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What’s Standing in Blockchain’s Way? Part 2

By Jaya Bijoor

Interoperability Issues

The absence of universal standards in blockchain development arises from different teams worldwide attempting to implement the technology in distinct ways. This is evident in the unique structures and functions of Bitcoin and Ethereum blockchains, which make them incompatible and incapable of working together. However, effectively addressing these interoperability challenges and seamlessly integrating different blockchains will enhance blockchain technology’s success and widespread adoption. For blockchain technology to be viable in the future, it is crucial to establish concrete standards that guarantee interoperability

among different blockchains and facilitate seamless integration with existing systems.

High-Energy Consumption

Many perceive the idea that blockchain technology can reduce energy consumption as contradictory. Although we have witnessed the application of blockchain technology in making the energy grid more efficient, it is essential to note that most blockchain technologies consume a significant amount of energy, often surpassing the energy savings they provide. A

prime example is Bitcoin, which consumes more energy in a year than Ukraine’s total energy consumption, according to the University of Cambridge Bitcoin Electricity Consumption


Many companies have turned to an Ethereum-based PoS blockchain for transaction verification to address the energy requirements of blockchain technology. This method

consumes less energy than the traditional PoW approach. However, to prevent blockchain from exacerbating the energy crisis, it aims to solve, implementing Layer 2 technologies that

reduce energy consumption while improving transaction speed is crucial.

The traditional PoW approach, used by cryptocurrencies like Bitcoin, requires miners to solve complex mathematical problems to validate transactions and add them to the blockchain. This process consumes a significant amount of computational power and energy. In contrast, some newer blockchain systems, such as PoS, use a different consensus mechanism that requires

participants to hold and lock up a certain amount of cryptocurrency as collateral to validate transactions. This approach consumes less energy compared to PoW, as there is no need for extensive computational work.

However, even with PoS, blockchain technology can still consume significant energy. To address this, implementing Layer 2 technologies becomes crucial. Layer 2 solutions, such

as state channels or sidechains, allow transactions to be processed off-chain or reduce the energy consumption associated with on-chain transactions more efficiently. By moving some transactions off-chain and only settling the final results on the main blockchain, Layer 2 technologies can improve transaction speed and scalability while also reducing energy consumption. This is important in preventing blockchain technology from exacerbating the existing energy crisis, as it allows for more sustainable and efficient use of resources.

Combining a more energy-efficient consensus mechanism like PoS and implementing Layer 2 technologies can reduce blockchain systems’ energy consumption while improving transaction speed. This is crucial to ensure that blockchain technology can be sustainable and scalable without exacerbating the energy demand and environmental impact.

Legal and Regulatory Challenges

Since blockchain is a new technology, many countries still need to enact regulations to monitor it. Also, since blockchain is decentralized and a distributed network, it’s unclear what

jurisdiction any country has regarding blockchain. For example, nodes (devices) in different countries process that transaction when buying or selling Bitcoin. In the case of disputes, deciding which laws will govern could pose a challenge. With smart contracts governing transactions, our laws must evolve to recognize smart contracts as legally binding and enforceable.



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