DeutschWhen the technology of the blockchain is mentioned, the world of cryptocurrencies primarily focuses on the positive attributes. This is generally true. The big ‘but’: Of course, the whole thing also has negative aspects. The innovative technology of tomorrow harbors certain risks. This is what this article is about. And that, without disregarding the essential advantages. It is true that every technological idea always carries dangers. This also applies to cryptocurrencies themselves as well as to the possible “use cases” of the various currencies and ideas behind them. Crypto portals and more and more established media are reporting for good reason about the various downsides that belong to every innovation.
Despite all the positive developments from trading Bitcoin and altcoins like Litecoin to official pilot projects and unbureaucratic application possibilities for the conclusion of contracts: The blockchain also presents unpleasant characteristics again and again.
Knowledge about the blockchain:
- What is the blockchain? The explanation
- How does a blockchain work? To the infographic
- What are the advantages of the blockchain? To the infographic
Not Technologies, but Users Can be the Problem
The most important realization when looking at the said dark side of the blockchain: Of course, it is not the technology that proves to be bad. As always, it is a question of what goals users pursue. Since the blockchain is increasingly being understood as an opportunity in the (financial) economy, it is obvious that criminals are also attracted to the promises. In the beginning, Bitcoin was something for insiders of the digital world, but now privacy coins like Monero have become the successor to BTC in the so-called DarkNet, where cybercriminals secretly conduct business. In the normal internet world, however, digital currencies are also becoming increasingly popular. More and more online shops recognize the interest on the customer side and accept at least the big coins as means of payment.
It is and was obvious from the beginning that this recognition also attracts criminals. They recognized early on the opportunities of the blockchain as a potential instrument for their illegal machinations. At the latest since the last price explosions on the crypto market from the year 2017, many dubious users felt called to the scene.
Coins Temporarily Characterized by Massive Price Movements
Even if fans primarily highlight the positive aspects of digital currencies and especially the blockchain, the other side of the coin should be discussed in detail here. Without looking at possible risks of abuse and crime, the high volatility (range of fluctuation) of all – so far not state-regulated – cryptocurrencies and the blockchain must be referred to in any case. The prices of digital currencies are subject to sometimes considerable fluctuations, as the past months have shown very impressively. Although this cannot automatically be blamed on the blockchain technology. For investments in blockchain-based coins and tokens, however, this is still important. Whereby it must not be concealed that exactly these fluctuations awaken investment hopes in all those who are willing to take high risks.
Belief Trap Blockchain – many Fans Tend to Overestimate
Despite all the variety of use cases of the blockchain, there are also some significant dangers. There are many supporters of the technology who attribute almost the status of a quasi-religion to the blockchain. In this regard, however, a clear distinction must be made. Of course, the technical approach is characterized by many extremely innovative properties that have opened up new paths in many areas of the economy (and not only there) since the introduction of Bitcoin and other coins and tokens since 2009. To put the blockchain on the religious pedestal, however, is one of the dark sides despite all the advantages. But it is certainly not the only true, great problem solver for social and economic worries. Without question, the blockchain offers itself for solving many problems. As in the case of the Internet since its emergence in the early 1990s, there will continue to be many sticking points that will continue to exist in the future.
One of the downsides here:
Various age and social groups are largely excluded. Why? Even today, not everyone has an internet connection or a mobile device with blockchain suitability. Also high electricity costs for mining and other use cases in connection with the technology are a weakness .
Fear of Too Little Control and Dangers of Abuse
A criticism that is often and gladly put into the field as the dark side of the blockchain is the lack of control mechanisms. More precisely, missing controls within the mostly decentralized execution of transactions. The already mentioned DarkNet is particularly often in the focus of critical voices here. The fact that the crypto systems expressly waive the verification of rights of disposal and funds are moved anonymously between wallets and crypto accounts, is from the user’s point of view, strictly speaking, an advantage. Especially since: Illegal machinations exist, of course, but according to studies and statistics, they make up a significantly smaller proportion than many laymen believe. The fact that no banks, notaries or other third parties are interposed as control instances does not mean that funds disappear forever in the event of faulty transactions.
Rather, it can be said that the execution of transfers with the help of access data and personal keys is sometimes safer than transfers in the traditional payment system of the banking world.
The Normal Banking System also Has its Weaknesses
Anyone who has ever tried to get transferred money back to the bank account knows about the risks of the banking systems. The fact that crypto transfers manage without an intermediary is rather the reason for the often very fast transfer with manageable transaction fees. The exchange of crypto currencies from one currency to another also succeeds faster than is often still the case with fiat money due to bureaucracy. As for the alleged lack of legitimization of transaction participants: The legislators worldwide are striving for a regulation of the market, which has already led to the mandatory disclosure of one’s own identity at many exchanges and other service providers. It has also been shown that state authorities can analyze and assign transactions in many blockchain systems. Transferring money unnoticed as a criminal? This often only succeeds with so-called privacy coins like Monero.
Blockchain: Too much Influence at Too few Companies and Developers?
The constant reference to the dangers of a complete decentralization as the trigger of a digital chaos state is just as inadmissible. Many systems, despite their orientation as an “open source” approach, are rather not characterized by 100 percent decentralization. One reason for this is that not infrequently, in the bottom line, only a manageable number of developers are responsible for technological progress. In fact, this is exactly a dark side of the blockchain for some fans from the very beginning, when the “power” lies in the hands of a few professionals. Such a development is increasingly emerging also with the big “global players” of the industry. For example, some companies such as the Binance exchange are striving for dominance in the market by constantly developing new products and expanding worldwide. Similar developments are taking place in the mining sector, where large pools are striving for increasing market shares.
Blockchain Industry Must Learn from Mistakes of its Own “Childhood Years”
The high energy consumption for the operation of the blockchain and similar systems, however, actually deserves the mention as a dark side. For mining, computers and accessories are used that require plenty of electricity. In times of increasing environmental awareness and the desire for sustainability, this aspect is a permissible point of criticism. Opponents of the growing crypto market see enormous need for improvement here in particular. And there is quite a bit going on, because quite a few systems are becoming more efficient and already attach importance to ecological aspects in the first developments. In the end, depending on the point of view, there may well be downsides. However, progress can no longer be stopped anyway. So in the end it will be about the majority of the community working together to fix the most obvious problems of the industry.
Given the short history of the crypto and blockchain world, it may take a while until the recognition of all errors is followed by necessary steps around Bitcoin, Altcoins and Token.
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