Web3/BlockChains

BlockChains and Decentralised Ledger Technology (DLT)

BlockChain Technology was pioneered and invented by a person or people using the name of Satoshi Nakamoto, as part of the Bitcoin system, in its original reference implementation, Bitcoin Core (formerly known as Bitcoin-Qt). BlockChain Technology underpins Bitcoin.

Some businesses now show signs like the one below:

There is a very ingenious system of trust-logic embedded in BlockChain Technologies. The following references explain the process of “Bitcoin Mining”, and how it ensures trust is maintained despite anonymity being inherent in Bitcoin’s design (so for us the question is how can trust be maintained, if we want to develop a Secure, Private, Scalable & Auditable Enterprise-Strength BlockChain?)

The answers found more recently (best example being Ethereum tokens and smart contracts) have limited scalability. Our preferred choice (Elastos) provides scalability, as well as much increased security, and fundamentally delivers to enterprises an immutable audit trail for all enterprise transactions, as well as providing smart contract capability. Rather than reinventing the wheel, Elastos actually allows us to use Ethereum, and some other Smart Contract systems, as Sidechains off the Elastos Mainchain. The Mainchain uses the Bitcoin miners to guarantee Trust via “merged mining” for all Sidechains, at consumers’ (such as our) expense. In this fashion, Elastos allows indefinite scalability, something unattainable in Ethereum’s traditional Single-Mainchain Design (now slowly choking with the volume of data).

Blockchain Miners, Bitcoins and Trust

Bitcoin Ultimate Guide

Although at the absolute beginning (2008), one Bitcoin had zero value, “the first real price increase occurred in July 2010 when the valuation of a bitcoin went from around (USD) $0.0008 to $0.08 for a single coin.¹“

Try googling

“what is a bitcoin worth”!

by Joseph Pham, A blockchain enthusiast

Written Jun 23

Blockchains as a technological innovation, provide a novel solution to a number of complex computational and cryptographic problems.

Chief amongst them is the Byzantine General’s Problem – basically, answering the question, how do I ensure the data consistency and integrity across a computer network? This relates to the corruptability of the data (data being manipulated by outsiders or untrustworthy insiders) in existing computer systems.

Other big issues that the blockchain was designed to solve include double spending – where you could pretend to spend money / tokens you have across multiple transactions (this is due to the ability to copy data) – and counter party risk – basically a social risk that someone does not fulfill their end of an agreement (or contract).

To understand the current limitations of blockchain technology, you need to understand how the technology solves some complex computation and cryptographic problems, and the limitations imposed by the design of these blockchain systems.

To simplify the discussion, we can limit the focus to the bitcoin blockchain, the first operational blockchain system.

Limitations of Proof of Work

One of the most innovative and often discussed aspects of the bitcoin blockchain is the Proof of Work protocol – a computational function, that requires computational resources to solve a complex mathematical puzzle by hashing (solving a cryptographic hash value) to verify that a series of data records have been correctly identified and added / recorded on a distributed ledger. This process produces a new “block” to a sequence of connected blocks, giving the blockchain it’s name.

The difficulty of the puzzle is automatically set by the system (complex maths formula), based on the available computing power across to produce an answer about once every 10 minutes.

This is probably one of the most complex aspects of the blockchain, and as such one of the most limiting. Depending on the parameters set within the blockchain protocol, there are various constraints that limit the usefulness of such a system.

In the case of the bitcoin blockchain, the speed of processing transactions – how many transactions the system can process & add to the blockchain – is limited. This means you cannot efficiently use blockchain technology for high volume transactions (ie requiring thousands or millions of transactions per second).

Similarly, due to the computational resourcing requirements of the network as a whole, to solve these mathematical problems, blockchains are designed to work best across a large pool of users that contribute their resources towards the goal of securing the network.

There are several economic and real world resourcing constraints that limit the commercial application of blockchain systems to current production environments, and limit the exposure blockchain systems have when interacting with other mature applications or systems on a network.

Due to the potential weakness and risk of external interference / attack (and hence potential influence, even control of the whole network) and subsequent distortion of a blockchain, the system is designed to be used at scale across a large number of distributed actors and devices constantly connected and participating in the process.

