The blockchain is a technology that offers its users the possibility to man-age and transfer ownership in an open and purely distributed peer -to- peer system. The way independent peers manage ownership collectively through distributed consensus has raised questions concerning the legal consequences of transactions being made and managed in the blockchain. Questions regarding the legal implications and acceptance of transactions performed in the blockchain need to be discussed regardless of the safety, security, and sophistication of its technology. It is a question regarding the incorporation of a new approach of managing ownership in the established legal system. Those who l witnessed the emergence and development of the Internet may see a similarity between legal statuses of the blockchain nowadays and the lack of legal acceptance of Internet commerce in the 1990s.
Both the technical and the nontechnical limitations are considered major hurdles for the adoption of the blockchain in real-world applications. How to overcome particular limitations has been, and still is, an area of active research and further developments. A detailed discussion of these activities is beyond the scope of this book. However, the following sections sketch how to over-come the limitations of the blockchain.
The nontechnical limitations of the blockchain can be seen as social, economic, legal, and psychological aspects of adapting to a new technology.
Education and legal initiatives can be seen as the appropriate measures to master the adoption of the blockchain. The example of the Internet and ecommerce has already shown that it takes time to answer legal questions that come with new technologies and that it takes time for users to understand, trust, and use them. Fortunately, the case of the Internet and e-commerce has also illustrated that educational initiatives about the functioning of a new technology increase its acceptance and adoption among users and foster the solution of legal issues.
• The openness of the blockchain and the absence of any form of central control are the fundamentals of its functioning but can also cause limitations for its adoption.
• Major technical limitations of the blockchain are:
• Lack of privacy
• The security model
• Limited scalability
• High costs
• Hidden centrality
• Lack of flexibility
• Critical size
• The most important nontechnical limitations of the blockchain are:
• Lack of legal acceptance
• Lack of user acceptance
• Technical limitations of the blockchain can be overcome by improving the existing technology or by introducing conceptual changes.
• The nontechnical limitations of the blockchain can be overcome by educational and legislative initiatives.
The robustness against manipulations and hence the trustworthiness of the collectively maintained history of transaction data rely on the assumption that the majority of the system’s computational power is controlled by honest nodes. However, in small peer-to-peer systems with a limited computational power, that majority can still be very small, which in turn could make it possible to perform a 51 percent attack. This problem is in particularly relevant for cryptocurrencies with low market capitalization and limited user adoption.
Hence, any blockchain will require a critical mass of honest nodes to support it and make it resistant to attackers with a lot of computational power.
Reaching a critical size that makes 51 percent attacks impossible is a challenge that every new blockchain has to face.
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