Blockchain Challenges and Global Adoption

Currently, many enterprises are experimenting with blockchain, and many have implemented a decentralized solution, but according to the Deloitte report on the adoption of corporate blockchains for 2020, 55% of the 1,500 executives surveyed said that technology has become a critical priority. However, only 39% actually initiated the deployment of the blockchain.

While blockchain is gaining momentum and acceptance in many industries, there are still some issues that need to be fixed before we see a large-scale deployment. Let’s take a look at seven blockchain problems that need to be fixed:

Scalability

The first problem is the technical scalability of the blockchain, which, at least for public networks, is an obstacle that can limit their implementation. For example, the increasing Bitcoin blockchain, and the node of the full Ethereum archive. Nodes that verify transactions must load the entire chain, which can create a problem in the long run.

Of course, there are many other blockchains that use a different approach and may require less storage space. However, the growth of data volumes – 175 zettabytes per year in 2025-may become a problem.

Scalability is less of a problem for private block chains such as Hyperledger, since nodes in the network are directly interested in processing transactions. This means that the processing power required to validate the blocks is not a problem. If transactions cannot be verified in real time or in a short time, this affects the technical implementation of the blockchain, as fast solutions are often required, especially in today’s high-speed environments.

Transaction speed

The second problem is related to the speed of the blockchain transaction. In 2021, the Bitcoin blockchain is still able to process only seven transactions per second, while the Ethereum blockchain can theoretically process eight. However, during the 2018 Bachelor Day in China, Alibaba processed 325,000 transactions per second (as a result, revenue amounted to $30.8 billion in 24 hours). It will take time for the blockchain to reach these levels. Meanwhile, new distributed ledger technologies are being developed that offer thousands or even millions of transactions every second. However, the implementation of these new distributed registry technologies in corporate environments is still limited.

Decentralization

The third problem is related to the level of decentralization using the Bitcoin block chain. Although this does not apply to all distributed registry technologies, it is important to emphasize this. The strength of Bitcoin is that it was designed for decentralization, and no centralized interested party could control the network.

However, today’s mining pools nevertheless control most of the collective bitcoin hashing speed. Six mining pools together control more than 75% of the mining capacity. This centralization of transaction verification is a logical consequence of how the Bitcoin protocol was designed, as it rewards economies of scale. This should not be a problem if mining pools can be trusted and they have an incentive to do the right thing. But…

95% of existing BTCs are controlled by whales, 2.4% of wallet addresses.

Search for talent

The fourth problem from the point of view of organizational design is the need for talent to create decentralized applications. Training employees to work with blockchain takes time; however, it is not yet taught in many educational institutions. Only 50% of the world’s leading universities offer courses on blockchain. As with all new technologies, organizations and academia must work together to ensure that the right curriculum is introduced.

Ecosystem

The fifth issue is that a decentralized ecosystem is needed that surrounds the blockchain and supports distributed products and services. This includes decentralized cloud storage (currently being developed by companies such as Ethereum and InterPlanetary File System), archiving, communication, and domain name servers.

Most of these technologies are not yet fully developed, which creates significant risks for anyone who wants to engage in blockchain and develop fully decentralized and autonomous organizations. DeFi, due to security issues, may not be the solution. However, the decentralized ecosystem consists of several layers, many of which are still under development:

1. Infrastructure level: applications that seek to create an infrastructure layer on which others can develop applications. Public blockchains include Ethereum, EOS, and Nxt, while private blockchains include Ripple, Hyperledger, MultiChain, and Chain.
2. Consensus mechanisms: Necessary to check the state of the network and determine which node can verify transactions. There are many consensus algorithms available, from Proof of Work( PoW), Proof of Stake and many others.
3. Distributed Computing: Using distributed ledger technology to distribute your computing requirements. In fact, cloud computing, but then decentralized. Examples include Golem and Sonem.
4. Distributed storage: Distributed data storage is especially important if you want to be sure that data can always be accessed, regardless of the restrictions established in some countries. Examples include Storj, IFPD, and FileCoin.
5. Privacy and Identity: Services that are aimed at developing a sovereign identity and ensuring the confidentiality of Internet users ‘ data. Examples include Sovrin, uPort, Civic, and Blockstack.
6. Money transactions: Currency tokens, that is, cryptocurrencies, are used to make financial transactions, and the most famous of them, of course, is Bitcoin. Others include ZCash, Bitcoin Cash, or Monero.
7. Wallets: Of course, all these cryptocurrencies need to be stored somewhere. Wallets are bank accounts of the cryptocurrency world. You can have hot wallets (connected to the Internet) or cold wallets (disconnected from the Internet). Examples include SpaceBot, Jaxx, Exodus, or Trezor.
8. Exchanges: as in the case of company shares, tokens must be exchanged, so there are a number of centralized and decentralized exchanges. Decentralized exchanges are at risk of hacking, which is impossible on a centralized exchange. Examples of centralized exchanges include Bitfinex, Bitstamp, Coinbase, or Kraken. Examples of decentralized exchanges include Uniswap, 0x, bisq or EtherDelta.
9. Industry Applications: Each industry can use DLT to improve collaboration, ensure provenance, speed up transaction settlements, or ensure transparency.

Energy consumption

The sixth problem concerns the energy consumption of decentralized networks. Although there are many consensus mechanisms, the Proof of Work consensus mechanism is still the most expensive. PoW requires solving complex puzzles, which requires a huge amount of energy.

It is estimated that the POW consensus mechanism in the Bitcoin blockchain currently consumes 66.7 terawatt-hours per year, which is comparable to the total energy consumption in the Czech Republic, a country with a population of 10.6 million people.

Fortunately, new blockchains can use other consensus mechanisms that require significantly less energy. In recent years, the number of available consensus algorithms has increased dramatically. It seems that each blockchain develops its own consensus mechanism.

Stability, irreversibility, quantum computing and lack of standards

There are also problems related to the data in the block chain. Stability and irreversibility are two key attributes of blockchains: once data or transactions are added and accepted by the network, they can no longer be changed. However, with the help of the blockchain, only authenticity can be guaranteed, and not reliability and accuracy.

If incorrect data is offered technically correctly, it will fall into the block chain, similarly, if a document contains false information, but is offered in accordance with the rules, it will fall into the block chain.

Theoretically, the data in the blockchain will be stored there indefinitely, but the development of quantum computing means that the cryptography used today may not be secure in the near future. Therefore, the importance of data management in organizations implementing blockchain will only increase. Poor implementation of smart contracts and, as a result, poor-quality automated decision-making can subsequently lead to huge problems.

Although blockchain reduces costs and increases efficiency through a common registry and smart contracts, the lack of standards can cause the opposite effect. Standards are important for networks that deal with information systems, and they can help align the industry. However, it is difficult to obtain global industry standards for new IT, and it may take some time before organizations receive a common global blockchain standard, which is currently being worked on by the International Organization for Standardization.

Conclusion

Blockchain is a promising technology, especially when it is used together with other technologies, and offers organizations the opportunity to rethink their internal and external processes, eliminate inefficiency, increase transparency, and build a better organization as a whole. However, it faces numerous issues that can affect its implementation in organizations. However, much more research is needed to overcome the serious management and technological challenges associated with this.

Scalability and lack of speed, talent and standards can slow down both its implementation and the development of new blockchain applications, which will negatively affect the development of innovative organizational forms, such as decentralized autonomous organizations.

Nevertheless, despite these problems, dozens of new applications have appeared in almost every industry that apply distributed registry technologies, and are already benefiting from this fundamental technology.