In comparison to VISA, PayPal handles 193 transactions
per second on average and said it had processed 450 payments per second on
Cyber Monday in 20151.  

 

In contrast, Bitcoin handles 3 to 4 transactions per
second, while Ethereum handles 15 transactions per second. Right now, each
Bitcoin transaction block takes 10 minutes to process, thus it can take at
least 10 minutes for the transaction to be actually confirmed. For sufficient
security, more time would be needed —about an hour—and for the transfer of
larger amounts it will take even longer. Again, in comparison, VISA takes
seconds at most2.

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This issue can be resolved by creating a protocol “sur mesure”: for example, Bitcomo is
introducing the TraceChain — a speed up, higher performance blockchain
developed by their partner MetaHash. Bitcomo’s solution can process around
500,000 transactions per second.

 

Consumption of
energy

Another technical issue invoked by Mr. Jeroen van
Megchelen, CEO of Ledger Leopard (The Netherlands), is related to the miners.

“In
the Bitcoin network, each node participating in mining is called a “miner” and
has to solve a computationally difficult problem in order to confirm the
validity of newly mined blocks. The first node that solves the problem is
rewarded with bitcoins. The probability of winning the reward and creating a
block is proportional to the total computational power owned”3.
Thus mining
draws an enormous amount of energy
that is wasted4.
Ever since its creation, the “proof-of-work” algorithm is behind the consensus
and trust of the Bitcoin network. The machines performing the “work” are
consuming huge amounts of energy5.
The Bitcoin Energy Consumption Index was created to provide insight into this
amount, and raise awareness. What is very worrisome is that the total energy
consumption of the Bitcoin network grew to incredible proportions and is now
comparable to the energy consumption of entire countries6.
If Bitcoin was a country, it would rank as shown below7:

Figure 4?1:
Energy Consumption by Country

The whole conception of mining seems to be in question
here: basically, rational agents compete in an otherwise useless proof-of-work
effort literally spending so much energy in hopes of the possibility of reward8.

 

According to Mr. Alexandre David, CEO of
Eureka Certification, France, miners have until recently been concentrated in
China for a simple reason: they are in need of huge amounts of power, and China
offers inexpensive electricity, local bitcoin chip-making factories and cheap
labor. The conversation with Mr. Alexandre David took place in November 2017
and he already predicted that if the cost of electricity or a current favorable
situation in China change, the miners will move to other countries, for
example, Canada. He was absolutely correct in his predictions. By the end of
December 2017, the Chinese government outlined proposals to discourage the
cryptocurrency mining. As Bloomberg News reports, according to people familiar
with the matter, the Government is planning to limit the industry’s power use
and have asked local authorities
to guide miners towards an “orderly” exit from the business9. Now
the top mining companies are considering shifting overseas. Bitmain Technologies Ltd (a privately-owned
multinational company headquartered in Beijing, China) is considered to be the
world’s most power-efficient bitcoin miner and a leading producer and designer
of ASIC chips that are used for the mining and artificial intelligence. Bitmain
is already setting up headquarters in Singapore and now has mining operations
in the USA and Canada. The other significant players on the bitcoin mining
field, such as BTC.Top and ViaBTC, are also moving their facilities to Canada,
Iceland and America. The founder of BTC.Top, also considered locations in Iran
and Russia10.

 

Speed of
information processing does not guarantee its accuracy

 

Another issue was invoked by Mr. Richard MARKOFF,
Supply Chain Researcher at École polytechnique fédérale de Lausanne and
Lecturer at ESCP Europe, the blockchain protocol processes the information
faster. Faster is always better. But the following question should be asked: is
the information always more accurate? 
Unfortunately, the answer is negative. 
Sometimes for two parties’ transactions a good database is enough. As
William O’RORKE, Legal Team Blockchain Partner (France) confirms one of the
risks is the implementation of the blockchain protocol when the company
actually does not need it:  if the
company already has a centralised system that is working properly there is no
need to implement the blockchain.

 

” Faster
is always better. But the following question should be asked: is the information
always more accurate? ”

 

Lack of knowledge
and public misperceptions

As Richard MARKOFF, Supply Chain Researcher at École
polytechnique fédérale de Lausanne and Lecturer at ESCP Europe said, the
blockchain is a very complex technology. And Antoine YERETZIAN, Co-founder of
Blockchain Partner (France) confirms that there is currently a lack of
knowledge about this technology.

 

There are also public misperceptions about the Bitcoin itself: it is perceived as a dark
network for various illicit activities like money laundering, drugs and
selling, of other illegal goods. But as Melanie Swan underlines in her book, Bitcoin and blockchain are themselves
neutral, as any technology, and are “dual use”: they can be used for good or
evil. Although there are possibilities for malicious use of the blockchain, the
potential benefits greatly outweigh the potential downsides11.

 

For companies interested in the blockchain use for the
digital marketing, one of the issues is the misuse of other digital advertising
techniques that made people see online advertising very negatively and had led
to the growing use of ad blocking software. This problem can be resolved by the
use of a blockchain based network that, according to Ivan KARADZHOV, Co-founder
of Bitcomo (Russia/Poland) makes the publishers work hard for a quality
advertising and targeting only the specific customers that can lead to actual
purchases and not anyone and everyone present online.