If there were only a few participants, and one or more bad actors in the network had a majority proportion of computing power (over 51%), there is greater opportunity for the bad actors to take over the network. That is why smaller and private blockchains are not seen as securely immutable (unchangeable), and thus have less perceived value than a well established and long time running publicly distributed blockchain like Bitcoin.

What this means is there’s more risk to a blockchain in it’s early stages, greater vulnerability to attacks / external manipulation and less certainty when there are only a few active people or machines (nodes) that participate in the network.

Furthermore, while there is an inverse relationship between cost and network processing power, the overall cost of running, growing and sustaining a blockchain system can grow to be quite large over time – mainly due to the large storage space required for each copy of the blockchain, the greater energy consumption and uptime costs of maintaining online computing systems, and the overall processing power needed to process new transactions / blocks.

While bitcoin has been proposed as digital money, the key design strengths of blockchain technology does not make it an effective digital money (because blockchain works like a vault locked with a key – if you lose your private key or someone discovers it, you will no longer have access to your money).

Since long and complex sequences of numbers and letters are not easy to remember, people have trusted external parties (online wallet services and exchanges) with their private keys (the keys to their bitcoin tokens), which is why they have been hacked and stolen or lost (when no one can access the tokens).

Another important limitation is the fact that the data on the blockchain is not editable. It is a write once, read only computer system by design (in order to be immutable). This means that there is no way to clear faulty, or incorrect / corrupt entries from the system.

There’s a lot more to discuss on this topic. I hope this gives enough of an insight to answer the question about the limitations of blockchain technology.

Overall, blockchain systems are best as a final, archive and store of data that is designed to be irreversible and useful referenced over time. Something like a big encyclopaedia or log book of data transactions.

In my opinion, the best future use cases for blockchain will capitalise on its strengths, and use it’s weaknesses / limitations as opportunities to explore development opportunities with complementary technologies.
Quora

[sc name=”BlockchainLimitationsToggler”]

Colonel, can you explain the benefits of the Hedera (Hiero) approach to Distributed Ledgers?
Of course. Hedera is one of the most distinct and interesting projects in the distributed ledger space because it is fundamentally not a blockchain. Understanding this difference is key to grasping its value and how it operates.
Here’s a breakdown of its value proposition and modus operandi.

Part 1: The Value Proposition (The “Why”)

Hedera’s goal is to be a public, enterprise-grade distributed ledger that overcomes the limitations of traditional blockchains like slow performance, high costs, and instability. Its value is built on four pillars:

1. High Performance & Low, Predictable Cost:
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Speed: While Bitcoin handles ~7 transactions per second (TPS) and Ethereum handles 15-30 TPS, Hedera is architected for 10,000+ TPS. This is throttled by the network for stability, but the underlying technology is extremely fast.
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Cost: Transaction fees are not volatile gas fees. They are fixed in US dollars (e.g., $0.0001 per transaction) and paid in the native currency, HBAR. This predictability is critical for businesses that need to budget for operational costs.
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Latency: Transaction confirmation takes only 3-5 seconds with finality. Once confirmed, it is immutable and cannot be reversed.
2. The Highest Grade of Security (aBFT):
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Hedera’s consensus algorithm, Hashgraph, is asynchronously Byzantine Fault Tolerant (aBFT).
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This is a formal mathematical proof of the highest possible level of security for a distributed system. It means the network can reach a fair and honest consensus even if up to one-third of the nodes are malicious and the network is suffering from delays and attacks (like DDoS). Blockchains like Bitcoin are not formally aBFT.
3. Fairness of Ordering & Access:
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Fair Timestamps: Hashgraph provides a mathematically proven fair ordering of transactions. No single node or miner can manipulate the order of transactions to their benefit (a problem known as Miner Extractable Value or MEV in the blockchain world).
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Fair Access: All nodes have an equal opportunity to submit transactions to the network.
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This is crucial for applications where order matters, such as stock exchanges, auctions, or multiplayer games.
4. Stable and Trusted Governance:
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Hedera is not run by an anonymous or amorphous group. It is governed by the Hedera Governing Council, a term-limited, rotating council of up to 39 of the world’s leading organizations.
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Members include Google, IBM, Boeing, Dell, LG, Ubisoft, and major universities.
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This council’s role is to run the initial consensus nodes, oversee the software codebase, and provide a stable, trustworthy governance framework that ensures the network will never be forked and will be managed responsibly.

