Blockchain is a buzzword in the tech world. It is an innovative technology that is destined to revolutionize the finance sector. A lot of companies have shown their interest in blockchain in terms of speed, cost, and smooth operations. Blockchain, which acts as a secure record of the transaction, has taken the world of business by storm. The technology possesses intricacies but its popularity and prevalence are also clear for all to see. Statista states that worldwide investments in blockchain are predicted to rise from 4.5 billion U.S dollars in 2020 to 19 billion U.S dollars by 2024.
However, as we have discussed blockchain and its spread in the business world, we can also not deny the number of merchants or enterprises who still hesitate to invest a penny on the blockchain. The technology nevertheless, is giving an edge to many organizations in keeping records for transactions but there are still some drawbacks that are preventing merchants from spending on it. Let’s see what are the challenges that are limiting its adoption in the market.
Challenges in Blockchain
Blockchain technologies are employed both as a source of public transactions and a private ledger for inter-company transactions and record keeping.
1.Restricted Developer Supply
Developers need some time to understand the technology. Blockchain technology is still in its infancy stage and thus suffers a lot from a shortage of trained developers. The shortcomings of a skilled and trained workforce further address a slow rate of innovation.
Along with the software and hardware, the technology requires additional know-how and qualification. There is a tremendous demand for blockchain professionals and developers. This distance between the demand and availability of enough trained resources resulted in generating greater than average sales within the industry, resulting in its implementation even more problematic.
2. Scalability
Thousands of transactions can be processed in a second through legal transaction processing networks. However, blockchain is a slow means when it comes to performing a lot of transactions in a second. The number of transactions i.e. for bitcoin (3 to 7) and Ethereum (15 to 20) transactions per second is making it unviable for big-scale uses.
Plasma for Ethereum and lightning network for bitcoin is the best solution when it comes to providing spontaneous transactions with regular fees. For adoption on a big level, blockchain must have an increased speed to become a reliable source of inspiration.
Blockchain gains attention by introducing transparency and decentralization in many industries followed by a large network of nodes. The higher number of nodes extends the merits and standards for which blockchain is considered a revolutionary technology. However, the majority of blockchains lack the capacity and effectiveness of serving several users which means that the transactions would be longer and costlier.
To encourage the mass-scale adoption of blockchain, there are several solutions introduced to enhance the scalability of the technology. For instance, lightning networks and sharding are deployed by businesses to give a much-needed push to enhance their scalability.
3. Energy Intensive
To know your transactions and to ensure trust to add them to the network, blockchain works on the mechanism of Proof-of-Work. This sort of mechanism needs a lot of computational power to solve complicated mathematical puzzles to process, identify, and most importantly to protect the whole network.
To combat this problem, the co-founder of Ethereum has come up with a solution to this problem. He suggested switching Proof-of-Work to Proof-of-Stake. With this mechanism in practice, participants do not need to solve complex mathematical puzzles, thus minimizing a lot of energy consumption.
4. Standardization
With the huge variety of networks that we use today, blockchain applications have no standards. Standardization provides a lot of benefits. This includes developing efficient consensus mechanisms, reducing costs, and introducing interoperability. This lack of uniformity in blockchain protocols further gives rise to problems regarding onboarding new developers. It also removes consistency from security processes and mass adoption becomes an impossible task. Professionals and investors take it as a hurdle to enter the blockchain game.
To develop industry-wide standards regarding many blockchain protocols, Ethereum established Ethereum request for comments (ERC) to describe the applications’ behavior and process of executing protocols.
5. Compliance
Since the time, media houses and global businesses have shown dissatisfaction regarding cryptocurrencies, this consequently meant a lack of trust in blockchain as well. It was also a reason to hinder the adoption of technology. But with time, there has been some progress based on the regulatory front. Several countries including Switzerland, Japan, Malta, and Singapore are developing blockchain-friendly legislation to take full advantage of the technology.
Summarising It All
Blockchain technology is providing the world with a wide range of solutions. Moreover, it plays a dominant role in fraud prevention through document verification as well. The year – 2020 is considered as a blockchain era but it has its fair share of challenges. These challenges are leading to its slow adoption in organizations and industries. With time, certain measures are taken to remove these challenges to keep the adoption of technology at a steady speed.
