Blockchain Risks

07 May 2025 18:07

1. Standard Risks
These are risks that also exist in normal business systems but happen in a
different way in blockchain.

Data Security
 Like how we protect passwords on social media, in blockchain
we protect private keys (which control your digital money).
 Risk: If someone steals your key, they can take your money —
and you can’t get it back.
□ Example: Losing your crypto wallet key is like losing your
house key forever, and no locksmith can help.

System Failures
 Just like any app or website, blockchain systems can crash or
have bugs.
 Problem: Once something is written in blockchain, it can’t be
changed easily, so fixing mistakes is hard.
□ Example: If a wrong amount is sent, it's like sending a
parcel to the wrong address with no return option.

Compliance (Following Rules)

 Businesses must follow the law in every country they work in.
 Blockchain is global, so it can be hard to follow all local laws.
□ Example: It’s like driving a car with different traffic rules in
each country — confusing and risky if not handled well.

2. Blockchain-Specific Risks
These are new types of risks that come only because of how blockchain
works.

Value Transfer Risks

Blockchain lets you send money or data directly, without banks.
○ Good Part: Fast and no extra fees.
○ Risk:
 If you make a mistake (send to wrong person), there’s no
“Undo” button.
 Hackers can steal from poorly protected wallets.
 You have to trust the other person or system completely.
○ Example: Sending money by blockchain is like giving someone cash
 through a hole in the wall — if it’s wrong, you can’t get it back.

Smart Contract Risks

Smart contracts are like automatic rules written in code. They do things
like:
“If A happens, do B.”
Risks:
○ Coding Mistakes: If the smart contract has a mistake, it might send
money to the wrong person.
 Example: Like a vending machine giving a Coke when you
selected water.
○ Real-life Confusion: Turning a legal contract into code can miss some
parts.
 Example: A smart contract says “Pay when goods arrive” — but
what if goods are damaged? The contract may still pay.
○ Hacking: Hackers can find bugs in the code and steal money.
GS1 Standards and Blockchain – Explained Simply
What is GS1?
GS1 is a global organization that creates standards to help businesses
identify and track products in the supply chain.
Example: The barcode on a biscuit packet or a medicine bottle is
based on GS1 standards. It helps supermarkets or hospitals track these
items easily.
How GS1 Helps Blockchain:
○ GS1 standards like EPCIS (for tracking movement) and CBV (standard
business terms) help everyone share the same data in a blockchain
system.
○ This avoids errors, miscommunication, and duplicate records.
○ It improves traceability.
Example: If a fruit is found contaminated, GS1+Blockchain can
track it back to the exact farm, ensuring safety and quick recalls.

ISO/TC 307 and Blockchain

What is ISO/TC 307?
It is a group formed by the International Organization for
Standardization (ISO) to create global standards for blockchain.
Think of it like making traffic rules for blockchain roads.
What They Work On:
 Reference Architecture: Blueprint for how blockchain should be
built.
 Security & Privacy: Protecting data from hackers.
 Identity Management: Checking who’s using the system.
 Smart Contracts: Making automated agreements safer.
 Use Cases: Listing areas where blockchain can be used (like
finance, health).
 Interoperability: Making sure different blockchains can talk to
each other.
Example: Just like USB cables work with any brand of phone
charger due to standardization, ISO/TC 307 wants all blockchains to
work together.

