DLTs’ Challenges

Distributed Ledger Technologies [of which BlockChain is best known due to BitCoin frenzy] offer potential for huge disruption of existing processes and business models.  In order to reach those opportunities, three challenges must be addressed:  speed and scale, user experiences and economic costs.  Interesting article here.

  1. Speed/scale:  Only the first of many potential applications of BlockChain technology, transactions in cryptocurrencies have slowed processing speed to a very modest number of transactions per second.  Achieving scale will require developments in quantum computing and a transition from “proof of work” [BitCoin mining] to “proof of stake”.
  2. User Experience:  unfamiliarity, banking rigidities, legal/regulatory hurdles and password management pose significant hurdles to the active uptake of DLT solutions.
  3. Economic Costs:  The critical example is that mining BitCoins is estimated to be consuming about 1.5% of global electricity production.  Mining requires special computers that obsolesce very quickly and gravitates to areas that offer the lowest electricity cost, eg Iceland and coal-fired Chinese plants.  By the nature of mining, most of the work done is thrown away as soon as one miner has successfully found the required solution.  Incredibly wasteful.

Processing a Bit Coin Transaction:

“Here’s what I now understand.  A BitCoin transaction [Buy a cup of coffee at Starbucks] and a miner processing a BC Block to be added to the Chain are different.  Each miner will choose the transactions he includes in his block. His tradeoff will be the fewer transactions, the faster will be the processing and the greatest likelihood of success.  On the other hand, if he chooses not to include the Starbucks transaction, there will be greater probability of another miner including it and therefore having a longer winning block.

From LK:  “Bitcoin ( and Ethereum) are not designed or suited to the high transaction throughput and instant verification required for a retail consumer pay system (like visa). Bitcoin was especially designed as a store of value system where the design tradeoff weighted security and anonymity very high. Ethereum, although a bit different was also not designed for speed. One aspect that also influences how fast or when a transaction is processed depends upon the transaction fee included for processing ( decided by the wallet I believe) and the value of the transaction. Therefore the small coffee transaction might not be high on the  priority list to get entered into a block so fast.

This is why we are hearing a lot recently about other blockchain and competing peer to peer network solutions such as HashGraph. The goal in most of these is to avoid the necessity of a Proof Of Work algorithm by using other faster and less expensive approaches.”

1 thought on “DLTs’ Challenges”

  1. Bob-

    Thanks for the Hashgraph piece. I hadn’t fully understood how important this was in the Distributed Ledger world. It really does look like a better protocol – safer, faster, simpler, less energy intensive – than the Blockchain. But most of us “unwashed” are still strying to get our heads around B/T and Hashgraph just adds another level of complexity to the discussion. Yet, it appears crucial to the growth of Distribute Apps (DApps) we will see over the next several years. Thanks for helping me fill in the “gaps in my thinking” Cheers, Drew

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