatens blockchain. In this scenario, a malicious entity or group gains control over more than 50% of the network's computing power. This grants them the power to manipulate transactions, double-spend coins, or even halt the network. Such an attack undermines blockchain's decentralized nature, causing financial losses and eroding user trust.

Forking: Forking occurs when a blockchain's underlying code undergoes significant changes, leading to the creation of a new version or branch. While some forks are planned and beneficial for upgrades, others can be contentious, dividing the community. This confusion disrupts consensus and weakens the security of both the original and new blockchains.

Mining Pool Attack: Mining pools, where miners combine their computing power, play a crucial role in validating transactions and adding blocks to the blockchain. However, if a single pool or group controls most of the hashing power, they can manipulate transactions and exclude others from block validation. This centralized control contradicts blockchain's decentralized principle and poses significant security risks.

Private Key Security: Private keys are vital for accessing and controlling cryptocurrency assets on the blockchain. Losing or compromising a private key can lead to irreversible fund losses. Poor private key management, phishing attacks, or insecure storage methods have caused numerous security breaches.


Transparency is a fundamental feature of Blockchain. The records on a public blockchain are available for every participant to view which prevents fraud. Once a transaction is recorded on the chain, it can not be altered; hence, it is also immutable and ensures the integrity of transactions.

But this is also a privacy concern.

Sensitive information, like medical records, and financial details, is accessible to all the participants on the chain. Protecting this information from identity theft, fraud, and other malicious activities is essential.

1. Public Chains: Public blockchains, like Bitcoin, work in a way that allows anyone to see all the transactions. This means that transaction information is not private and can be viewed by anyone. On the other hand, private blockchains give us the ability to choose who can participate and have access to the information. This way, we can ensure that only authorised individuals can view the data, making it more private and secure, especially for sensitive information.

2. Pseudonymity: When we talk about pseudonymity in the context of blockchains, it means that users are identified by their usernames or pseudonyms, rather than their real names. While this helps maintain a level of anonymity, it can also lead to some potential issues. People with bad intentions might misuse this anonymity for illegal activities like money laundering or supporting terrorism. Therefore, while pseudonymity can protect identity, it also requires measures to prevent misuse.

3. Technical Vulnerabilities: Blockchains are considered secure, but they are not completely immune to technical vulnerabilities. If the code behind a blockchain or a smart contract is not properly designed or is weak, it could be vulnerable to hacking or attacks. Once a blockchain is compromised, the data stored on it may no longer be safe and could be tampered with or stolen.

4. Regulatory Compliance: Compliance with Data Privacy laws, such as the General Data Protection Regulation (GDPR), can be a challenge in the context of blockchains. The decentralised nature of blockchains makes it difficult to determine who is responsible for ensuring compliance. Additionally, different jurisdictions may have conflicting regulations, making it challenging to comply with all the relevant laws.


Blockchain technology has brought unprecedented advancements to various industries, promising enhanced security, transparency, and efficiency. However, regulatory challenges pose significant hurdles to its widespread adoption.

1. Jurisdictional Challenges The decentralised nature of blockchain presents jurisdictional complexities, as transactions can span multiple locations globally. Each transaction recorded on the blockchain could potentially fall within the jurisdiction of multiple nodes, leading to a complex web of rules and regulations that companies must navigate. This could create confusion and legal complications, especially in cases of fraud or errors.

2. Financial and Tax Compliance Blockchain-based systems operating with virtual assets, such as cryptocurrencies, present challenges regarding financial and tax regulations, which can vary significantly across jurisdictions. Navigating these complexities and ensuring compliance with applicable regulations can be daunting.

3. Smart Contract Enforceability Smart contracts, automated by computer code, raise questions about their legal enforceability. Since smart contracts lack traditional negotiation opportunities, reevaluating contract elements like offer, acceptance, and consideration may be necessary. Ensuring high code quality and security is critical to prevent losses due to poorly written code.

4. Cybersecurity Vulnerabilities Although blockchain technology is inherently secure and tamper-proof, cybersecurity vulnerabilities can arise from compromised data input points. Attackers may target data entry processes, leading to the storage of false or misleading information on the blockchain, compromising the integrity and reliability of the data. To address this concern, companies must implement robust security measures to safeguard data input points, conduct regular audits, and deploy encryption protocols.

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