Blockchain is making waves promising a new era of technology revolution across industry segments. Beyond cryptocurrency, blockchain brings a huge number of benefits by ensuring transparency in transactions through a decentralized architecture.
Reuters reported that blockchain revenue of chipset company Nvidia was more than $100 million in the Q3 2017.
Credit Suisse analyst John Pitzer estimated that AMD sold about $320 million in chips to blockchain companies in 2017, but it was a fraction of AMD’s full-year revenue of over $5 billion.
Revenue from blockchain for both AMD and Nvidia indicates that enterprise CIOs have begun the adoption of the new technology despite its growing challenges in both the development and deployment stages.
The blockchain market size is expected to grow from $242 million in 2016 to $7,684 million by 2022, at a Compound Annual Growth Rate (CAGR) of 79.6 percent. However, with every new system there exist several challenges; and blockchain is no different.
Challenges in blockchain adoption
Technology: Despite the large number of industries that the blockchain is impacting, there are concerns regarding the technology that is preventing its adoption. These include data security and privacy, a limited pool of technical specialists and applying regulatory requirements to a new technology.
The fact that it is expensive to initially put it in place because the software required must be developed for the specific firm is just one problem. It also requires qualified personnel to work with it. A poll of 200 senior level professionals, carried out by Synechron and TABB Group, found that almost 40 percent of firms do not currently have enough talent capable of bringing blockchain to the business.
The blockchain spending statistics prepared by research agency IDC indicates the boom in blockchain investment.
The mathematical calculations to process and secure the network of blockchain also require large amounts of energy and giant servers which could transform offices into mega campuses that require significant amounts of electricity to run.
However, the challenges related to infrastructure coupled with technical understanding will be the main obstacle. Although skilled personnel may ultimately learn how to tackle the systems, the public may lag behind in understanding the difference between bitcoin, other cryptocurrencies and the blockchain. They remain reluctant to evolve with the change in fear of yet another breakdown.
Regulatory: Blockchain, the infrastructure underlying cryptocurrencies, has attracted significant interest from both businesses and governments for its many applications. Although the regulatory approach adopted in the EU and the USA bodes well for future contribution of blockchains in the financial services and related sectors, and China also being open to the use of blockchain to promote the growth of its secondary loan market, other countries may not extensively agree.
In the UK, the country is at the early stages of considering the risks posed by blockchain and what regulatory requirements should be applied to its use. In France, the government has shown some interest in the technology but unlike the UK it has not yet launched any major initiatives. In Australia, the Australian Securities and Investments Commission stated that it will follow a ‘technology neutral’ regulatory approach to blockchain.
These disagreements lay in the facts that maximizing the impact of blockchain technology by bringing transparency may address corruption, fraud or misappropriation of funds and inefficiencies within the public procurement funding process. For example, Tokyo-based Coincheck reportedly lost around a half billion dollars’ worth of its customer’s blockchain tokens to hackers. This cyberbreach highlights one of the central risks of investing in digital assets.
Another challenge is the fact that blockchain grants the “right to be forgotten” which might conflict with other rights recognized by politicians and governments. This states that user’s information stored in databases, either on paper or in electronic format, can be deleted if they wish. Governments are trying to redefine this right to have information “deleted”, with a right to “prohibit the use” of personal information by third parties. This can be done when individuals decide to exercise their right in case information is being accessed.
Blockchain’s ability to establish trust between a consenting party and a receiving party and innovative features like smart contracts have encouraged several governments to explore blockchain’s potential to address the challenges associated with sharing of data. An IBM report even found that 90 percent of government organizations plan to incorporate blockchain-powered platforms within their countries by 2018.
Business: Adopting blockchain in businesses can radically improve the security and efficiency of banking, supply chain, and other transaction networks and create new opportunities for innovation in new market segments. However, there exist concerns like the higher CAPEX, bandwidth requirements for processing a transaction, and the huge storage requirements. These are issues that may slow the pace of blockchain adoption in businesses.
Another challenge is the lack of regulatory oversight across the sector which means there is always a chance that the exchange or online wallet where your companies maintain their transactions will be hacked or be shut down by governments.
Although blockchain has the potential to create new platforms for the economic and social systems, the impact will be enormous and it will take decades for blockchain to seep into the infrastructure. Executives who evaluate blockchain-based solutions for their business will have to continually reaffirm their legitimacy and market position. For this one needs to establish a track of records and a team with strong technical skills.
Start-ups: The unregulated environment of blockchain technology gave startups the freedom to innovate, resulting in a ton of solutions for both financial and non-financial segments. Transactions are prone to changing values, which in turn cause surges and drops in coin value. This will affect startups who cannot afford such losses.
Scalability: Another issue with the blockchain has been scalability, something that was witnessed with bitcoin, which was split into two crypto coins as stakeholders disagreed on how to scale. This increases the time it takes to validate individual transactions, which is below the requirements in the financial industry where thousands of transactions occur every second.
However, businesses are now learning to cope with the obstacles of blockchain ; CanYa.io, a cryptocurrency-based online marketplace, is determined to change the challenges by introducing a contract that is hedged against the current scenario, which protects both the buyer and the seller from losing out when conducting crypto transactions.
In the long run, companies have to overcome the challenges and give people a reason to use blockchain. They have to be willing to work hard to develop a strong team and establish viable solutions.