Introduction
The system of recording and overseeing contracts and transactions is the foundation of the regulatory, financial, and political frameworks which help the modern world function. After all, they do not only draw legal and organizational boundaries but serve as verification and security tools. Thus, they are in charge of facilitating and balancing relationships between corporations, nations, international organizations, and individual communities. However, these contracts still function off the established bureaucratic processes, which struggle to keep up with the current digitalization of the economy. Blockchain is the technology that serves as the potential solution for regulating the administrative processes behind various transactions.
In recent years, cryptocurrency and Bitcoin have attracted the public’s attention due to their massive success of both. Although Bitcoin is arguably the most well-known application of blockchain technology, it can be utilized in several different ways beyond cryptocurrencies. Blockchain is on its way to solidifying itself as the most efficient tool for Internet interaction systems. Therefore, there has been a surge in investments in blockchain and its development. Despite that, it is crucial to acknowledge that numerous challenges are associated with the construction and scalability of this particular technology. The purpose of this paper is to examine blockchain as the phenomenon of the digital age, identifying its primary strategic implications, opportunities, and potential issues.
Overview of Blockchain
What It Is and How It Works
Although the technology behind blockchain may seem complicated, the concept is rather simple. Zibin Zheng et al. (2018) defines blockchain as “a public ledger, in which all committed transactions are stored in a chain of blocks” (p. 354). Thus, it is evident that it is a type of database that stores information using a specific structure to allow for easier and more time-efficient data searching (Nofer et al., 2017). The blockchain structure enables even the biggest corporations to store, filter through, and manipulate massive amounts of information. To house such databases, servers made up of hundreds and even thousands of computers are utilized.
Underlying Structure
What differentiates blockchain from any other computerized database is its architecture. A blockchain gathers information in groups, known as blocks, which house several data sets. Each block has a maximum storage capacity, which means that once a block is filled, it is chained to another previously filled block (parent), and so on. Additionally, it is important to note that “uncle blocks (children of the block’s ancestors) hashes” are also stored in blockchains (Zheng et al., 2018, p. 355). The only block, which does not have a parent, is the genesis one because it is the first block in a chain. The body of a block consists of two main components: a counter for transactions and the transactions themselves. Its capacity depends entirely on its size and the size of each transaction. Zheng et al. (2018) further note that blockchain technology utilizes an asymmetric cryptography tool for authentication. This mechanism is essential for creating digital signatures.
Key Characteristics
It is crucial to determine the primary features of blockchain technology. They include decentralization, persistence, anonymity, auditability, and transparency. In regards to decentralization, blockchain offers an alternative to a traditional database system, which requires all the transactions to go through the central agency (Schneider, 2018). This main organization, such as the Central Bank, serves as an authentication and validation tool, which, in turn, deteriorates the speed of transactions. However, as all the transactions must be cleared through this central office, hold-ups affecting overall performance and efficiency are inevitable.
On the other hand, in the case of blockchain, a transaction is cleared without the need for a centralized framework, which enhances efficiency and allows for creating of versatile networks (“Blockchain technology: What’s ahead,” 2021). The network enables it to be completed by utilizing the connection between any two peers (P2P). As a result, blockchain minimizes operational costs usually associated with using a centralized transaction system and establishing decentralization.
Persistency refers to blockchain’s ability to make the process of collecting and storing data with which it nearly impossible to interfere. That is because every transaction in the blockchain network has to be authenticated and confirmed before it reaches the stage of recording and distributing. This feature allows for any falsification or inconsistency in data to be identified rather easily (Viryasitavat & Hoonsopon, 2019). As for anonymity, it is evident that blockchain technology provides its users with the necessary privacy as they interact with the network through a generated address. Moreover, this feature can be extended to include multiple addresses for one user, which provides even better protection from personal data and identity theft. Apart from the preventive measures against someone’s privacy being compromised, blockchain offers additional security due to a decentralized transaction network. However, intrinsic consent limits the technology’s ability to protect the privacy of its users, the features that it does have to maximize anonymity.
Auditability refers to the opportunity blockchain provides to trace back each transaction to previous ones sequentially. A user can access a specific node and see a list of transactions with accurate timestamps recorded. This characteristic ensures that the data stored using the technology is easily traceable and transparent (Viryasitavat & Hoonsopon, 2019). Transparency is a key feature of blockchain, which is both beneficial and disadvantageous. Although blockchain’s decentralized nature allows users to view transactions effortlessly, hackers can access them just as easily. Still, while the hacker might be anonymous, transactions are not, which means that any activities involving these contracts cannot be hidden. Moreover, different blockchains might be used for different purposes and exhibit the characteristics mentioned above in various ways. Indeed, according to Okada et al. (2017), types of blockchains include market-based and under authority (sidechain), market-based and without an authority (bitcoin), non-market-based and under authority (consortium blockchains), and non-market-based without authority.
International and Regional Benchmark on Blockchain Technical Strategy and Implementation
The implementation of blockchains in the contemporary public and private sectors strives. The domains of blockchain implementation include such fields as finance, education, identification, government, healthcare, fraud detection, energy, internet-of-things, insurance, smart cities, resource management, supply chain, and transportation (Abou Jaoude & Saade, 2019). For example, the government implements blockchains to digitalize public services (“Emirates blockchain strategy 2021,” 2021). Benchmarking is an exceptionally important tool for assessing the existing state of development and integration of blockchain technology. Staiger et al. (2019) note that “referring to the point of reference (the benchmark), benchmarking facilitates the understanding of processes by which performance can be compared, and consequently improved” (p. 59). Although the goal of this paper is not to apply benchmarks to individual blockchain companies to increase their efficiency, benchmarking can still serve as an instrument for an in-depth examination of the industry.
Firstly, it is evident that certain regions are more advanced in innovations and the procurement of insights related to blockchain. Therefore, the benchmarks for blockchain technology and its implementation are going to differ across the world. For instance, Europe, North America, and Asia need to be held to a much higher standard regarding blockchain technology. The primary regions consistently present the world with innovative blockchain solutions, cryptographic upgrades, and new Internet of Things (IoT) devices. Regarding geographic representation, these are the areas of extreme influence in the field of blockchain technologies. A significant part of all the research surrounding decentralized data records originates in the regions mentioned earlier.
The industry has a certain point of reference, which can be easily examined through a specific set of standards. Both private and public entities implement blockchain technologies for successful development. Firstly, the largest share of live blockchain networks is attributed to operations in banking. Financial services dominate as the prevalent sector that integrates these technologies. Secondly, the blockchain industry is not as monopolized as others. The vast majority of networks have been initiated by independent founders and small entities partnering with each other. Thirdly, the main value proposition of life blockchain networks remains significant cost reduction for participants serving as the primary motivation for joining in the first place.
Furthermore, in terms of technical strategy, blockchain is suited for transactions that do not have a substantial digital footprint. Thus, it can provide such advantages as transparency and immutability. It is important to mention that blockchain usually requires other technologies during the implementation process, which should all function efficiently when combined. Lastly, blockchain is not designed as a tool for storing high-volume data. The technology’s limitations in capacity and computational constraints make the storage of a sizeable amount of information, not cost-efficient.
Examples of Implemented Use Cases
It might seem surprising how diversified the application of blockchains can be. The technology is efficiently utilized in finance, public services, social initiatives, banking, and other projects. Importantly, governments use it to shift toward digital governance, as the blockchain implementation strategy of the United Arab Emirates demonstrates (“Emirates blockchain strategy 2021,” 2021). To simplify the distinction between various applications, one should categorize them into two main groups: financial and non-financial. Economic applications include crypto-currencies, securities insurance, and settlements. Examples of crypto-currencies, which refer to the exchange mediums utilizing cryptography to secure “monetary” transactions, are Bitcoin, Ripple, and Monero (Mensi et al., 2019). As for securities settlements and companies trading their liquid shares, examples might include Blockstream, Medici, and NASDAQ. Blockchain networks are suited for registering properties and managing the insurance process, an example of which is a platform named Everledger.