Social and Cultural Constraints in Blockchain Adoption

1. Digital Literacy and Access
○ Many people don’t know how to use blockchain or don’t have
internet access.
 Example: A farmer in a village might not understand or use a
blockchain-based land record system.
Solution: Provide simple training and tools.
2. Trust and Acceptance
○ People think blockchain is too complex or fear hacking.
○ Many don’t even know the benefits.
Example: A shopkeeper may prefer traditional cash over digital
currency due to fear of scams.
Solution: Spread awareness and show how it improves safety.
3. Regulatory and Legal Issues
○ Different countries have different laws, causing confusion.
○ Current laws may not fit blockchain.
Example: No clear law for how a smart contract is enforced in
court.
Solution: Governments must create proper laws for blockchain use.
4. Cultural Resistance
○ Some cultures trust centralized systems (banks, governments) more.
○ People may be resistant to change.
Example: In some countries, people may not want to switch from
traditional cash to decentralized digital currency.
Solution: Show how blockchain respects privacy and fits local values.
5. Energy Consumption
○ Blockchain like Bitcoin uses a lot of electricity.
Example: One Bitcoin transaction can use as much electricity as a
household does in a day.
Solution: Use energy-efficient models like Proof of Stake.
6. Social Influence
○ People follow leaders or influencers.
Example: If a popular business leader supports blockchain, others
follow.
Solution: Promote real-life success stories (e.g., Walmart using
blockchain for food tracking).
7. Integration with Existing Systems
○ Blockchain must work with current company software.
Example: If a hospital’s record system can't connect with a
blockchain system, it's useless.
Solution: Make sure blockchain tools are compatible with old
systems.
BlockChain Challenges
07 May 2025 18:24

1. Scalability
• Problem: Blockchains get slow when many people use them.
○ Example: Like a traffic jam on a single-lane road. Bitcoin handles only
7 transactions per second.
• Why it matters: Apps like online shopping or stock trading need fast
speed.
• Solutions:
○ Off-chain channels (like side roads): Some work is done outside the
main road.
○ New designs: Use better roads (algorithms) to handle more cars
(transactions).

2. Energy Consumption
• Problem: Verifying blockchain transactions (especially Bitcoin) uses a lot
of electricity.
• Example: Bitcoin mining is like thousands of computers racing to solve a
puzzle – that eats a lot of power.
• Why it matters: Bad for the environment and expensive.
• Solutions:
○ Use Proof of Stake (PoS) instead of Proof of Work (PoW). PoS is like
voting instead of solving puzzles – less energy.

3. Security
• Problem: Blockchains are secure, but not perfect. Hackers can attack if
smart contracts have bugs.
• Example: A smart contract is like a vending machine – if there's a flaw,
someone might take snacks without paying.
• Why it matters: Can lead to big money loss and people lose trust.
• Solutions:
○ Test smart contracts carefully before using.

4. Complexity
• Problem: Blockchain is hard to understand and use.
• Example: Like trying to fix a car engine with no training.
• Why it matters: People may avoid using it.
• Solutions:
○ Create easy apps and tools.
○ Provide training in schools, colleges, and companies.
○ Make standard rules for easier setup.
5. Interoperability
• Problem: Different blockchains don’t work together easily.
• Example: Like having different phone chargers for each phone brand.
• Why it matters: Causes confusion, more cost, and less efficiency.
• Solutions:
○ Cross-chain tools like bridges that connect blockchains.
○ Standard protocols like having a universal charger for all phones.

The Future of Blockchain Technology

• Mainstream Use: Used in elections, healthcare, payments, and supply
tracking.
○ Example: Voting through blockchain to avoid fraud.
• Better Scalability: Faster and more users can use it together.
• Interoperability: Blockchains talk to each other easily.
• Sustainability: Use energy-saving methods like PoS.
• Regulation: Governments will make rules to ensure safety and trust.
• Smart Cities & IoT: Blockchain may power smart homes and traffic
systems by managing data securely.

The Future of Artificial Intelligence (AI)

• Personal Assistants: AI like Siri or Alexa will help more in homes and
offices.
• Healthcare: AI will help doctors spot diseases early.
• Job Automation: Repetitive jobs (like factory work) will be done by AI, but
new jobs (like AI trainers) will be created.
• AI in Creativity: AI can help make music, design clothes, or write stories.
• Ethical AI: Developers will focus on making AI fair and safe (e.g., no bias in
hiring decisions).

The Future of Digital Privacy

• User-Controlled Data: You will decide who can use your personal info.
○ Example: Like locking your diary and only giving keys to trusted
people.
• Privacy Laws: Countries will bring strict rules like GDPR to protect users.
• Secure Tech: Tools like encryption and blockchain will protect data from
hackers.
• AI and Privacy Together: AI will be trained to handle data without
misusing it.
• Awareness: People will be educated about online safety and data sharing.