Due to blockchain’s impact on our lifestyle, many organizations, business leaders, and policymakers want to adopt this technology. However, there are sets of technical challenges to the slow adaption of blockchain. Some critical technical challenges are listed below.
Scalability
Scalability is the first technical challenge for Blockchain, which, at least for public blockchains, is an obstacle that may limit their acceptance. For example, the Bitcoin blockchain grows at 1 MB per domain every 10 minutes and currently has a capacity of 241 GB, while the full Ethereum blockchain currently uses over 3 terabytes of data. Nodes that want to increase transactions will need to download the entire Bitcoin blockchain, which can cause problems in the long run. Of course, there are many plugins that take a different approach and perhaps require less storage space. However, data acquisition (175 zettabytes per year by 2025) could be a problem.
Scalability is less problem for private blockchains, such as Hyperledger, as the nodes have a direct interest in the system in performing transactions; that is, the computational power needed to ensure that blocks are less of a problem. Failure to verify transactions in real-time or in the short term will affect Blockchain’s technical use, which requires quick decisions, especially in today’s high-speed environment.
Transaction Speed
Transaction speed is the second challenge related to Blockchain. In 2019, the Bitcoin blockchain still can process seven transactions per second, while the Ethereum blockchain could theoretically perform eight transactions. Nevertheless, on the 2018 single day in China, Alibaba processed 325,000 actions per minute (which resulted in revenue of $ 30.8 billion in 24 hours). For Blockchain to reach these levels, it requires time. In the meantime, new technologies are being developed that offer thousands or millions of transactions every second. However, the adoption of these new distributed ledger technologies in corporate environments is still limited.
Decentralization
The third challenge concerns the level of decentralization with the bitcoin blockchain. Even if it is not applicable to all the ledger technologies provided, it is essential to emphasize. The strength of Bitcoin lies in the fact that it is designed to be decentralized, as no single stakeholder can centralize the network. However, mining pools today even hold most of the collective hash rate of Bitcoin. The six mining funds together control more than 75% of the mining power. This centralization of transaction approval is a logical consequence of the development of the bitcoin protocol, as it rewards economies of scale. So, it should not be a problem, as long as you can trust the mining pools and there is an incentive to do the right thing.
Lack of Blockchain Developer
The need for blockchain professionals is increasing day by day. However, a shortage of trained and qualified people to develop and handle the complexity of peer-to-peer networks is a major challenging factor in adopting this technology. Educating employees to build a decentralized application takes time. Only 50% of the world’s universities teach blockchain courses. Like every new technology, organizations and educational institution need to cooperate and ensure a proper educational plan to be presented.
There are hundreds of blockchain start-ups there, all attempting to attract similar limited talent, but organizations face a pool of talent that is expanding more slowly than demand grows. Therefore, organizations wishing to adopt blockchain technology should have a deep pocket to pay experts a salary or rely on employees who are just beginning to learn new technology.
Energy Consumption
This technology requires Proof-of-Work to ensure transaction confirmation and their addition to the network. This mechanism requires a large amount of computing energy to solve complex mathematical puzzles, process the entire network, and, most importantly, verify it.
To address this issue, the co-founder of Ethereum came up with a decision on Proof-of-Work to decide on Prod-of-Stake. In practice, participants with this mechanism do not need to solve difficult puzzles, thus reducing their enormous energy consumption.
Lack of Standards Resilience, Irreversibility
There are also data-related challenges on a blockchain. Irreversibility and resilience are the two main characteristics of a blockchain. When data or transactions are added and accepted by a network, they can no longer be modified. However, reliability and accuracy can only be guaranteed through a blockchain. If incorrect data is presented correctly, it will end up on a blockchain; similarly, if the document contains false information but is properly presented, it will end up on a blockchain.
In theory, the Blockchain data will exist indefinitely, but quantum computing’s development means that the encryption technology used today may not be safe (in the near future). Therefore, data management will only increase the importance of content within organizations that adopt Blockchain. Poorly implementing smart contracts and, therefore, poor decision-making can lead to many problems.
While the Blockchain reduces costs and increases efficiency due to shared ledger and smart contracts, a lack of standards can have a counterpart. Standards are necessary for networks that interact with data systems and can help streamline the industry. However, achieving global industry standards for new IT is difficult, and it may take some time before organizations have the global blockchain standards in place, which the International Organization for Standardization now uses.
Conclusion
Blockchain, primarily when used in conjunction with other technologies, gives organizations an opportunity to rethink their internal and external processes, eliminate inefficiencies, improve transparency and origin, and build a better organization in general. Moreover, it faces several challenges that could affect its adoption in organizations. Thus, significant research is needed to overcome the governance and technology challenges involved.
