TOP 6 BLOCKCHAIN CHALLENGES FACING BUSINESSES AND ENTERPRISES
Although there have been great opportunities and positive impacts that blockchain has had on businesses and enterprises, there are still blockchain challenges to be surmounted. According to the World Economic Forum, the hype surrounding blockchain technology often leads to unrealistic expectations from businesses, enthusiasts, and enterprises alike. Blockchain technology has the capacity and potential to improve organizational operating models and security of enterprises.
There are many business executives and industry leaders who still struggle to figure out how to successfully find value using blockchain technology. In a survey of more than 500 people across 13 industries and 79 blockchain project projects by the World Economic Forum and Accenture, different blockchain challenges were identified. When you consider these obstacles, you will understand that the mass adoption of blockchain technology is not yet in view. Over the years, trust has been the underlying factor of any business deal or agreement between two parties.
The idea is that with the application of blockchain technology, we can alter the trust paradigm, hence transforming society as we know it. Although blockchain technology with its transparent math algorithms can help solve the trust issues, blockchain challenges are standing in the way of businesses and enterprises. Currently, the infrastructure conversion of blockchain technology by companies is never easy.
Emerging business models that are primarily based on blockchain technology might not experience the same challenges, but businesses adopting the technology will have to through the awkward phase of adaptation. For most of these businesses and enterprises, it doesn’t make economic sense to embark on such a venture.
In this article, I have listed the most significant blockchain challenges that the current blockchain platforms must overcome to become more enticing to businesses and entrepreneurs alike.
Top 6 Blockchain Challenges For Businesses
- The Low Performance And Scalability Problem
Most of the business use cases where blockchain technology can be applied to provide massive advantage need fast transaction processing systems that are capable of proving reliable services on a vast scale. The current blockchain solutions have not lived up to the bidding. There are significant setbacks like decentralization and the high cost of the use of technology. The existing blockchain platforms are orders of magnitude slower than the centralized systems. There are believes that it will become even slower with more scale.
Unless the current blockchain solutions match the centralized systems in terms of processing speed without creating a negative user experience, businesses and enterprises will continue to keep faith with the centralized solutions that fulfill their needs more efficiently. With the continuous evolution of the blockchain decentralized consensus mechanisms, likely, blockchain performance issues will undoubtedly be solved. There is certainly the possibility of more advanced engineering and off-chain scaling solutions as the technology matures.
- Absence Of Interoperability And Standardization
The lack of standardization does not permit different blockchain platforms to interact with each other. The problem with such a scenario is that businesses and enterprises would have to carry out in-depth research and analysis to know the particular blockchain network that will efficiently benefit their business model. Currently, lack of scalability and limited standardization are among the top blockchain challenges facing businesses around the world.
The lack of standardization among the blockchain solutions introduces a risk factor for businesses seeking to adopt blockchain for their operations. You can imagine the fate of a business establishment that embraces a particular blockchain solution that fails in the long run. It means that such a business has also lost in the process. Remember that the number one rule in investment is “don’t lose money.” So, you wouldn’t blame businesses for being skeptical towards blockchain at this point.
The good news is that there are blockchain solutions that are focused on providing interoperability such as Cosmos, Interledger Protocol, and Polkadot.
- The Inability To Capture Ecosystem Value
The key to successful blockchain implementation is industry collaboration. Blockchain solutions leaders seem to have forgotten that it is a team sport, especially at this current stage. From a proof-of-concept standpoint, you can go as a lone ranger, but when it bothers on real production value, there must be a consensus effort from the blockchain industry. Before proof-of-concept can be adopted at an industrial scale, the different blockchain solutions must work as an entity to create a system of shared values. The poor ecosystem value by blockchain networks forms one of the significant blockchain challenges facing enterprises and businesses.
- Network Security And Robustness Issues
Since its inventions, immutability has been of the major selling points of the blockchain network. It will interest you to know that the immutability of a blockchain network is dependent on the size of the system. Blockchain networks with fewer hash rates are prone to double-spend attacks, malicious forks, and other types of malignant activities. These mentioned activities have the potential to render a blockchain network unusable by preventing the execution of transactions and computations.
Although the technology has been around for a relatively short time, there has been a very long history of significant bugs and hacks. It is true that the attacks only affected the second and third layer infrastructure without changing the core protocols. But, all decentralized apps for business use cases are built on these second and third layers of the network. Since most of the advantages of blockchain technology come from it decentralized or partially decentralized operations or development, the approach leaves a high margin for human error.
- The Absence Of Methods To Limit Risks And Bugs
This is one of the significant blockchain challenges facing businesses and enterprises. Lack of tools to ascertain or verify the security of the blockchain code is a substantial drawback to the adoption of blockchain. At the moment, most of the blockchain projects deployed are without a way to prove the reliability of the code. To reduce the blockchain challenges faced by businesses, the blockchain industry would need to adopt a culture similar to what is obtainable in the medical and aviation sectors.
This can be achieved through the formal verification of the blockchain code and smart contracts. Alternatively, they could implement a thorough testing and simulation environments. When this is done, they will significantly reduce the associated risks that businesses face when adopting blockchain solutions.
No Regulatory Clarity
The absence of a clear regulatory framework is a significant hindrance for companies trying to adopt blockchain solutions. Without regulatory clarity, the blockchain environment becomes more risky and uncertain for businesses. The newer technologies like the smart contract are not covered by any existing regulatory framework because they present a totally new paradigm.
The immutability of data records in a public blockchain network could lead to a GDPR disaster, especially for businesses in the European Union.
There are a number of reasons why businesses should wait a little while before the full-scale adoption of blockchain solutions. The good news here is that all the blockchain challenges listed in this work are currently being addressed by the community of developers ad entrepreneurs in the blockchain industry.