Bitcoin and other cryptocurrencies have often overshadowed the potential of blockchain technology for real-world applications. It's time to shift focus from the allure of wealth through digital currencies toward the practical use of this groundbreaking technology.
One expert recently noted, "The skepticism surrounding blockchain’s value may stem from its association with Bitcoin and other virtual currencies." This connection has led to confusion between the technology itself and the speculative nature of cryptocurrencies.
The Global Interbank Financial Telecommunication Association (SWIFT) handles more than half of high-value cross-border payments globally. After testing blockchain, they concluded that the technology is still not mature enough for widespread, mission-critical use.
SWIFT added, “Further progress is needed before blockchain is ready to support production-level applications in a large-scale, mission-critical global infrastructure.â€
The "get rich quick" narrative promoted by cryptocurrency advocates has fueled doubts about the true potential of blockchain, also known as distributed ledger technology (DLT). While DLT offers promising capabilities—such as reducing fraud, improving data accuracy, speeding up transactions, and lowering operational costs—the focus on speculative gains has diverted attention from these core benefits.
Once some of the practical limitations of DLT are addressed, the conversation will likely shift from cryptocurrencies to the actual value and potential of the technology. However, despite its design to prevent fraud, cryptocurrency theft remains a serious issue. Hackers frequently steal digital wallets, and recovering stolen assets is extremely difficult.
It is believed that multiple independent parties process the same transaction in parallel, which helps prevent fraud by creating a chain of ownership. Each new transaction is added as a "block" to the existing chain. However, if fraudulent data is entered into a block, it can't be easily corrected without a separate, accurate transaction.
This highlights the need for centralized oversight or regulatory frameworks to ensure that transaction data is entered accurately and efficiently. Only authorized participants should be allowed to access or modify the system, ensuring data integrity and security.
Replicating transaction blocks across multiple processors increases reliability but also slows down processing and raises costs. The more copies there are, the more resources are required, making the system less efficient.
It's hard to see why such extensive replication is necessary just to ensure 100% accuracy in a decentralized network. The economic viability of DLT depends on whether it provides clear advantages over existing technologies.
Cryptocurrencies hide their true costs behind the creation of new coins. Miners earn these coins by validating transactions, then sell them to cover expenses and make a profit. However, the energy consumption and hardware demands of mining have raised environmental concerns and even impacted productivity.
As the price of cryptocurrencies continues to fall, while resource usage per coin increases, questions arise about how long this model can sustain itself. The long-term success of DLT cannot rely on the speculative value of digital assets, which lack intrinsic worth and limited real-world utility.
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