 

There is also the public mistrust towards a technology
that is completely decentralized and is self-governed: Jeroen van Megchelen,
CEO of Ledger Leopard (The Netherlands) does not consider that the public
blockchain will be used by companies in the next five years or more. It is very
hard to convince a company that all its data will be decentralized around the
world and will be in the hands of someone a company knows nothing about. As
confirmed by William O’RORKE, Legal Team Blockchain Partner (France) a cultural
change is difficult to implement. Also in some sectors and some countries like
healthcare in the United States medical documents are still transmitted via fax
between doctors and hospitals, as underlined was by Richard MARKOFF, Supply
Chain Researcher at École polytechnique fédérale de Lausanne and Lecturer at
ESCP Europe.

 

Regulations
challenges

According to Antoine YERETZIAN, Co-founder of
Blockchain Partner (France), governance ambiguity represents an
important risk and an opportunity at the same time. The way the governmental
regulations will unfold in the nearest future will have a direct impact on the
development of the blockchain technology. Also, another issue is that in some
countries (like France) banks are not willing to support activities connected
to this technology: for example, for a blockchain startup it is very hard,
almost impossible to open a bank account in France.

 

 

According to Jeroen van Megchelen, CEO of Ledger
Leopard, The Netherlands, there are two main interconnected risks: absence of
law/regulationa and of governmental control: when using a peer-to-peer network,
the government is not able to check what is being done.  There is no control over who is sending which
data to whom.

 

The EU authorities are currently working on the
regulations of the blockchain technology, but specifically for the crypto
currency aspect. It appears that the EU authorities intend to keep all doors
open at this moment, in such a way as to keep the EU innovation engine running
while at the same time developing options to intervene rapidly in case of need12.

 

One of the very complicated regulations issue is the
taxation question. A
decentralized peer-to-peer sharing economy of Airbnb and Uber is already under
fire from the tax authorities. Individuals paying with crypto currencies
and performing the transactions with digital imprints renders traditional
taxation structures impossible13.

 

Mainstream
adoption of technology

According to Mr. MARKOFF, there are tons of actors
already like IBM, startups and others and lots of competing blockchain
protocols.

 

Privacy
challenges for personal records

According to Dr Johnny NOBLES  Blockchain Specialist, Senior Principal
Advisory at BlockRx at Government Blockchain Association (USA),  although the blockchain is a secure system,
there is still a possibility of patient data key getting leaked and thus the
patient data. Additional level of protection is warranted. The hospitals will
probably be very resilient to investing in the blockchain technology and making
all patient data available electronically can be challenging.

 

As Melanie Swan stated in her book, the potential
privacy nightmare is that if all your data is online and the secret key is
stolen or exposed, you have little recourse14.
Just as today with personal and corporate passwords being routinely stolen or
databases hacked the consequences are broad but shallow, but people deal with
it as with a minor inconvenience. If a thorough personal record is stolen, the
implications could be staggering for an individual: identity theft to the
degree that you no longer have your identity at all15.

 

1.1.1      Evolution
of blockchain

 

Blockchain
technology surfaced in 2009 with introduction of Bitcoin, a cryptocurrency and
the first digital currency. This technology promised to solve problem of double
spending and remove requirement of a trusted administrator. The introduction of
Bitcoin on the market generated a positive response both from institutions and
customers, which were eager to discover the benefits it could bring to daily
life. With continued interest and investment, in 2014 emerged new application
of blockchain technology i.e. smart contracts. Smart contracts not only
facilitated legal clause agreement between the parties but also allowed to make
transactions safe and private.

 

In recent
times, there have been studies and researches
into possible application of blockchain technology in various industries.
Finance sector is the first adaptor of blockchain technology. However, multiple
experts and reports suggests that application of blockchain can be impactful in
many fields such as retail and healthcare.

 

Following
are the excerpts from blockchain experts on the future of blockchain technology. During the interviews the experts were asked the same questions in order to
understand their opinion regarding
blockchain technology. Most of the experts opined that the technology is
promising and is evolving at a greater speed. However, as it is with any new
technology, there are few challenges which will be apparent in future.

 

Prof. MARKOFF, is skeptic about
the future of blockchain technology. He adds, “Bitcoin is a bubble, but
blockchain isn’t one”. According to him, “If two people out of twenty know about
this technology, is it a revolution?”. Huge investment is required in
developing expertise and knowledge sharing. Prof. Markoff is optimistic about
application of the technology in redistribution of digital assets in retail and
healthcare.

 

Dr. Johnny NOBLES, a blockchain Specialist at Government Blockchain
Association in the USA says that blockchain technology in healthcare will
primarily be used in private hospitals or labs in the US. As both stand to gain
a lot in terms of payment management and patient data analysis with
implementation of blockchain. However, he opines that legal approval or
governmental acceptance of the use of blockchain in healthcare will take few
years.