The Blockchain technology is providing us with the bricks to build a decentralized world. In this new society, cryptocurrencies are the main form of payment, there is complete anonymity and the economy is truly decentralized.
This has many advantages, of course, but there is a dark side too.
There was no electric chair before the discovery of electricity.
Too much anonymity
Cryptocurrencies like Monero, ZCash and soon Ether offer nearly untraceable anonymity features for its users. This is great because many people prefer to keep their transactions private.
However, it also facilitates certain criminal activities. Money laundering, online drug, weapons dealing and tax avoidance are some of its possible applications. Dark Web marketplaces like Silk Road or AlphaBay would have probably never come to life without the partial anonymity cryptocurrencies provide.
But anonymity is not only used for payments. An increasing number of Internet users are making use of strong encryption protocols, VPN’s and onion routing. Users that are active on platforms like 4chan or Reddit will have probably noticed how anonymity empowers the very worst among us.
So far, 4chan has been involved in tricking people to microwave their iPhone, causing countless suicides, making Apple stock to drop by 10 percent and hoaxing people into fabricating highly toxic chlorine gas.
The cryptocurrency market can be manipulated
The total market cap of all cryptocurrencies combined sits now at around $90 bln. In contrast, Facebook is worth around five times more with a market cap of $475 bln. This shows how small the crypto world still is.
We live in a society where half of the world’s wealth is in the hands of one percent of the population. In the crypto market, wealth distribution is brought to a new extreme. This is mainly due to the difficulties associated with acquiring these assets.
The top 315 Bitcoin addresses own a 25 percent of all circulating coins. This makes market manipulation an actual threat.
Not efficient enough
A decentralized company or cryptocurrency does not have a chain of command. Although this has several advantages, it can also make the decision taking process painfully slow or ineffective.
A good case study is the current situation of Bitcoin. Core developers, stakeholders, and miners have been debating about Bitcoin’s scalability issue for months. However, each party is fiercely protecting their own interests.
This makes a mutual agreement practically impossible. The result is a potential chain split on Aug. 1, 2017.
This being said, it’s important to keep in mind that the benefits of the Blockchain technology will probably outweigh its associated downsides.