Zheng et al. (2018) distinguish the financial applications of blockchain by classifying them into four groups. Financial services refer to the blocks in technology’s ability to distrust the banking industry by decentralizing the liquidation and settlement of financial assets. The fact that Microsoft and IBM offer blockchain as a separate service further proves the impact of the technology on the traditional market. The next disruption blockchain causes in finance are enterprise transformation. Another group is the Peer-to-Peer (P2P) financial services, which are based on “combining peer-to-peer mechanisms and multiparty computation protocols to create a P2P financial MPC (Multiparty Computation) market” (Zheng et al., 2018, p. 364). Lastly, the technology can be utilized as a risk management tool by providing investors with a framework to assess all the potential scenarios and risks involved.
Non-financial applications include IoT, decentralized storage, anti-counterfeit solutions, a variety of public and social services, security and privacy frameworks, and reputation systems. Firstly, blockchain technologies can improve the sector known as the Internet of Things in many ways, including in such key areas as e-business and safety/privacy. An example of an e-business solution powered by blockchain technology is distributed autonomous corporations being adopted as a decentralized transaction hub, eliminating the need for a third party throughout the trading cycle. Another crucial example of blockchain application in the IoT sector is Filament ADEPT, a project created in collaboration between IBM and Samsung (Jeong & Choi, 2019). Regarding public and social services, blockchain technology is already integrated as a crucial part of operational innovations in such sectors as energy saving, education, human rights, and land acquisition. Additionally, it can become useful in patent registration, marriage licensing, censorship projects, and taxation systems.
When it comes to specific examples of blockchain being integrated into public and social services, there are various. For instance, Imogen Heap is a musician who uses blockchain to sell her records, determine music royalties, and coordinate the managerial activities involved in acquiring and securing music rights ownership. In addition, the implementation of blockchains by such large private companies as Deloitte and others enhances business capabilities through blockchain technologies (“Blockchain – Perspectives, insights, and analysis,” 2021). Storj serves as a tool for sharing files, which functions due to the existing P2P storage platform. It is worth noting that potential applications of blockchain may include the elimination of falsification in reputation records. Nowadays, many businesses hire people to write fake reviews to establish credibility and achieve a favorable social status. However, if blockchain is integrated efficiently, there can be a trustworthy reputation system, which might function well both in academia (offline) and social media (online).
Blockchain is no longer just used for digital currencies such as the infamous Bitcoin, which has led to the popularization of blockchain technologies. While blockchain might have been created and developed to advance the objectives dictated by Bitcoin and similar currencies, the scope of applying the technology is much bigger. After all, in the mid-2010s, there was only a primitive, simple frame of a shared ledger specifically designed to support a digital currency network. Later, a more complex cryptographic validation and verification process was introduced to ensure the security of transactions.
As time passed, the potential of blockchain technology grew in astronomical projections and was no longer limited to just documenting transactions. Developers started to apply blockchain to assets, agreements, and intangible transactions, using all the functionality (auditability, privacy, decentralization, and so on) and utilizing smart contracts. They are specific programs for making the process of executing an agreement fully or at least partially automated. Smart contracts save costs and time, serving as the primary facilitator of cryptocurrency and digital tokens (Oliva et al., 2020). Moreover, they are completely self-managing since they make adjustments as needed, although they still require a system of triggers and a set of predetermined conditions.
Blockchain Strategy and Governance
UAE Blockchain Strategy Outcomes
Dubai is on its course to becoming the planet’s first city powered by blockchain technology. In 2018, the government of the United Arab Emirates had adopted the Emirates Blockchain Strategy 2021. The UAE has demonstrated itself as one of the prominent leaders in adopting emerging technologies. As a result of a fruitful collaboration between the Smart Dubai Office and the Dubai Future Foundation, the Executive Council presented the Dubai Blockchain Strategy back in 2016. According to officials, the strategy’s main goals include increased government performance through blockchain adoption and the creation of a paperless digital layer, industry creation, and global leaders.
