For having a large scope and huge possibilities the term Blockchain could mean different thing to different people. For technologists, Blockchain is the driving force behind the next generation of internet. For businesses and finance, it is a distributed ledger for keeping records of all of the transactions. For developers, it is a set of protocols and encryption technologies for securely storing a data on a distributed network. For artists, it is a whole new way of distributing the art in the market. For the people of supply chain, it is all about keeping track of their product making the process transparent while reducing unnecessary cost and contacts. For consumers, it is an effective means of tracing the origin and genuinity of the relative product and for other it is a tool for radically reshaping the society and the economy taking us more into a decentralized world.
Surely the way one looks at Blockchain and how Blockchain works for a certain individual might vary but despite the difference in application the purpose remains the same. For the very first time people anywhere can trust each other and transact within large peer to peer network without any sort of centralized management. The implication of such technology is truly profound.
“Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain.”
Today, there are hundreds of startups that are using blockchain technology to disrupt an array of industries such as trade finance, healthcare, cloud storage and cybersecurity, among many more. Despite the large number of industries that the blockchain is impacting, there are also concerns regarding the technology that are still preventing its widespread adoption. Now let’s discuss some of the major challenges of Blockchain.
1. Current stage of Blockchain
One of the major challenges of Blockchain is that the technology itself is in its infant stage. 20 years ago when internet was in its infancy people were skeptical about the internet. It was considered to have no or lesser scope and received a lot of criticism. And today internet has changed our lives in such a way that we can’t imagine the offline life. For Blockchain, it is the same. People have the same mentality towards Blockchain for being in its infancy. But this hasn’t stopped the believers to dub it as internet 3.0.
2. Government’s intervention
In Nepal, recently NRB passed a law that forbids the transaction of Bitcoin and all other cryptocurrencies. The way NRB decided to communicate this law was somewhat vague and indefinite. This led to confusion among the people about Bitcoin and Blockchain making Blockchain synonymous with Bitcoin. The implementation of such vague law has strongly discouraged the people of Nepal to discuss openly about the possibilities and potential of Blockchain. For a developing country such as Nepal where the potential of Blockchain is even higher than that of developed countries, this act can be regarded as a major setback in the process of implementing Blockchain.
3. Lack of Blockchain talent.
As Blockchain is still in its infancy the majority of the public is still oblivious to the existence and potential uses of this technology. This is because of lack of Blockchain talents. And those who are aware of this revolutionary technology are not being able to benefit from it because of lack of Blockchain developers. The demand of Blockchain experts and developers is very high in regards to the supply. Educating people about Blockchain is very crucial in balancing the demand and supply of Blockchain experts and ultimately making the general masses aware of Blockchain.
4. Energy consuming consensus mechanisms
The majority of Blockchains use proof-of-work (PoW) in order to achieve consensus. PoW involves the use of the computational power of a machine to solve complex mathematical equations in order to verify a transaction and add it to a block.
While this mechanism works well, as is witnessed in the Bitcoin network, it does consume a lot of energy. It has been reported that the miners who work to validate transactions in the Bitcoin Blockchain consume about 0.2 percent of the global electricity total per year. This is equal to what the country of Bulgaria consumes. Moreover, going on the current trend it is being estimated that by 2020 the Bitcoin network will require more electricity than what the entire world currently uses.
With current concerns about global energy production and consumption, Blockchains will need to use other methods to achieve consensus, such as the proof-of-stake algorithm which requires much less energy. This will allow the technology to be integrated into a future, which is increasingly conscious of energy matters.
5.Transparency and Privacy
Blockchains, as in the original design, are made to be publicly visible. Take, for instance, the Bitcoin Blockchain, which is designed to be accessible to all those who have made a transaction on the network.
In the case of bitcoin and other cryptocurrencies, this is an important feature. However, for governments and corporations, this creates a number of concerns. Governments and corporations have a need to be able to protect and restrict access to their data for a myriad of reasons. This means that Blockchain technology cannot work in spaces with sensitive data until this challenge is met.
For the general mass to benefit from this revolutionary technology Blockchain, the issues mentioned above should be addressed. One can not overlook one of these factors and expect smooth implementation of Blockchain.
Sources Alexander Lielacher, Greenwich Associates, Blockgeeks, Bitcoin Magazine