With blockchain technology, people and processes alike have witnessed faster transactions, accuracy, and data security, however, some challenges have been attached to why the technology has not seen widespread adoption.
In blockchain technology, users share ownership and administration of the network through computer nodes, making it a decentralized and distributed data network (ledger).
Blockchain acts as a digital database that stores data, and for playing a crucial part in cryptocurrency systems like Bitcoin, blockchain is well-known. It keeps a secure, decentralized log of cryptocurrency transactions.
Blockchain Adoption
Blockchains work better and more efficiently when used by a large network of users. For instance, a blockchain ecosystem would require suppliers as well as users to sign up for the network.
Organizations across all sectors are investigating blockchain technology to determine whether it can enhance workflows and efficiencies. Blockchain can therefore eliminate the need for a third party and ensure the accuracy and security of data records.
There are some signs, nevertheless, that the adoption of blockchain technology may grow. Businesses are gradually organizing cooperative blockchain working groups to address related issues and offer solutions that can be helpful to everyone without disclosing confidential information.
Organizations have put blockchain technology through a lot of testing, implementation, use, and even abandonment. The adoption of blockchain technology by businesses depends on a variety of factors, and some challenges that might deter the widespread adoption of blockchain technology are discussed below.
7 Challenges to the widespread adoption of blockchain technology
- Cost of blockchain implementation
- Scalability
- Privacy and Security
- Blockchain Interoperability
- Crime-Inclined activities
- Talent Shortage
- High energy consumption
Cost of blockchain implementation
The lack of financial resources is the next obstacle to the broad use of blockchain technology. Blockchain implementation is not free.
Costs associated with implementation may be too high for some businesses. Despite the majority of current solutions being free, hiring skilled software engineers specializing in blockchain development, paying licensing fees if one wishes to switch to a for-profit software version, general administration, and other costs require a sizeable investment.
It is among the most significant implementation challenges for blockchain. The root cause of this impediment, which can be identified after closer inspection, is a deficiency in organizational knowledge and comprehension of blockchain.
Making a convincing business case for the adoption of new technologies gets easier as public awareness of them grows. This will also be true for blockchain, provided that proponents put their attention to developing a business case that shows how the advantages of the technology will outweigh the costs of deployment.
Scalability
Scalability is the key issue with its implementation. Although blockchain networks may conduct hundreds of transactions per second without experiencing any issues, the transitions take longer to process as the network’s user base grows.
As a result, transactions are more expensive than usual, which limits the use of the network by additional people. The entire transaction may take hours or even days to complete. In the end, the difficulty in adopting blockchain technology means that it is becoming less and less profitable.
Scaling methods for Bitcoin like Lightning Network and Plasma for Ethereum enable quick, inexpensive transactions. Blockchain needs to accelerate if it is to be adopted widely.
Due to the growing need for corporate blockchain and its companion apps, businesses that can successfully scale their enterprise blockchain platforms will prosper.
Privacy and Security
Blockchain has a few security loopholes, just like any other technology. Although cryptocurrencies offer pseudonymity, many possible blockchain applications require smart contracts and transactions to be unmistakably connected to real persons, which raises serious privacy and data security concerns.
Security is another essential component, Even while blockchain-based apps, systems, and businesses are more secure than traditional computer systems, hackers may still be able to access them. Blockchain technologies have a unique architecture. Certain are safer than others.
For instance, compared to centralized blockchains, decentralized blockchains are more susceptible to 51% attacks. Many blockchain systems have been hampered by 51% attacks, in which hackers seize more than half of the network’s processing capacity.
They take use of a flaw in decentralized systems that gives people access to over 51% of the processing power, giving them control over a chain. On networks that employ the proof-of-work (PoW) model, this frequently occurs.
The protocol layer needs better security to handle this.
Here, blockchain technology in private or consortium settings may be used. Your private information would still be protected, and you would only have access to what you needed. Only a small number of networks, nevertheless, have robust protocols that can handle this.
Blockchain interoperability
Interoperability between blockchain networks refers to the capacity to share, see, and access data without the aid of a middleman or centralized authority. Due to their inability to send and receive data from other blockchain-based systems, the majority of blockchains are maintained in isolation and do not interact with peer networks.
There is presently no global standard to allow various blockchain networks to connect with one another because different blockchains do not operate together. The job of achieving mass acceptance of blockchain may be nearly hard due to a lack of interoperability.
Crime-Inclined activities
While some nations have openly outlawed bitcoin, others have made vain attempts to control blockchain networks. The proliferation of fraudulent enterprises and other bad actors looking to take advantage of naive investors has been encouraged by the absence of strict regulations and the fact that blockchain technology is still in its infancy.
Both academics and criminals were drawn to blockchain technology’s anonymous aspect. Why? Since the network is decentralized, nobody can determine your genuine identity.
A number of prominent cryptocurrency exchange thefts have also occurred, including the infamous Mt. Gox bitcoin hack in 2014 that almost brought down the entire sector. It is possible for scams and market manipulation to lead to a worldwide economic catastrophe. As a result, blockchain has been the subject of a lot of unfavorable media coverage.
Stopping the criminal connection permanently will allow for improved blockchain deployment, which is the only method to deal with this.
Talent Shortage
According to current data, as startups and established companies search for top talent, the demand for blockchain talent has surged by more than 300%.
Blockchain is still a very new technology, and there is a shortage of the abilities required to create and utilize it. For quite some time, there has been intense competition in the market for the blockchain expertise.
The shortage of experienced engineers in the blockchain sector has gotten worse as a result of intense competition among businesses that provide extremely competitive salary packages to recruit and retain their staff.
Therefore, you will need to pay high salaries if you want to hire qualified individuals. The cost of hiring the proper individuals only serves to increase the worries that businesses have about implementing blockchain and integrating it with older systems.
Utilizing blockchain as a service (BaaS), which enables enterprises to benefit from the blockchain without having to invest heavily in the technical talent behind it, is one option to address the skills gap.
Users won’t require a technical understanding of the workings of distributed ledgers, but they will need to understand how to execute smart contracts (which use blockchain to automatically execute particular activities whenever the terms of the contract are met).
High energy consumption
The fact that Proof of Work, the most popular consensus algorithm, consumes a lot of energy is another cause for concern. Another issue with blockchain adoption is energy usage.
The majority of blockchain technologies use the energy-intensive Proof of Work consensus process and are built on the same infrastructure as Bitcoin.
Proof of Work, however, is not as good as it seems. The system will require processing power to remain operational. Most likely, you have heard about mining.
This makes it difficult for average users to access PoW networks, promotes the creation of massive mining pools, prevents decentralization by pressuring users to join these pools, and creates environmental issues.
You must use your computer to answer difficult equations when mining. As a result, once you start mining, your PC will require an increasing amount of electricity to function.
For this reason alone, many businesses are attempting to completely ignore blockchain technology. Because of this, the situation needs to be under control, and blockchain can make use of additional consensus techniques like proof-of-stake. Algorithms of consensus that process with very little energy are used to validate the transitions.