Thus, starting from 2016, the country’s officials have initiated several reforms and invested many resources into integrating blockchain into the public and private sectors. The technology implementation process was powered by nationwide projects, which solidified the UAE as a center for blockchain adoption. The World Economic Forum (2020) has published a report on the deployment of blockchain in the United Arab Emirates in collaboration with the Dubai Future Foundation. The findings from this paper suggest that the four primary pillars of the federal-level Emirates Blockchain Strategy 2021 are “happiness of citizens and residents; elevating government efficiency; advanced legislation; and international leadership” (World Economic Forum, 2020, p. 5). The strategy was created as a part of the nation’s digital transformation efforts and made its purpose of ensuring that at least half of the government transactions on the federal level will be conducted through blockchain networks. Some of the expected benefits of integrating the blockchain technology also include operational cost reduction, increased security of transactions, and optimization of government efficiency.
Prior to identifying the outcomes of the aforementioned Blockchain Strategy, it is crucial to determine the primary challenges the country has had to face. The government experienced difficulties in finding, bringing together, and educating the stakeholders involved in the projects. Corporate entities struggled with assembling and educating stakeholders as well. However, they were tasked with navigating a unique challenge: not clearly defined regulatory implications (World Economic Forum, 2020). As for service providers, their issues were rather similar to those of corporate organizations. In the survey conducted by the World Economic Forum (2020), UAE organizations identified the main challenges they had to overcome. They included the ones mentioned earlier, as well as “identifying and understanding the most relevant applications of blockchain, addressing governance, addressing interoperability, managing compliance and security standards” (World Economic Forum, 2020, p. 10). These were the common experiences of UAE companies tasked with a not so easy task of implementing blockchain.
Regarding the success of the Blockchain Strategy, it is important to consider all the statistics and respondent data available. According to the World Economic Forum (2020), there are a large amount of public and private companies engaged in blockchain adoption, 80% of which have passed the pre-implementation stage and are currently implementing or have already successfully integrated the blockchain technology. The Smart Dubai Department (2021) presented a detailed report on the achievements of the UAE blockchain strategy. It is important to recognize that the document’s main focus was the city of Dubai. The Department provides examples of positive outcomes of blockchain implementation in 8 key sectors: finance, education, real estate, tourism, commerce, health, transport, and security.
Regarding the projects in finance, the Blockchain Strategy has led to the creation of Dubai Pay, an exchange platform Bitoasis Cryptocurrency, a blockchain-powered insurance initiative Addenda Insurance, as well as the facilitation of money transfers between India and UAE (Smart Dubai Department, 2021). As for education, in the past five years, Dubai has achieved a lot, including the establishment of the Smart City Academy X10. Moreover, institutions such as Hamdan Bin Mohammed Smart University, Zayed University, and Al Mawakeb School started to issue digitally accredited certifications. The only initiative in the education sector, which has not been fully implemented is Dubai Knowledge, which is a multi-part project focused on digitizing enrollment procedures for students who are moving between different emirates.
When it comes to real estate, the primary blockchain-based solutions implemented in UAE over the past five years are the SmartCrord, digitized property rent procedures supported by Wasl Properties, and an integrated process of property title verification. The United Arab Emirates finds a great source of its riches in tourism, which is why this sector is crucial to examine in detail. Atlantis Hotel and Caesar’s Bluewater have both fully implemented the digital wallet. Two initiatives that are currently under implementation include the Emirates loyalty program and the EMR loyalty program funded by Emaar Properties.
In regards to commerce, there has not been as much improvement as in other sectors. However, it is still worth noting that projects such as the Digital Silk Road and the UAE Trade Connect are under implementation. It is projected that solutions such as these ones will disrupt trade finance, licensing, and supply chain management, making commerce more cost- and time-efficient. In the UAE health industry, blockchain technology is successfully utilized for licensing healthcare professionals. As for transport, the Roads & Transport Authority is currently working on integrating blockchain into monitoring the life cycle of vehicles. Simultaneously, the Dubai Electricity & Water Authority has multiple crypto-projects of its own, which are currently under implementation (Smart Dubai Department, 2021). Lastly, in the security sector, developers collaborate with Dubai Police to improve existing digital records by adding data verification tools.
As for key metrics surrounding the outcomes of the UAE Blockchain Strategy, it is important to examine Dubai’s global market value in the blockchain industry. According to the Smart Dubai Department (2021), it has grown over 50% in the last five years. Out of all the global blockchain companies, around 2% are located in Dubai. Additionally, it is worth mentioning that the integration of crypto payments in the UAE is facilitated by a government-owned licensing company KIKLABB. It is questionable whether such firms should be in full control of the authorities. However, it is apparent that the fact KIKLABB is funded by the government means that the Dubai Financial Services Authority will have the necessary data and insights to create the first comprehensive crypto-regulatory framework.
