“Blockchain” is a term that we all hear today, it has become more of a buzzword with people; so much so that even without knowing the proper functioning of a blockchain, people still quote it as a possible alternative to almost every business process problem. Satoshi Nakamoto with his white paper on blockchain in 2008 ushered in a whole new era of technological possibilities that baffle the common man, even a decade later.
Challenges faced by businesses in adopting blockchain and how to overcome them-
In the simplest of terms, blockchain essentially contains a chain of records (or blocks, hence the name) that keeps growing as more and more data is added onto it. Each block of data has a timestamp of the previous block thereby creating a ledger of sorts that can be used to store data and transactions.
Although there are several major challenges that businesses face while adopting blockchain, there are ways these challenges can be overcome.
- One of the major challenges in implementation of blockchain is the lack of skilled developers and is one of the major skills that companies are on the lookout for. But with many online courses available to train every level of learner, this problem can be easily addressed. It all boils down to whether an individual has the curiosity needed to explore a new technology and start working on it.
- Regulation in blockchain is a grey area that many experts as well as the common man disagree to. Some are of the opinion that government intervention and regulation is necessary while others feel that the true essence of blockchain is its decentralized nature. But then, a little bit of regulation becomes important to protect those having the minimum amount of knowledge regarding blockchain. The primary point to keep in mind is that all the stakeholders must have all the benefits of using a blockchain enabled system.
- Privacy is another core issue that blockchain enabled systems will face. For example, a company that deals with sensitive customer data will never want to implement an open ledger system like blockchain. Therefore, areas will have to be discovered where blockchain principles can be used without exposing the public data to the outside world. Again, this ties in with the problem of finding competent people to work on blockchain and extract its benefits optimally.
- Scalability is an issue because blockchain is not so capable of handling thousands of transactions per second. For scaling blockchain to a big enough level to support transactions of such frequency, the whole system needs to be made robust and durable especially when sensitive data is involved. Also, as blockchain works on hash functions which is cryptographically encoded, it takes a lot of processor power to run. To overcome these challenges, more research needs to be done on blockchain and best practices needs to be followed so as to overcome this insurmountable challenge.
- Last but definitely not the least, security. Blockchain is known for its security, but something known as the 51% attack through which users (miners) controlling 51% of the blockchain can prevent the newer transactions in the chain from getting created thereby halting the process for all new users.
Regulations and policies surrounding Blockchain-
Anything that is widely used by the masses needs regulations and policies guiding it, not only to protect it from being abused but also to make the general public aware of the nuances of the system. The challenge is to regulate a decentralized system through a central institution. Two types of regulation can be followed in this scenario- horizontal regulation and vertical regulation.
Horizontal regulation focuses on the hierarchy of identifiable layers which are involved in the technical structure of applications. The layers which are identifiable in this case involves the blockchain (platform level), tools and applications running on the platform such as cryptocurrencies (application level) and the ledgers (the overall ecosystem).
Vertical regulation is the regulation of various sectors by forming vertical lines amongst the multitude of intermediary services in the targeted ecosystem by building interfaces with traditional, economic and financial systems.
While things such as Initial Coin Offerings (the blockchain equivalent of Initial Public Offering) are on the rise, there has been an increasing need for a regulatory body that deals with blockchain and its applications. Governments and financial institutions have either been lukewarm or strongly opposed to Blockchain until now, but the situation needs to change dramatically in the near future.
Blockchain’s edge over other technology
Blockchain has an inherent advantage over all technology that deals with data. Thus, blockchain can be used in industries that deal with registries. As blockchain entries are time-stamped, hence data such as the registry for land ownership can be inherently stored in a blockchain type platform. This would mean that in the event of any dispute the title can be tracked through the chain to the point of origin. If blockchain can be implemented on a large enough scale, the caveman approach of storing data would change overnight.
Another case can be a scenario where contacts are stored only if they meet a certain specification or preference. An example would be insurance claims wherein the provider can put in certain specifications wherein the claims can be disbursed provided the specifications are completely met by the claimant.