5 Improvement Areas to Unlock Blockchain’s Potential

It is no secret that blockchain’s potential is enormous. One ABI research shows that blockchain companies will reach over $10 million in revenue in the next couple of years. The International Data Corp (IDC), meanwhile, predicts that the technology will witness a 5-year compounded annual growth rate (CAGR) of 76% between 2018 and 2023. 

Even global organizations such as the World Economic Forum (WEF) believe that blockchain could have a huge impact on various industries. According to WEF, the wide-scale adoption of blockchain will boost global GDP by 5% and lead to a 15% increase in trade volumes. These numbers give us great hope and confidence though we must also recognize the challenges offered by the present moment.

Challenges To Blockchain Adoption

One barrier making blockchain adoption difficult, for example, is the technology’s sluggish transaction systems. For enterprises that depend on high-performance legacy transaction processing systems, these slow speeds are an instant turnoff. 

Another serious stumbling block is the lack of standards and interoperability between various blockchain platforms and solutions. Integrating blockchain technologies with existing computer systems is currently a huge challenge for many merchants. Unless standards are established such that blockchain becomes readily connectable to existing enterprise systems, the technology will remain of little help to enterprise initiatives. This is particularly relevant when considering the adoption of the best crypto assets, which rely on blockchain technology and are increasingly significant in the digital economy. Establishing these standards is crucial for the broader acceptance and integration of cryptocurrencies into existing financial systems.

Finally, legal and regulatory challenges persist, especially around data privacy, the enforceability of contracts, intellectual property, and choice of jurisdiction. And, that’s before you mention blockchain’s technical complexities. 

Owing to these challenges, only about 9% of CIOs have either invested in blockchain-related projects or plan to jump into the bandwagon in the short term.

Improvement Areas to Unlock Blockchain’s Potential

Deloitte has identified five improvement areas that, if addressed, can help overcome the above challenges and many other bottlenecks stunting blockchain growth. The first three recommendations address the need to enhance technical feasibility while the last two are concerned with broadening the technology’s applicability to various industries. 

• Increase Transaction Speeds

Blockchain, as currently designed, is rather slow. Take an example of Bitcoin, one of the technology’s best-known creations. While some legacy systems can process up to tens of thousands of transactions per second, Bitcoin, currently, only processes three to seven transactions in a second. Etherium is not much better at approximately 15 transactions per second. Owing to these slow transaction speeds, many enterprises don’t see blockchain as a viable alternative for large-scale transactions. 

To solve this problem, developers must work on new consensus mechanisms that allow participants to agree on the validity of transactions even if they don’t trust each other. Doing this would reduce the number of nodes involved in a transaction, thus cutting down on overall transaction processing time. Thankfully, household names in the blockchain market, including Hyper Ledger, Stellar, and Ripple are all working on various consensus mechanisms. 

• Establish Standards and Boost Interoperability 

Where there are no standards, chaos reigns. Lack of guidelines grants developers and coders the leeway to carry out whatever they wish. IT departments find it even more challenging as the blockchain platforms they desire cannot communicate without translation or some form of help. GitHub, for instance, has more than 6,500 active blockchain projects written in different programming languages and running on diverse platforms. 

The only solution to this challenge is standardization. We must create an environment where developers and coders work along with enterprises to design and develop practical solutions. Stakeholders need to start validating proofs of concepts together and share blockchain solutions. That’s the only way to create provisions that easily integrate with existing systems. 

• Address Implementation Costs and Complexities

There’s no denying that the high costs and complicated process of blockchain implementation are proving to be barriers for enterprises. Because of the highly customized nature of blockchain technology, most people can get their heads around its technical structure and security protocols. And it makes little sense trying to implement a technology that you don’t fully understand, especially when you need to spend big money.

To address these issues, several tech vendors, including Amazon, IBM, and Microsoft now provide blockchain as a service. A few cloud providers are also releasing blockchain templates in a bid to automate the setup process. Then, we’ve also seen tech giants such as Google partner with blockchain startups to make blockchain-building tools readily accessible. These efforts will go a long way in reducing the cost of blockchain implementation while simultaneously shielding enterprises from the technical aspects of the technology. 

• Address Regulatory Challenges 

In the Deloitte survey referenced earlier, two in five CIOs cited regulatory issues as the chief barrier to blockchain implementation. Blockchain introduces concepts and methods, such as smart contracts and cryptographic signatures that existing laws don’t necessarily address. In some cases, blockchain practices may even conflict with existing laws. For example, some blockchain technologies want to allow for the sharing of patient records while existing health laws prohibit disclosure of patient records. 

These regulatory obstacles must be addressed if blockchain is to make its mark on the global economy. Fortunately, some measures are being undertaken. Today, for instance, legislatures in the US have considered and passed several bills on blockchain adoption including recognition of cryptographic signatures, the definition of smart contracts, and the possibility of using blockchain to maintain business records.

• Expand of Consortia  

Finally, the success of blockchain is only possible if we actively and consciously expand its use. Without a consolidated effort to introduce the concept to new industries and sectors, it might be impossible to achieve the desired global impact. 

Blockchain consortia are small groups of companies that collaborate to advance the shared goals of the technology. Among other things, the consortia help to define use cases, set standards and develop infrastructure. Moreover, some consortia are also actively involved in educating users, conducting research, and providing advice to members. 

There are more than 40 blockchain consortia globally, with finance leading the way in launching new consortia. But, that’s barely enough. We need to create more of these consortia to preach the blockchain gospel globally as well as help active and prospective users better understand the technology for successful adoption

NIX Can Help

Implementing blockchain is no walk in the park. Challenges such as high costs and technical complexities make the technology out of reach for many enterprises. The lack of standards and regulations, meanwhile, create multiple adoption bottlenecks. 

NIX has the technical expertise and experience to help you implement blockchain solutions in the best manner. Contact us today for a free consultation.