In conclusion, as the aforementioned evidence suggests, the United Arab Emirates has no intention of slacking in regards to blockchain technology adoption. In fact, the authorities’ commitment to blockchain integration has made the nation one of the global leaders in government infrastructure and financial services blockchain implementation. The key to the success of UAE’s strategies and initiatives related to digitalization and blockchain is the fact that the security risks of implementing such technologies are minimized by regulatory clarity.
Blockchain Standards and Qualifications
It is hard to overestimate the importance of standardization in such areas as digital transformation and blockchain implementation. Even in non-technology industries, standards serve as crucial guidelines for a variety of actors involved, including authorities, legislators, manufacturers, employees, consumers, and so on. According to Aristidou and Marcou (2019), they are a product of “lengthy deliberation, discussion, and ultimately consensus of experts involved in an area, and while not legally binding, per se, are highly influential to the operation and implementation of the subject they are concerned with” (p. 296). Thus, it is apparent that the most well-structured and respected standards have explicit authority, although they might not hold any legal power. While regulations and laws are usually rigid, standards enjoy the perks of flexibility as they adapt and bend based on the subject matter and specific objectives of the project, to shich they are applied.
In order to achieve common qualifications for blockchain integration and ensure such traits as interoperability, auditability, scalability, and others are present, standardization is needed. The qualification framework, therefore, should be based on the categories of qualifications and the areas of their use. In fact, the lack of clearly defined standards may serve as one of the most challenging obstacles in the process of implementing the technology. Valid standardization serves as a tool to fight cybercrime, assess international benchmarks, and integrate blockchain into the existing systems of laws and regulations. Therefore, in recent years, there has been a campaign calling for blockchain standardization initiated primarily by various constituencies affected by the new technology.
Numerous organizations are involved in developing, evaluating, reviewing, and recommending standards, which address the common issues surrounding the adoption of blockchain technologies. They include International Organization for Standardization (ISO), International Telecommunications Union (ITU), International Electrotechnical Commission (IEC), European Committee for Electrotechnical Standardization (CENELEC), as well as European Telecommunications Standards Institute (ETSI). In addition, private entities have also undertaken a number of standardization initiatives, sometimes in collaboration with government-led projects.
Standardization in the blockchain is exceptionally complex and demanding as there is a need to ensure a balance between regulating technologies and supporting innovation. Some experts express growing concerns regarding the fact that certain standards in blockchain are developed rather prematurely, which halts innovation (Aristidou & Marcou, 2019). Aristidou and Marcou (2019) further argue that “different categories of blockchain standards should, and are expected to develop within a spread-out timeframe, considering the complexity of the issues involved, the interconnection of the said categories” (p. 297). Thus, it is important to acknowledge that while blockchain is an innovative tool capable of disrupting industries and transforming the world, implementing such a technology requires careful and well-researched standardization.
One of the main categories of blockchain standards is consistent terminology and conceptualization. Unfortunately, since the technology is novel and has an innovative nature, it is often subjected to misunderstandings. Such a lack of clarity serves as one of the primary obstacles in the adoption of blockchain. Constituencies involved and affected by the technology benefit greatly from a common vocabulary with clear and concise definitions of relevant terms. The aforementioned organizations are the ones tasked with approving the necessary terminology, which is often regarded as the first step in standardizing a new technology. For instance, ISO has created working groups that focus on the Foundations of Blockchain, including Taxonomy and Ontology (Aristidou & Marcou, 2019). They are responsible for identifying, describing, and categorizing blockchain architecture, frames of reference, components, and other characteristics.
