What are the limits of blockchain and Web3?

It can't undo a payment

Crypto payments usually can't be reversed. Once you pay, you can usually only get your money back if the person you paid sends it back.¹ On Ethereum, sending crypto to the wrong address is a common mistake, and the transaction is irreversible.⁴

Crypto held in accounts is also not insured by a government, the way US bank deposits are.^1,5

It can't bring back a lost key

A private key is the secret that controls crypto. If you lose it, the assets tied to it are lost, because the key can't be made again.² If someone steals it, they get full access to those assets.²

When the news says crypto was "stolen", it almost always means someone's keys were taken. It does not usually mean the blockchain itself was broken.²

It can't see the real world

Blockchains work well with their own data. They struggle with facts from outside, which is called the oracle problem.² Say crypto pays for a real item. The blockchain alone can't tell whether the item was ever shipped.²

It doesn't remove all trust

In a permissionless blockchain, anyone can take part and no trusted third party approves payments. But you still have to trust a lot.^2,3

• You trust the maths and code behind it, which can have flaws.²
• You trust the developers to write software that is as free of bugs as possible.²
• You trust that most users are not secretly working together to take control.²

NIST says blockchains are tamper-evident and tamper-resistant, not strictly unchangeable.² On 11 March 2013, a faulty software update split Bitcoin into two chains for several hours. Miners chose to undo one of them, and many payments that users thought were final were cancelled.³

It doesn't make money stable, cheap or green by itself

In 2014, the Bank of England said digital currencies like Bitcoin were not widely used to pay for things. Their popularity came mostly from being something to invest in.⁶

In 2018, the BIS argued that cryptocurrencies don't scale like national money. When blocks fill up, payments queue and fees soar.³ It found their values extremely volatile, because no central issuer adjusts the supply.³ It also argued that permissionless cryptocurrencies can't guarantee that a single payment is final.³ ethereum.org itself says fees are still too high for many people, and that the technical barrier to using Web3 is too high.⁷

Energy use depends on the design. In 2018, the BIS said bitcoin mining used as much electricity as a mid-sized economy such as Switzerland.³ Ethereum first used proof-of-work mining too, then switched to a design called proof-of-stake.⁸ ethereum.org cites an estimate that the switch, called the Merge, cut its electricity use by more than 99.9%.⁸