4 Fundamental Challenges Faced By Public Blockchain (With Solution)


If you are one of the blockchain enthusiasts, this blog is for you. Herein, we’ve rounded up 4 fundamental challenges faced by public blockchains and provided solutions. Have a look!

The global economy has been sharing a love-hate relationship with cryptocurrencies ever since Satoshi Nakamoto incubated the idea of Bitcoins back in 2009. But all of them have unified over one thing and that is the unbridled potential of the trusted public ledger popularized by the name of Blockchain.

Modern-day FinTech startups are increasingly relying on the blockchain programming to bring breakthrough discoveries in the fields of asset management, prediction markets and much more. But just when the whole world is rejoicing the birth of this fantastic phenomenon which is causing investors to shell out billions in Initial Coin Offerings, we are totally forgetting its inherent limitations which are creating wholesome loopholes in its path of achieving holistic success.

In our today’s post, we shall discuss four of the biggest challenges of public Blockchain network and educate our readers about ways to circumvent the same before blockchain technology reaches mainstream adoption within the coming five to ten years.

  1. Scalability Limitations

    It is required for every node fully participating in the network to process every single transaction. Thus, no central party can be held responsible for maintenance and blockchain security issues. Rather every single node has to take part in securing the system by maintaining a copy of the full state and processing every transaction.

    This unanimously approved decentralized mechanism brings along benefits like censorship resistance, political neutrality, and security guarantee by compromising on the scalability aspect as now there is an upper ceiling on the transaction processing amount of a fully participating node. Two practical implications are brought forth by this limitation in the form of:

    • Slow transaction times when compared with services such as Visa or Square
    • Low throughput in the form of limited transaction processing prowess

    Thus, public Blockchains are coerced to engage in a trade-off in between high degree of centralization and low transaction throughput. With the growing size of Blockchain network, the requirement for bandwidth, storage, and computational power felt by the fully participating nodes also increase. After the passage of a considerable span of time, only a few nodes can afford the resources which are required for processing blocks paving the way for a possible centralization.

    Hence, the design of the Blockchain network needs to be such that it can function seamlessly without making it necessary for each node to process greater than a certain percentage of the network’s total transaction. Without losing the trust factor guaranteeing the validity and authenticity of the network it is necessary to limit the number of nodes required for the same. This immense roadblock in the path of technological supremacy can be catered to with the proposed solutions as enumerated below:

    Sharding – The entire Blockchain network gets broken down into different shards each stored and processed by various nodes in the network. Thus, only a small part of the processing is done by each shard in a parallel manner. But it can become challenging to maintain the authenticity and security amongst the decentralized network.

    Off-chain Payment Channels – A micropayment channel network can keep a lion’s share of transactions off the blockchain. Thus, the blockchain network is earmarked exclusively as a settlement layer for processing the final transaction thereby lifting a burden from the underlying blockchain. Typical latency can be eliminated when the transaction happens immediately after the processing by a payment channel rather than confirmation of the block.

    DAGs – The Directed Acyclic Graph structure comes with edges and vertices allowing us to access nodes sequenced in a topological order. DAG-based protocols like IOTA’s Tangle rely on their exclusive approaches which do not require every single node to linearly process every transaction.

    Off-chain computations – Here the core goal remains to execute computations off-chain which can prove to be prohibitively expensive on-chain. A high transaction throughput can be achieved by moving the verification and computation process into a separate protocol off the blockchain.

  2. Privacy Limitations

    It becomes almost impossible to track any transaction’s originator with no attached real-world identity. The external veil of comprehensive security can also be misleading since the secret gets revealed immediately after somebody makes the connection.

    Once such situation arose when the law enforcement agencies identified certain Bitcoin users while conducting investigations which came as a huge shock given the whole anonymous tag which blockchain development companies promise to offer. Information about web transactions gets leaked by cookies and web trackers on merchant websites which can be readily accessible by malicious users, law enforcement agencies, and government bodies.

    Details of smart contracts entered into by users in the Ethereum network such as the code executed, transaction data and state stored within the contract becomes open to public access. In such a scenario, uploading critical data pertaining to credential management, electronic medical records, financial documents and identity verification can make it vulnerable to hacker attacks. Blockchain Application Development teams worldwide have been trying to fill in this loophole by bringing along groundbreaking blockchain solutions as enumerated below:

    Mixers – Here a group of people maintains track of their debts in a private ledger by combining their payments in one single pool. The origin of each payment gets concealed when funds belonging to the pool is spent. The amount paid can be viewed by everyone observing the blockchain along with the recipients. However, the person who authorized the payment specifically remains untraceable.