It is not only important to identify the standards commonly utilized in relation to blockchain but to assess their accuracy, efficiency, and completeness. Konig et al. (2020) offer an overview of selected standards created by numerous organizations. For example, the National Institute of Standards and Technology (NIST) has presented NISTIR 8202 – Blockchain Technology Overview, which contains information on the fundamental functionalities and architecture of blockchain. The document aims to cohesively structure basic insights related to blockchain applicability, constraints, as well as common misconceptions. Konig et al. (2020) note that the report can be considered “an entry point to blockchains and the distributed ledger technology, as it explains the structure and models, consensus mechanism and well-known examples of it” (p. 227). On the one hand, this overview has many strong aspects due to its ability to organize complex terminology into a well-structured description, which contains technical guidelines and blockchain qualifications as well. On the other hand, however, it lacks use-cases and is prone to becoming outdated rather quickly as the industry keeps transforming with astronomical speed.
The International Organization for Standardization has also published a report outlining the basics behind blockchain deployment. ISO/TR 23455:2019 is the official name of the overview, which focuses on the integration of smart contracts within blockchain networks. The document includes detailed examinations of a smart contract life cycle. Furthermore, it addresses common security concerns and explains the concept of cross-chaining as a possible solution for a number of blockchain issues. Although the report is full of comprehensive and in-depth information regarding smart contracts outside the field of smart contracts, the discussions and explanations presented are rather useless.
Another prominent standardization organization worth mentioning is the European Union Agency for Cybersecurity (ENISA). It has published a document titled Distributed Ledger Technology & Cybersecurity – Improving information security in the financial sector, which deconstructs DTL and blockchain into separate components. Each of them, including side chains, smart contracts, consensus protocols, and so on, is thoroughly explained. Most importantly, the discussion takes into consideration the challenges, which might arise when implementing the technology and affect its applicability. ENISA also adds, “Blockchain Use Cases, a short study on the famous Etherum DAO hack, as well as an overview of several distributed ledgers” (Konig et al., 2020, p. 229). The main advantage of this overview is the fact that it contains a set of clearly defined best practice implementation guidelines and quality standards. However, the weakness of the document lies in its lack of information regarding other sectors, and not just finance.
Future Opportunities and Challenges
Apart from the projections surrounding the potential disruption of various industries by blockchain, the public discourse lacks any discussions regarding the possible future challenges the technology will face. For example, it is still not clear what long-term impact the reaction of financial institutions to blockchain will have. After all, despite the progress already made, banks, trade organizations, and other traditional financial networks are still at the forefront of transactions. Furthermore, it is hard to predict how the regulators will respond to the popularization of blockchain applications. Their actions will directly affect whether blockchain is going to enjoy a long period of broad adoption and innovation. Additional concerns stem from the fact that even if the blockchain technology completely replaced the existing financial system composed largely of powerful banks, no one could promise the same level of fiduciary liability. While it is challenging to make predictions regarding the future of blockchain, this section will focus on them in particular. It will cover adoption rates across different regions, investments into blockchain applications, as well as the most prominent challenges in the upcoming years.
Adoption Rates Across Government and Private Sectors and Investments and Adoption of Blockchain Applications
When analyzing blockchain adoption rates, it is important to focus not only on the government adoption but the authorities’ regulations of the private sector’s use of the technology. Firstly, it is crucial to note that, when it comes to blockchain integration, the stand-out is the track-and-trace applications. In regards to the public sector, IBM has conducted a survey, which revealed that 14% of government leaders worldwide initiated projects to implant blockchain in their countries’ financial transaction systems, regulatory compliance strategies, as well as asset control (Marrs, 2017).
Statista reported that at least 40% of supply chain leaders were planning to invest in blockchain technology (Liu, 2021). Regarding digital currency, in particular, there are around 76 million blockchain wallet users globally (Liu, 2021). Furthermore, Liu (2021) notes that the venture-capital funding into the startup businesses focusing on blockchain was at 2.3 billion dollars as of 2020. These numbers are only projected to increase due to the sector expanding and making more profits. For instance, the latest statistics show that the market capitalization of Bitcoin is at 884 billion dollars right now (Liu, 2021). This is nearly ten times more than the figure of 70 billion Bitcoin’s market capitalization had been at the back in 2017. This paints a picture of a young industry, which is not fully mature yet has the potential of securing major investments and turn them into opportunities for growth.
