3 Challenges of Cryptocurrency That You Should Know
Cryptocurrencies have taken the world by storm as evident from their massive growth and the polarity that they have gained. According to a recent article by Fortune.com, if you knew about bitcoins seven years ago and the potential they would have in the future, you would be now $4.4 million richer. The article goes ahead to state that the value of bitcoin has since 2010 multiplied by 879,999 times.
Despite the huge potential and impact that cryptocurrency have on the modern financial world, there are a number of challenges that about them that you should know. Let us briefly look at these challenges.
Battle between Nations for Control
Nations especially the developed countries are currently battling for control of who plays in their financial system. Some of the nations are also not ready to validate cryptocurrencies at the state level and as a result numerous cases have filed in court to address these matters.
Complex Technical Aspect
The leaders in the cryptocurrency world as well as analysts are concerned about the high degree of complexity of the Blockchain and its scalability. As these digital currencies continue to gain traction, there is a risk of the entire system collapsing due to various issues related to scalability such as bandwidth TPS (transactions per second, DDoS attacks, and Blockchain size. A robust system needs to be put in place to prevent such scenarios from occurring to foster the success and sustainability of cryptocurrencies.
Architecture of Consensus
According to an article posted on Medium.com, PoW often results in technological and mining centralization. In addition, PoS give attackers a golden opportunity to maintain parallel block chains without incurring high costs.
These three challenges pose great danger to the sustainability of cryptocurrencies across the globe. Other challenges that we need to be aware of as we continue to invest in bitcoins and other cryptocurrencies is the unpredictable increase in Bitcoin fee and hyper volatility.
Limited supply results in high rates and the value is directly linked to the demand in the market. It is also important to note that it is not possible to carry out any form of quantitative easing especially when assessing bitcoins because the coins are only made available as fast and the processing networks involved are able to resolve blocks. Irrespective of these challenges, a tremendous growth in value of various cryptocurrencies has been recorded thanks to advancement in the systems that are used to monitor it.