The Cryptocurrency Tradeoff: How Decentralization, Privacy, and Throughput are Crypto's Major Pain Points

Diving into the cryptocurrency market a bit deeper displays shortcomings beyond those mentioned above; which include usability issues, compliance roadblocks, and scalability fallacies, as Forbes highlights.

Despite countless hours spent by blockchain developers around the globe, the zealousness of cryptocurrency investors felt towards the end of 2017 has all but died down, and the market sentiment begs the question: When is the quintessential "Killer app" of blockchain and cryptocurrencies coming out?

The fallacy forms one of the biggest roadblocks to building a truly decentralized system, and even the famed consensus mechanisms-decision-making votes from a blockchain network's users-fails to address critical decisions for a dApp's longevity.

Much of the cryptocurrency market has been propelled with a mere whitepaper and ideas on a virtual blackboard-with no mention of the steps a team will take to tackle legal concerns, token liquidity, and even public awareness.

Unlike the traditional markets, a blockchain entrepreneur or dApp developer faces three fundamental tradeoffs presenting an obstacle for making a distributed system the next "Killer app;" decentralization, data throughput, and privacy.

Despite the sheer computation power, Bitcoin's throughput is capped at a mere seven transactions per second.

In case the transaction speed is sped up and confirmed by lesser miners on the network, a divergence amongst all nodes is reached that leads to questions about which chain is legitimate and could subsequently lead to a split, or a fork in the network.

If the tradeoff between transactional speed and trustworthiness is addressed as Ripple Labs did with its XRP tokens-whose throughput is clocked at 1,500 transactions per second-the tradeoff of centralization is presented to network participants.

Even the famed Lighting Network operates on an "Off-chain" methodology that, strictly speaking, does not utilize the security of the Bitcoin network.

Only vetted parties can participate in such networks, and while they tradeoff PoW mechanisms to provide high throughput, the aspects of privacy and decentralized are compromised substantially.