An Analysis of the Opportunities and Threats in Blockchain Technology
Blockchain technology continues to be one of the most exciting emerging technologies in the world today. individuals, developers, corporations and even governments are trying to develop means to use this revolutionary new technology in advancing their processes. Many experts have come out to say that blockchains hold the key to the actualization of a number of important technological breakthroughs. Within the haze of excitement and optimism, the core of the discourse surrounding blockchain tends to center on strengths and weaknesses of the technology. Everyone knows that in order to complete a SWOT analysis, the opportunities and threats must also be looked at.
The potential opportunities of blockchain technology will be examined in this article under three broad categories as follows:
The first recognizable niche that comes to mind when the blockchain is mentioned is commerce. The first ever successful implementation of the blockchain framework resulted in Bitcoin, a payment processing architecture. This, and the fact that the majority of the blockchain applications that have been launched since then have been focused on cryptocurrencies has led some to believe that crypto is all there is to blockchains.
The entire framework of global commerce presents a veritable opportunity for blockchain implementation. Blockchain technology can be applied to almost every aspect of commerce. One of the most valuable opportunity for blockchain adoption in commerce is the area of cross-border transactions. The current framework for cross-border transactions is one that involves a number of processes and checks that slow down the transactions and even make them quite expensive. Blockchain technology has the potential to create a borderless network architecture that will enable cross-border transactions to happen almost instantaneously. All the time-consuming checks that are required before an international money transfer is approved can be accomplished on the blockchain at a fraction of the normal time taken.
The cost of trust continues to be a heavy burden on commerce as a whole. Transactions need to be validated by third-party authenticators like banks and clearing houses. These services charge substantial fees that contribute considerably to the final cost of the transaction. Blockchain technology can be used to eliminate the need for the third-party agents in the commerce ecosystem. Such a move has the advantage of eliminating the extra transaction cost burden brought about by needing to pay transaction clearing fees to centralized infrastructure like SWIFT. Also, the delays brought about by these centralized services will be materially diminished.
Government is charged with a whole host of duties and responsibilities that must be discharged for the benefit of the citizens. Blockchain technology has a vital role to play in government especially in the context of the 21st-century world. Blockchains can be utilized for identity management systems, document processing, safeguarding financial and state services, as well as transmitting sensitive information just to mention a few.
Efficiency is a major problem faced by governments around the world. The wheel tends to turn slowly and a lot of potential progress is bogged down by bureaucratic red-tape. With blockchain technology in government, a lot of these processes that consume countless manhours can be run directly on a digital ledger with intuitive smart contract protocols. More work will be accomplished in less time and the citizens will be the better for it.
Apart from the investment opportunities that abound for corporations when it comes to blockchains, there is also the fact that the technology could be used to improve the running of an organization. Blockchains provide a single data source that is available to all participants of a network at the same time. Corporations can keep track of documents far more efficiently with blockchain thereby reducing administrative costs and preventing costly delays.
Corporations can also use blockchains to better improve E2E processes especially in the area of quality control. Producers and end-users will be able to interact better in a blockchain network. Detailed information can be hosted on a blockchain about a specific product so that customers can preview the information. Information flow between producers and consumers will also be greatly enhanced when blockchains are integrated into the entire B2C spectrum.
Blockchain technology can be put to a variety of uses but the threats to blockchain in almost every area of application are the same. The following are some of the threats to blockchain technology.
1. Environmental Regulation
The threat of global warming has led to renewed focus on environmentally friendly practices. The cost of electricity required to run large-scale blockchain networks is immense. Already, the Bitcoin network already uses more electricity than many countries of the world. with increased blockchain adoption, the energy burden will become even more considerable. If more energy efficient means cannot be found to run blockchain technology applications, then there is likely to be a lot of opposition as far as its large-scale implementation is concerned.
2. 51% attack
Blockchains are theoretically immutable; this means that past records on the blockchain cannot be altered. This theoretical immutability of the blockchain is enhanced as the size of the network increases. However, not every potential blockchain application needs to be largescale blockchain network, thus opening the door for a 51% attack and other forms of manipulation. A 51% attack is a situation whereby a node or group of nodes that control 51% of the hashing power of a blockchain can alter the records of the blockchain. A successful 51% attack of a blockchain could have devastating consequences.
3. Scalability — Security Trade-off
The exponential growth in the size of a blockchain leads to a scalability — security dichotomy that can be difficult to handle. On the one hand, a larger blockchain means more security as a 51% becomes extremely difficult to accomplish once the network reaches a certain size. On the other hand, the bigger the blockchain gets, the less scalable it becomes. The sheer size of the data stored on a large blockchain will create data storage space constraints.
With the focus of the world firmly fixed on blockchain technology, many of these opportunities and threats are likely being evaluated. Time will tell how well the blockchain is implemented on a larger scale and how these aforementioned and other threats are mitigated.