By Admin March 3, 2023 4 minute read
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Posts » 7 Major Challenges For Blockchain Adoption In
2023
Table of Contents
· Major blockchain adoption challenges
o
#1 Difficult to understand and adopt
o
#2 Lack of appropriate skill set
o
#3 Lack of trust and privacy
o
#4 Higher implementation cost
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#6 Lack of proper regulation
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#7 Higher energy consumption
In the tech world, blockchain is still the most
popular buzzword. Some believe it will change the financial industry and other
industries, like real estate, medical, and law. The key reason behind the hype
is the potential to work in a distributed environment with a tamper-proof
facility.
Nonetheless, there’s always a hype phase for new
technologies. It takes a long time to overcome every challenge and use them to
drive the modern world. Nothing is different about the blockchain, either. Even
though there are many options, it will still take a while to get past all the
challenges.
Therefore, in this blog, we did a little digging
to find the challenges faced by blockchain and the industries preparing
themselves to adopt this new technology.
Before we move forward, let’s understand
blockchain.
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Introduction to
blockchain
Before going into what blockchain means, it is
crucial to understand what a database is and how it works. According to Oracle,
a database can be defined as an organized collection of structured information
or data, typically stored electronically in a computer system.
To understand blockchain, all you need to know
is that databases are usually an electronic and organized way of storing data,
usually in a tabular format.
Blockchain is a very specific type of database
that has a unique way of storing information. The data in a blockchain is
structured differently when compared to a typical database. The information is
gathered in groups called blocks. Each block has a predefined storage limit,
and once filled, it will be chained with the previously filled block. When new
data is presented, a fresh block is created, within which the additional data
is compiled, which is added to the chain. This creates a virtual chain of
blocks and, thus, is called a “Blockchain.”
To learn more about blockchain, click here.
Let’s move on to check the challenges that
hinder blockchain adoption.
Major
blockchain adoption challenges
#1 Difficult to
understand and adopt
A layperson may find it challenging to
understand the advantages of blockchain technology due to its complexity.
Before using this revolutionary technology, one must read through and
understand the distributed ledger and encryption principles. The fact that
financial institutions can offer secure payment gateways and other services at
reasonable prices compared to the costs associated with blockchain makes its
adoption difficult.
#2 Lack of appropriate
skill set
In addition to hardware and software, you need
to recruit qualified staff to administer blockchain technology. As you are
aware, blockchain technology is still evolving. Few people now have the
necessary skills to handle such technology.
On the other hand, there is a huge need for this
kind of skilled personnel. So, you will need to pay higher salaries if you want
to hire qualified individuals. Therefore, hiring the right personnel will cost
you some extra money.
#3 Lack of trust and
privacy
In general, privacy and blockchain don’t go
well. The public ledger powers the system; therefore, complete privacy is a
matter of concern.
But can any business survive without privacy?
Well, no. Many businesses that deal with privacy must have defined boundaries.
Customers entrust them with personal data. Therefore, if they are stored in a
public ledger, they wouldn’t genuinely be private anymore, would they?
So, to restrict access to the data, it is
required to change the registers that are on the public ledger. A solution to
this would be to make it exclusively available to customers.
#4 Higher implementation
cost
Blockchain is typically implemented to cut costs
associated with third parties and intermediaries involved in the value transfer
process. Although blockchain technology has many advantages, it is still in its
infancy and is, therefore, difficult to integrate into existing systems.
Moreover, it makes it more expensive all over, limiting both the government and
private companies from adopting it.
#5 Interoperability
One of the main problems that needs to be solved
is interoperability,
which is one of the main barriers preventing organizations and industries from
implementing this technology. Due to their inability to send and receive
information from other blockchain-based systems, the majority of blockchains
operate independently and do not interact with peer networks.
Many projects have been launched to solve this
issue. For example, Ark uses the SmartBridges architecture that bridges the
communication gap between the networks. This project claims that it offers
worldwide transmission and transfer, along with global interoperability.
#6 Lack of proper
regulation
One of the biggest challenges to deploying
blockchain in an organization is the lack of regulation. Blockchain technology
is being adopted as a transactional tool by numerous organizations. You will
observe that many products will depend on this. But there aren’t any specific
rules about it right now. As a result, nobody strictly adheres to any
regulations when it comes to the blockchain.
Herein is the issue, though. Although one of the
advantages of blockchain is that it provides visibility, security is still
inadequate. You won’t be able to say whether it will be risk-free for you.
Governments and several industries may need to establish laws for blockchain to
overcome these challenges.
#7 Higher energy
consumption
The technology uses a Proof-of-Work mechanism to
verify transactions and establish trust before allowing them to be added to the
network. This system needs a lot of computer power to process, validate,
and—most importantly—secure the entire network by solving challenging
mathematical puzzles.
The co-founder of Ethereum has proposed a way to
resolve this problem by switching from Proof-of-Work to Proof-of-Stake. By
using this approach, participants can save a lot of energy by not having to
solve challenging puzzles.
Bottom line
Despite all these challenges, various industries
have slowly started adopting blockchain technology, like education, retail,
logistics, media and entertainment industry, etc. We have a whole series on how
blockchain technology can transform these industries. Click here to learn
more about it.