Discuss the challenges faced by current blockchain technology

Before discussing the technical bottlenecks faced by blockchain, let us first review the concept of blockchain. Blockchain is a distributed database or ledger used to share data between nodes in a computer network. Compared to traditional databases, blockchain stores information electronically in a digital format. However, a key difference between blockchain and traditional databases is the structure of the data. Although blockchain technology is still in its early stages of development, it faces a series of technical challenges. One of them is inefficiency. Due to the consensus mechanism and decentralized nature of blockchain, data verification and transaction confirmation are relatively slow. This limits the blockchain’s scalability and usefulness when processing large volumes of transactions. Another challenge is storage costs. Since blockchain is a distributed database, copies of data need to be stored on multiple nodes, which increases storage costs. As a blockchain grows in size, storage requirements increase accordingly, which may limit the scale and scope of deployed blockchains. Waste of resources is another issue. The consensus algorithm of blockchain requires a lot of computing power and energy consumption. Current blockchain networks consume huge amounts of energy, which to some extent wastes resources and puts pressure on the environment. Finally, privacy and security are also among the challenges facing blockchain. Although blockchain uses encryption technology to protect the confidentiality of data, a public blockchain can still reveal transaction information and the identities of participants. This may raise privacy and security concerns in some application scenarios. All in all, after the development of blockchain technology

what technical bottlenecks does blockchain still face

1. The problem of low efficiency

Although the distributed consensus mechanism in the blockchain model ensures the security of the system, it also comes at the expense of efficiency. Each node must process all transactions, which causes the system to give up a certain degree of efficiency selectivity, resulting in a system that can only process a limited number of transactions, and is slow and prone to congestion.

2. Storage cost issue

The blockchain system is a distributed database, and data storage is crucial to it. For example, in the Bitcoin blockchain system, each node needs to store all information. However, since the database can only be added but not changed, the data is stored permanently, which places high demands on the storage of large-scale public chains and also reduces the operating efficiency of the system. This is an important technical bottleneck in the commercial application of blockchain technology.

3. The problem of resource waste

Each node needs to invest a lot of computing power in the blockchain to perform workload proof in order to obtain the accounting rights of new blocks. Only nodes that successfully mine can receive token rewards, while the work done by other failed nodes is considered useless. If the goal of blockchain technology is to realize public chain transactions between millions of nodes, then the energy waste caused by the proof-of-work mechanism will be unimaginable.

4. Privacy and security issues

Transactions in the blockchain network are not directly linked to identity, and on the surface the transactions appear to be more private. Any person or organization can create a new wallet anonymously to conduct transactions, and the transaction is only associated with an account address consisting of numbers and letters. The real identity of the transaction parties seems to be untraceable.

How does blockchain work?

The goal of blockchain is to allow digital information to be recorded and distributed, but not edited. In this way, blockchain is the basis for an immutable ledger, or record of transactions that cannot be changed, deleted, or destroyed. This is why blockchain is also called distributed ledger technology (DLT).

The blockchain concept was first proposed as a research project in 1991, long before its first widespread application: Bitcoin, which appeared in 2009. In the years since, blockchain usage has exploded through the creation of various cryptocurrencies, decentralized finance (DeFi) applications, non-fungible tokens (NFTs) and smart contracts.

Imagine a company that has a server farm of 10,000 computers that maintains a database containing all of its customer account information. The company owns a warehouse building with all these computers under one roof and has complete control over each computer and all the information contained within it. However, this provides a single point of failure. What if that place goes out of power? What if its Internet connection is cut? What if it burns to the ground? What if a bad actor deletes everything with a single keystroke? In any case, data may be lost or corrupted.

What blockchain does is allows the data held in this database to be distributed among multiple network nodes in different locations. Not only does this create redundancy, but it also maintains the fidelity of the data stored in it - if someone attempts to change a record in one instance of the database, the other nodes will not be changed, preventing bad actors from doing so. If one user tampered with Bitcoin's transaction records, all other nodes would cross-reference each other and easily pinpoint the node with the wrong information. The system helps establish an accurate and transparent sequence of events. This way, no single node in the network can change the information held within it.

The above content is the editor’s detailed elaboration on what technical bottlenecks the blockchain still faces. Blockchain technology enables decentralized security and trust in many ways. First, new blocks are always stored linearly in chronological order. That is, they are always added to the "end" of the blockchain. After a block has been added to the end of the blockchain, it is extremely difficult to go back and change the contents of the block unless a majority of the network has agreed on it. That’s because each block contains its own hash, as well as the hash of the block before it, as well as the aforementioned timestamp. A hash code is created from a mathematical function that converts numerical information into a string of numbers and letters.

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