Like most good things, blockchain technology also has a flip side. While it offers the benefits of almost unprecedented levels of transparency, decentralization and immutability, it brings in its train several dark sides that can potentially spell doom if the technology ever spirals out of control.
What are the potential dark sides of blockchain technology?
1. Excessive Anonymity: The world of blockchain and cryptocurrency offers a great deal of anonymity. People can update transactions and details related to healthcare, supply chain management etc. without revealing identities. Similarly, zero knowledge proofs in smart contracts, while making lives of the people using them significantly easier, also open up the world of blockchain technology to the risks of excessive anonymity.
Cryptocurrencies, which are run on blockchain networks, often allow a great deal of untraceability, especially tokens like Ether or Monero.
Such anonymity can easily be misused by criminals, terrorists, drug peddlers, arms dealers and so on to update and smoothen transactions that are essentially connected to illegal activities. The dark web marketplaces are often powered by the use of cryptocurrencies, as we saw in the cases of AlphaBay or Silk Road that were almost entirely dependent on virtual currencies to support transactions.
2. Excessive decentralization: Too much decentralization that underlies the principle of blockchain technology can cause problems by doing away with any central authority that can take control in case the technology needs saving from itself. In addition, the extreme dependence on decentralization often makes the process less efficient and more time-consuming, as we have seen in problems concerning bitcoin’s scalability and the fact that it takes almost ten minutes per transaction.
3. Underlying Security Flaw: When Satoshi Nakamoto wrote the Bitcoin White Paper, he cautioned against the 51% attack. If some conglomerate of miners is somehow able to control the majority of the network’s hashrate, then it can overpower it by brute force and end up rewriting transaction records. When Satoshi had written about it, this had seemed to be a mere possibility on paper has but such attacks have actually happened in the cases of Verge Monacoin Cash, Litecoin Cash and Bitcoin Gold already. This makes it a rather scary proposition to be a part of blockchain networks and storing transaction records on them.
4. Conflict with Data Protection Laws: The immutability of data on blockchain makes it come into conflict with many data protection laws such as the GDPR. The tenet of deleting information upon request from concerned persons is something that is directly opposed to the nature of blockchain and this raises complicated legal questions that baffles even the most erudite of experts.
Issues such as scalability, technological barriers, drain on device resources, noise pollution and high electricity usage also add to these 4 dark sides of blockchain. However, the pros of blockchain still outweigh its flip sides and as long as we take it with just a pinch of salt, we should be able to bypass the dark sides of this otherwise brilliant technology.