    Monero – This crypto form is private by default and is not generated out of a Bitcoin fork like other altcoins. It rather functions on the basis of an alternative protocol termed as CryptoNote and offers a substitute for “ring signature” scheme wherein each signer within the group is coupled with a secret and public key. A group signature verifies that a transaction has been approved by one signer belonging to a fixed group without exposing his real identity.

    Zero-knowledge proofs – Herein the verifier is convinced by the prover of having some secret knowledge without actually revealing the knowledge directly. Such a program aids in the building of privacy-preserving mechanism by providing fundamental primitives.

    Oracle – This refers to a party relaying information between external data sources and smart contracts. Thus, it actually works like a data carrier between external data sources when functioning of the blockchain and between smart contracts when functioning on the blockchain. Using oracles for simply fetching private data from an external source can be one way of maintaining the privacy of information.

    Trusted Execution Environments – This refers to the main processor’s secure area which guarantees the protection of the data and code loaded inside in terms of its integrity and confidentiality.

  3. Shaky Consensus Mechanisms

    Users benefit from attributes such as censorship resistance, autonomy, permissionless innovation, and authenticity while operating with the “trustless” blockchain protocol. The background mechanism which triggers the development of a trustless blockchain network which does not get sabotaged by attackers is termed as a “consensus protocol.” The proof-of-work mechanism devised by the anonymous Bitcoin creator Satoshi Nakamoto paved the way for this numero-uno crypto in becoming a widely appreciated global decentralized transaction ledger by solving the “double-spend problem” without any third-party assistance. In-spite of being loaded with such a bevy of possibilities, the proof-of-work concept comes with certain inherent limitations as described below:

    • Devices termed as application-specific integrated circuits were launched in 2013 for mining Bitcoin with an increased efficiency of 10-50x. Since then, it has become totally unprofitable to mine using the GPU and CPU of a regular computer. Manufacturing an in-house ASIC or purchasing the same from a manufacturer is now the only way of mining cryptos which comes as a sharp deflection from the very concept of blockchain decentralization where everyone can contribute towards the enhancement of network security.
    • Users often engage in a mining pool to benefit from the consistent and proportionate payout. But this increased weight causes large mining pools to have relatively fewer variations in terms of returns when compared to a single user. The majority of the network starts being controlled by a few pools who gain supreme power over time. The top five mining pools of present times own near about 70% of total hash rate.
    • The power requirement behind crypto mining is massive. The Bitcoin Energy Consumption Index of Digiconomist revealed the estimated electricity consumption for global mining of Bitcoin is 29.05THw which suffices for 0.13% of the world’s holistic electricity requirement.

    Enough said, let’s look at the probable solutions which the best-brains around the world have come up with for putting an end to these problems:

    • The proof-of-work function can be used to focus on the attributes which deserve primary importance. For example, miners can devote a greater amount of time and energy on solving AI algorithms rather than an arbitrary SHA256 problem.
    • The mining centralization issue can be tackled with by abolishing mining in its entirety and shifting base to some other mechanism which will aid in calculating the weight of every single node in the consensus. This can be achieved by the proof-of-stake concept where one currency unit transforms into one vote. This concept is also immune to concerns over hardware centralization since it eliminates the necessity of hardware and also brings along energy-efficiency as the miners do not require to spend extravagant energy for coming up with solutions to the proof-of-work algorithms.
  4. Lack of Regulations And Governance

    The very decentralized attribute of the blockchain network makes it susceptible to lack of proper regulation and governance by an authorized body. Thus, there is actually no one who can be held responsible for maintaining the network standards. Although we are all hardcore advocates of the brilliant developments which the decentralized blockchain technology brings along, there is also a requirement for an organization who will look after its features, upgrades, and code of conduct. Blockchain governance is an extremely tricky affair and the key to development lies in striking the right chord of harmony between distributed and centralized control.


Every technological revolution comes with inherent treacherous passes. The quantum of funding and mindshare around blockchain pushing it into the ICO track is really unfortunate. Blockchain developers are trying desperately to fill-in these fissures but are lacking inadequate resources. Suggestions of ‘forking’ the blockchain which has been made for updating the blockchain protocol have garnered a lot of positive response in the FinTech community.

As one of the top blockchain app development companies, we have been focusing on the blockchain wallet for quite some time now. This has helped us in launching the Cryptocurrency wallet application recently using this empowering technology. Our skilled blockchain app developers having sound knowledge of C, C++, Angular2, Ionic2, Node JS, Typescript, GoLang and Python programming languages can build private as well as public cryptos on various blockchain application development platforms.

Still, if you may have any query related to the blockchain, you can get in touch with us through below given form and our sales representatives will get back to you within 48 hours.

This page was last edited on October 14th, 2020, at 10:30.


Have an App Idea?

Get your free consultation now

Leave a Reply

Your email address will not be published. Required fields are marked *