Challenges and Risks
It is crucial to regard blockchain as an emerging technology, whit it definitely is. This means that the implementation strategies and application techniques will continuously change and adapt as time goes on. Unfortunately, this can become a cause of numerous challenges and risks associated with the utilization of blockchain in both the public and private sectors. Zheng et al. (2018) identify three distinct problems that this new technology has to face. They include scalability, privacy, and selfish mining, all of which require multi-faceted solutions.
As blockchain becomes more popular, the transactions increase in number, making the storage much bigger. As mentioned earlier, a transaction is validated through all the previous transactions and users, which means that decades-old data has to be stored somewhere. This posits a question as to whether it is scalable to build thousands more huge computers for blockchain transactions storage. Additionally, it is clearly not sustainable as manufacturing and providing technical support for such gigantic computers requires a lot of energy.
As energy is mostly generated from natural resources such as coal, environmentalists are rightfully concerned that computations needed for blockchain have an extremely bad impact on the climate. As long as most of the energy needed for crypto mining originates from non-renewable sources, the growth of popularity of blockchain, especially bitcoin and ether, will result in the destruction of the environment. Energy consumption is not the only concern when it comes to the effect digital currencies have on the outside world. There is also an increasing amount of hardware waste caused by organizations and individuals disposing of application-specific integrated circuits used for mining. The primary issue is that these circuits are non-recyclable, which leads to the blockchain industry producing dozens of tons of electronic waste.
An alternative viewpoint regarding scalability and blockchain uncovers the time and size constraints of blocks. Zheng et al. (2018) raise the alarm by noting that “the Bitcoin chain can only process nearly seven transactions per second, which cannot fulfill the requirement of processing millions of transactions in a real-time fashion” (p. 367). In order to address the challenge the scalability and attempt to overcome it, there is a need to consider two main groups of efforts: optimizing storage and redesigning. There has been a prototype of a cryptocurrency, which completely removed the transaction records, forcing validation to take place via a special database under the name of account tree. Furthermore, researchers proposed Bitcoin-Next Generation (NG), a cryptocurrency designed to deconstruct the conventional blockchain into two parts: “key block for leader election and macroblock to store transactions” (Zheng et al., 2018, p. 367). Thus it is apparent that there are ways to overcome the challenge of scalability.
Blockchain implies the risk of privacy leakage, although the technology is regarded as ultra-safe. Since users do not operate with real identities but rather generated addresses on the platform, the chance of someone’s personal information being stolen is minimized. Despite that, blockchain cannot actually offer any transactional privacy because the network depends on the values of all transactions being public. New-generation hackers are able to link a user’s nickname to their transactions and balance, which can lead to subsequent network address translation. To ensure the full anonymity of blockchain, developers can utilize multiple strategies. The first one is mixing, which implies the practice of conducting transactions for one user using multiple input and output addresses. This makes it harder to track the real identity of someone using blockchain for transferring funds or information. The second method is to use a zero-knowledge proof in a blockchain platform by eliminating the need to validate a transaction with a digital signature. In addition, it is exceptionally to hide the payment’s origin, amount, and the actual value of coins a certain user possesses.
The third challenge lies in selfish mining, which endangers the network but makes substantial profits for the people responsible. As a result of selfish mining popularity, other types of exploitative mining have emerged, including stubborn mining. It attempts to generate numerous mining attacks together with network-level eclipse attacks. One of the primary risks surrounding the often controversial topic of blockchain and cryptocurrency is the reign of selfish minors through the creation of dozens upon dozens of private chains for mining.
Conclusion
In conclusion, it is evident that blockchain technology is one of the most revolutionary inventions of the 21st century. Although it has gained popularity through the “get rich fast” via Bitcoin scheme perpetuated by business coaches and a variety of influencers-entrepreneurs, blockchain has many applications. Some of them include digital currency, a transparent ledger system, smart contracts, and tracking. Despite the significant number of researchers and people in business working all over the world to find the best way to apply blockchain technology, there is distinct geographic supremacy, which puts Asia, the USA, and the European Union in the lead for the blockchain integration race. In the future, it is expected that people will face certain challenges while trying to adopt blockchain as a crucial part of the public and private sectors. These issues include scalability, privacy, and selfish mining, which generate immediate risks for the users.
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