A lot of time has been spent recommending this blockchain and cryptocurrency
series. However, cryptocurrencies have a number of disadvantages that many have
described (such as the Warrant Buffet, a well-known investor) as another
“bubble”. It is therefore important to identify and understand potential
problems and barriers to refusing to adopt these key technologies.
Issue no. 1: Scalability
Perhaps
the biggest concern about cryptocurrencies is the scalability issues that have
been raised. Although the number of digital coins and entries is growing
rapidly, the number of transactions processed every day by the payment giant
VISA is still declining. In addition, trading speed is another important metric
with which cryptocurrencies cannot compete at the same level as players like
VISA and Mastercard up to the infrastructure that these technologies are
scalable. Such an evolution is complex and difficult to unravel. However, some
have already suggested various solutions, including lightning networks,
fragmentation and construction, as options to solve the scale problem.
Issue no. 2: Cyber security issues
As
digital technology, cryptocurrencies will be vulnerable to cyber security and
may fall into the hands of hackers. We have already seen evidence of this: many
ICOs went bankrupt this summer alone and cost investors hundreds of millions of
dollars (one of these attacks was caused by $ 473 million). To reduce this, the
security infrastructure needs to be constantly monitored, but we are already
seeing that many players are tackling this directly and using advanced cyber
security tools that go beyond those used in the traditional banking sector.
Issue no. 3: price vulnerabilities and lack of intrinsic value
Price
volatility, coupled with a lack of intrinsic value, is a major issue, and one
of the details that Buffett specifically mentioned a few weeks ago when he
described the cryptocurrency ecosystem as a bubble. This is a major concern,
but it can be overcome by linking the value of the crypto-currency directly to
tangible and intangible assets (as we have seen, some new players are dealing
with diamonds as energy products). Increased acceptance should increase
consumer confidence and reduce this volatility.
Issue no. 4: Rules and Regulations
In his speech, Buffet addressed the following issue:
"It
simply came to our notice then. This item is only regulated. He is out of
control. It is not controlled by the US Federal Reserve as another central bank.
I do not believe in all this. I think he will apply. "
Even
if we implement the technology properly and get rid of these problems so that
the technology is adopted and regulated by the federal government, investing in
this technology will be riskier.
Other
things related to this technology are in principle logical. For example,
changing the protocols required to develop the technology can be time-consuming
and prevent the normal flow of operations.
Summary:
With
all the possible barriers to high acceptance, it makes sense that savvy
investors like Warren Buffet choose to make a mistake on the safe side of this
technology. And yet we know that cryptocurrencies (and blockchain technology)
will be here. They offer too many of the benefits that consumers seek from
today's money; distribution, transparency and flexibility are among the most
important. Expanding the debate to what blockchain can achieve in many
industries confirms this.
Author:
Arif Halili
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