Why Isn’t Everyone Using Blockchain Yet?

Blockchain has been around for close to a decade. The past year has seen it take centre-stage globally. News articles on how it will change everything about the digital world and beyond are abundant. So too are sophisticated speculations on the enormous potential of blockchain. Global conferences and meet-ups relating to Blockchain have mushroomed, with investors swarming around companies with even the most tenuous links to the technology.

The hype that currently surrounds Blockchain technology is huge. It is centered around the idea that both public and private blockchains can automatically solve the shortcomings of our current systems.

According to the 2017 Harvard Business Review, “virtually everyone has heard the claim that blockchain will revolutionize business and redefine companies and economies”. Yet the practical adoption of this technology has proven to be much slower than all the publicity would have suggested.

Time to ask ourselves why.

The first problem is that without adequate knowledge on how exactly to implement the technology, many companies simply steer clear of it. Blockchain is new territory for everyone, and the reluctance of many to put trust in the system contributes greatly to a delay in widespread use. Most are wary of the unknown.

Blockchain has also been maneuvered into the role of a solution looking for a problem to solve. While it powers Bitcoin and other cryptocurrencies, industrial applications have proceeded case by case, rather than by widespread deployment.

Some of the higher profile applications could lead to broader uptake. According to Forbes, Dubai has plans to implement private blockchain systems at the very core of its government. With plans in the next two years for a “blockchain-powered government,” Dubai officials hope to use the technology to deal with as many transactions as possible. Using Blockchain has the potential to save their government over $1.5 billion by cutting out millions of hours of unnecessary labor.

Other industries, such as the automotive, finance, and healthcare, are also accelerating blockchain projects with the goal of introducing faster and cheaper transactions with a higher degree of accountability and transparency. A survey taken in October found that 24% of enterprise businesses are “looking into” blockchain technology, while 16% of said companies have already invested in the tech. Time will tell how fast that interest is translated into real-world usage.

What else is delaying mass adoption of blockchain?

It turns out the tech just isn’t ready yet. Existing blockchain technologies are having some serious scalability issues and the one’s which aren’t tend to have had traded in other important aspects, such as decentralization, instead.

The design of some blockchains creates a bottleneck as the number of transactions grows. The original design of Bitcoin limited performance to 7 transactions per second. By comparison, the well-established Visa card network can process thousands per second.

Rarity makes things expensive and rapid blockchain transactions are no exception. When everybody wants their transaction to go through, the ones that are completed first belong to the users prepared to pay higher transaction fees. While this keeps miners happy because the higher fees mean higher rewards for their mining work, it doesn’t encourage mass-market uptake.

As a technical issue, scalability needs a technical solution. Blockchain designers are working on various possibilities, including:

• Increased block size. By changing a blockchain protocol to pack more transactions into each block added to the blockchain, transaction handling rates can be increased.
• Off-chain transaction networks. Transactions are validated away from the main blockchain, which then processes the results of the validation but without having to do the heavy lifting. Off-chain validation can be done faster, as can the addition of new blocks to the blockchain.
• Sharding. A term borrowed from database technology, sharding is the splitting of the validation workload into several parts, each part being handled by an individual group of validating systems. As transaction volumes rise, so do the number of parts and the number of groups of systems to cope with the increase.

Enormous energy consumption is also an issue. Many blockchains use the PoW (proof of work) algorithm. That means the use of computational power of a machine to create new blocks of transactions, also called “mining.” While this provides a robust way of gaining consensus on transaction validation, the amount of energy it consumes has already created problems for Blockchains.

While there are attempts underway to reduce such consumption, such as using different kinds of consensus algorithms such as Proof of Stake (PoS) instead, miners continue to battle with each other by building ever faster mining computer centres, which in turn only exacerbates the energy consumption problem.

Faster uptake of blockchain also depends on a better user experience and education.

Blockchain pioneers found the technology exciting, but we must keep in mind one important fact — the public will use the easiest, cheapest option available. Once blockchain is just as easy, or even easier to use, than current centralized products, the possibility of widespread use will increase in the way many want. While the principle of decentralization may be hugely motivating for some people, for many others it is simply not a priority.

Blockchain account keys in the form of long strings of seemingly random letters and numbers are hard for most people to handle too. So is the risk of losing the contents (like digital cash) of a blockchain account by mislaying the key or making a mistake in recording it. Solutions exist to hide this complexity from users and make accounts simpler and safer to manage, but people must know about them if they want to get the benefit.

Another vital step is therefore education. Educating the public on not only why to use it and why to care, but how to use it easily and safely will make all the difference. In parallel, educating IT engineers on how to develop applications on top of blockchains and educating companies on relevant use cases should also lead to greater acceptance of blockchain overall.

Blockchain is not simply generating excitement. It is also creating opportunities for more democratic, transparent, protected organizations, cheaper transactions, and fairer voting systems and trade agreements, to name a few. After an initial phase of uncertainty and with the right progress in scalability and user experience, organizations that integrate blockchain into their systems will see measurable increases in efficiency and security of their transactions and operations.

Despite it being around for over a decade, blockchain technology just isn’t ready for mass adoption yet. It’s functional, but not yet efficient enough. Much like we knew we could achieve 4G or 5G internet when we had 2G — the functionality exists, but further research, investment in infrastructure, testing and work is required to reach its full potential.

Technology takes time to evolve and adapt. We can expect the same from Distributed Ledger Technology.

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