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Part 2: The Modus Operandi (The “How”)
Hedera’s performance and security come from its unique consensus mechanism, Hashgraph, which works very differently from a blockchain.
The Problem with Blockchains: In a blockchain, nodes must “mine” or “propose” a block of transactions and then vote on it. This process is slow, inefficient, and requires a huge amount of bandwidth for communication.

The Hashgraph Solution:
Hashgraph achieves consensus without blocks and without direct voting. It uses two key concepts:
1. Gossip about Gossip Protocol:
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Imagine a group of people gossiping. When two people talk, they share all the information they know.
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In Hedera, when two nodes “sync,” they don’t just exchange transactions; they exchange their entire history of who they talked to and when. This is the “gossip about gossip.”
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This process builds a data structure called the hashgraph. It’s a directed acyclic graph (DAG) that contains the full history of how information spread through the network. It’s a web of events, not a chain of blocks.
2. Virtual Voting:
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This is the genius of the system. Because every node has a copy of the hashgraph (the history of all communication), it can figure out what every other node would have voted on without actually sending a vote.
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Each node looks at its copy of the hashgraph and runs the voting algorithm locally. It can calculate, with mathematical certainty, when a specific transaction has been seen by over two-thirds of the network.
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When a node proves that a transaction has reached this threshold, consensus is achieved, and the transaction is given a final, immutable timestamp.
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By eliminating the need to send voting messages across the network, Hedera avoids the bandwidth bottleneck that slows down blockchains, allowing it to be extremely fast and efficient.

Summary: Hedera vs. Blockchain

Feature	Traditional Blockchain	Hedera Hashgraph
Data Structure	A linear chain of blocks	A graph (DAG) of events
Consensus	Miners/validators propose blocks and nodes vote	“Gossip about gossip” protocol and “virtual voting”
Performance	Slow (7-30 TPS)	Very Fast (10,000+ TPS)
Fairness	Transaction order can be manipulated by miners	Mathematically proven fair ordering
Security	BFT (usually)	Asynchronous BFT (aBFT) – the highest level
Governance	Often decentralized and informal	Formal council of leading global organizations

In essence, Hedera sacrifices the “fully decentralized” ethos of some blockchains for a model of “distributed trust” among a council of reputable global players, in exchange for unparalleled performance, security, and stability.

Tx-Rails Federations
(Maximum practical number of federations, in terms of operational limits, is 13)

tolerable faulty servers (f)	number of BFT network servers required to tolerate f faulty servers (n=3f+1)	Relative Risk of Initial Breach of Consensus of f+1 servers (Subsequently Detected by ChubbyChecker)
0	1	High: 1 server must be corrupted
1	4	High-Moderate: 2 servers must be corrupted
2	7	Moderate: 3 servers must be corrupted
3	10	Moderate-Low: 4 servers must be corrupted
4	13	Low: 5 servers must be corrupted

BlockChains and Decentralised Ledger Technology (DLT)

BlockChain Technology was pioneered and invented by a person or people using the name of Satoshi Nakamoto, as part of the Bitcoin system, in its original reference implementation, Bitcoin Core (formerly known as Bitcoin-Qt). BlockChain Technology underpins Bitcoin.

Some businesses now show signs like the one below:

Blockchain Miners, Bitcoins and Trust

Bitcoin Ultimate Guide

Although at the absolute beginning (2008), one Bitcoin had zero value, “the first real price increase occurred in July 2010 when the valuation of a bitcoin went from around (USD) $0.0008 to $0.08 for a single coin.1“

Try googling “what is a bitcoin worth”!

Part 1: The Value Proposition (The “Why”) Hedera’s goal is to be a public, enterprise-grade distributed ledger that overcomes the limitations of traditional blockchains like slow performance, high costs, and instability. Its value is built on four pillars: