Five Challenges Blockchain Technology Must Overcome Before Mainstream Adoption
Blockchain technology is being hailed as one of the most revolutionary and disruptive technological advances of today. The technology that underlies the digital currency bitcoin has changed our perception of what constitutes money as well as the storage and transfer of value.
However, what makes the blockchain truly revolutionary is its potential for applications beyond processing bitcoin transactions. Today, there are hundreds of startups that are using blockchain technology to disrupt an array of industries such as trade finance, healthcare, cloud storage and cybersecurity, among many more.
Despite the large number of industries that the blockchain is impacting, there are also concerns regarding the technology that are still preventing its widespread adoption.
1. Initial Costs
Though the adoption of blockchain technology promises long-term benefits with regard to productivity, efficiency, timeliness and reduced costs, it is expensive to initially put it in place. The software required to run blockchain technology in organizations must typically be developed for the specific firm and is therefore expensive to purchase, acquire or develop in-house. Moreover, organizations may have to obtain specialized hardware for use with the software.
In addition to the software costs, organizations must also find qualified personnel to work in tandem with the technology. The blockchain technology space is relatively new and is growing at such a fast rate that professionals proficient in the field are few and far between. Due to the large demand and limited supply, organizations must be willing to pay large salaries to the individuals who are qualified for these positions.
This means that a move to a complete or even partial blockchain-based system is out of reach for most small- and medium-sized business due to the high setup costs involved.
2. Integration With Legacy Systems
In order to make the move to a blockchain-based system, an organization must either completely overhaul their previous system or find a way to integrate their existing system with the blockchain solution.
However, it may be difficult for blockchain solutions to handle all functions needed by organizations, initially making it difficult to completely eradicate legacy systems. Therefore, considerable changes must be made to the existing systems in order to facilitate a smooth transition. This process may take a significant amount of time, funds and human expertise.
In some cases, it may be undoable to reconcile the two systems, and the organizations must acquire new systems that are compatible with the blockchain solution. Many organizations are reluctant to make the move to blockchain solutions because of the meticulous planning, time and money that would be required in order to achieve successful company-wide implementation.
3. Energy Consumption
The Bitcoin network, as well as the Ethereum network, both use the proof-of-work mechanism to validate transactions made on the blockchains. This mechanism requires the computation of complex mathematical problems to verify and process transactions and to secure the network. These calculations require large amounts of energy to power the computers solving the problems. In addition to the energy used to run the computers, a sizable amount of energy is also required to cool down the computers.
In a white paper published in June 2017, the World Economic Forum stated, “Estimates liken the bitcoin network’s energy consumption to the power used by nearly 700 average American homes at the low end of the spectrum and to the energy consumed by the island of Cyprus at the high end. That’s more than 4.409 billion kilowatt-hours, a Godzilla-sized carbon footprint, and it’s by design. It’s what secures the network and keeps nodes honest.”
The large amount of energy required to keep the most well-known blockchains in operation is a deterrent to many corporations that are now focusing on sustainable methods of doing business. With climate change being a major concern, such massive use of energy does not seem justifiable.
It should be noted, however, that the Ethereum network is planning a move to a proof-of-stake mechanism, which would require much less energy in order to function. Since most real-world blockchain applications are based on Ethereum’s network, this would make the move to blockchain technology more sensible with regard to energy consumption.
4. Public Perception
The majority of the public is still oblivious to the existence and potential uses of this technology. In order for blockchain technology to make the move to the mainstream, there must first be a public buy-in to its benefits. Though the technology is revolutionizing many different industries, knowledge of the benefits of distributed ledger technology is still limited to those who are involved in the technology space and those whose industries are adopting blockchain solutions.
Presently, blockchain technology is nearly synonymous with Bitcoin. Though the value of bitcoin continues to rise to unprecedented levels, there is still an association of the cryptocurrency with the shadowy dealings of money laundering, black market trade and other illegal activities.
Before mainstream adoption can be achieved, members of the public must understand the difference between bitcoin, other cryptocurrencies and the blockchain. This will help remove the sometimes-negative undertones of Bitcoin and allow the technology to stand on its own, which will lead to an increase in willingness to utilize the technology.
5. Privacy and Security
Blockchains, as in the original design, are made to be publicly visible. Take, for instance, the Bitcoin blockchain, which is designed to be accessible to all those who have made a transaction on the network.
In the case of bitcoin and other cryptocurrencies, this is an important feature. However, for governments and corporations, this creates a number of concerns. Governments and corporations have a need to be able to protect and restrict access to their data for a myriad of reasons. This means that blockchain technology cannot work in spaces with sensitive data until this challenge is met.
However, a blockchain can be customized to meet the needs and specifications of the task at hand. A blockchain can be made permissible. This means that people are only able to access parts of the blockchain that are relevant to their tasks. Although creating such blockchains takes a sizable amount of planning and expertise, it lessens the apprehension that firms and governments have about the technology, thus making adoption more likely.