The Missing Link in Blockchain
It’s not a tech issue, it’s a social one.
Blockchain: Our Bane or Boon?
Adoption of a technology or a product is dependent on how well it assimilates into our existing practices, how it value-adds, and if it causes any problems which could potentially outweigh the benefits. Is it worth our time, effort and money? The internet was slow, time-consuming and expensive to use at first, but people recognized its usefulness for communication and worked on better design, infrastructure and hardware to realise its utility and potential. Today, communities and economies thrive off it.
Blockchain although useful is commonly mistaken to be synonymous with cryptocurrency, hacking, fraud and speculation. Inconveniently, because of its technical immaturity, blockchain still faces technical challenges which overshadow its social challenges.
Trust Issues
Blockchain technology prides itself on enabling ‘trustless’ networks, where there is no need for trust among network participants. Yet it is careless to dismiss trust altogether because trust remains relevant. It is innate to us, whether we are electing the next political candidate, finding a new babysitter, or leasing a business vendor. We trust in wisdom, experience and what is proven. Fostering a sense of trust and reliability in any system is a crucial step towards its uptake.
Fear
There is a lot of uncertainty to fear in a technology as disruptive as blockchain. First and foremost, blockchain literacy is an issue. Public perception of blockchain is still murky, people are commonly confused by technical jargons, and the value of the technology is not easily communicable. It was also thrown around carelessly as a technological buzzword in the past three years which made it questionable. Without sufficient understanding on the subject, it is hard for people to develop confidence in the technology in the first place.
Secondly, people fear change, especially so for something unfamiliar. Incorporating blockchain into operations often necessitates a change in business processes, new technological implementations or even overhauling routine that business operators find comfort in. Blockchain could also mean distributing control that once belonged to a central institution, which could be both unsettling and unwelcomed.
A Lack of Order
Disorder spells confusion and seems symptomatic of neglect or even failure. To keep social order, we create systems of governance and regulation. Society is used to having legal authorities implement and enforce laws to ensure proper functioning.
Blockchain products like cryptocurrencies present new challenges to regulators. The controversies of initial coin offerings (ICOs) made regulations on digital assets and its likes become a greater concern for the real world and is pushing for progress. There is still much to be decided with regards to the treatment of cryptocurrencies and other blockchain regulations.
In the meantime, how does blockchain applications work with existing regulatory structures? One of the main problems with ICOs was the lack of protection for token investors because there was little oversight and accountability in the management of funds raised, which posed great risks in misuse of large funds that needed to be curbed. Without precise technological definitions for more effective regulation, the crypto space is barely regulated simply because the nature of cryptocurrency is, as an instrument transacted for financial reasons, absolutely non-traditional. This presented unique regulatory challenges which is difficult to tackle; even the blockchain community has yet to properly define it. So it could be essential and perhaps inevitable for blockchain users to, aside from relying on government bodies for proper blockchain regulations, self regulate and balance the ecosystem with good ecosystem practices.
Enabling the People
To combat all these negative feelings and reservations about blockchain, we need to equip people with the appropriate knowledge and tools. This comes with understanding of social and cultural realities, and translating those into the blockchain user experience.
Accessibility and Usability
There is a clear trend towards easier-to-use blockchain tools and platforms. On the technology end, firms like Amazon, IBM and Microsoft are working on improving the cost and complexity involved in creating blockchain networks, offering effective “templates” and blockchain-as-a-service. There are also more feature-rich tools for third-party developers to participate and value-add.
On one hand participation in the blockchain/cryptocurrency ecosystem is still difficult. Transacting requires a validation process that users may find unappealing, and complex security processes while necessary act as barriers to adoption. Blockchain solutions would do well to create more user-friendly processes and a navigator (the equivalent of a browser) for blockchain data. Furthermore, the main challenge for corporations, especially SMEs, is a lack of awareness of the technology and widespread lack of understanding of what they can do with it. This might have to do with the dominance of technicians in the blockchain area and a too-technical approach, which could be hampering the exploration of ideas for those who are less technical-minded, more business-oriented.
Organization and Standardization
Blockchain is fragmented. With increasing numbers of users, standalone blockchain networks, platforms and solutions, the ever-expanding blockchain space has chalked up quite a clutter. Most networks operate in silos, fragmenting the users, features and value of the industry. A lack in universal standards takes away consistency from many basic processes and is particularly problematic for data communication. The success of blockchain technology depends on how different blockchain networks can interact and integrate with one another.
There is a serious need to reconcile and organize blockchain data and processes better. In other words, to standardize. According to Deloitte, standardization could help enterprises collaborate on application development, validate proofs of concept and share blockchain solutions as well as make it easier to integrate with existing systems. The ecosystem will be more productive when discrete players come together to work to enable an interoperable internet of blockchains, by way of cross-blockchain transactions, interconnectivity, and more meaningful analysis of blockchain data. Fortunately, there are some networks who are working on interoperability, although integration with pre-existing network systems remains a concern.
Collaboration
Collaboration is imperative in order to promote the development of applications and education of blockchain technology. Organizations can derive more value from blockchain when they work together on shared opportunities or pains. Furthermore, increasing collaboration would help the lack of interoperability between networks. The problem with many existing approaches is that they stand alone and fail to harness network effects.
More recently, many blockchain platforms are setting themselves up to support semi-private blockchain consortium systems to tackle industry wide issues and leverage shared information for improving workflows, accountability, and transparency.
Self-Regulation
Aside from being technically reliable, we need to introduce some of that reliability and accountability we apply to social interactions in our physical life in this virtual space that lends users anonymity. With the right incentivisations and penalties in place to promote desirable behaviour, I believe we will form and internalise social codes as a mode for self-regulation to navigate the blockchain ecosystem.
People Just Need to Feel Comfortable
Blockchain and crypto are confronting many fundamentals of how our economy and society work. People often think that the shortcomings of blockchain concern technological developments such as scalability and security but there are also some social considerations and external factors worth examining to realize the technology’s potential for mass adoption. The key thing is to build blockchain as a trustworthy technology before people are willing to take the leap.
A lack in awareness, understanding, and user experience, as well as the attitudes surrounding blockchain and crypto have to be addressed to lower the perceived risk and difficulty of utilizing blockchain. Absence of standards in the technology both in the ways we operate technologically and socially is indicative of how immature the industry still is and how far we still have to go to realize its potential.
At Novum, we are currently working on a communication protocol for blockchain data and information to more holistically address the blockchain challenges mentioned above and redefine consumption of blockchain in the space. You can read our previous article to learn more about Novum Trust Order (NTO) Protocol, or stay tuned for upcoming articles where we will analyse in greater detail the challenges we are addressing.
