Why Blockchain May Not Be Ready for Mass Adoption

Blockchain is a fundamental technology that can disrupt business as we know it on the same scale as the Internet. Anyone who knows anything about Blockchain will tell you about all the possible problems it can help us address.

But why isn’t greater adoption? Why don't we see quicker adoption with all of the euphoria around Blockchain, the potential benefits, and everyone’s interest in the technology? The truth is a lack of awareness and education hinders blockchain adoption.

The number of companies investing in blockchain technology is rising. Everyone says the distributed ledger has great potential to change key business processes. But, like any other cutting-edge technology, blockchain carries certain business risks. And Forrester warns that blockchain is not even a clear definition yet.

To realize the full potential of the blockchain, some issues need to be addressed:

1. Lack of clear definitions

First of all, it is important to develop common agreements regarding the working definition of blockchain. Blockchain is a record store that implements a one-time entry and addition of data. It is forbidden to overwrite them. Blockchain, or a chain of blocks of transactions, has a distributed structure and is fully or partially replicated.

This approach is cryptographically secure but not equivalent to encryption. By default, the content of the blockchain — a transaction or a record itself — is not encrypted. Cryptographic security is provided by hashing a transaction and linking it to a hash. Modification attempts are immediately detected because the hash no longer matches the transaction.

And if the word “registry” is replaced by “database,” there will be even less reason for a dispute. Why is it so important? When discussing blockchain, be sure you and your interlocutor are discussing the same subject, since blockchain, like clouds or Big Data, carries the semantic weight you put into it.

2. Safety and risk

One of the key features of the blockchain, which financial service providers and insurance companies value, is the ability to guarantee the safe execution of transactions and reduce risks due to the fact that any changes are immediately visible.

But there are also side effects. The blockchain exposes everything, as its content is usually plain text. But even with the adoption of special measures, some technologies allow anyone who wants to access the content.

Meanwhile, even the simplest rules of personal security are often not respected, and there is a lot of personal data in the blockchain. And scammers can use them to their advantage. The requirements for confidentiality and data protection are violated.

If information about all trading operations is contained in the chain, competitors can use it. Companies have already recognized this and are cautiously turning to blockchain to maintain commercial confidentiality and avoid antitrust harassment. Possible risks, security, and access policies must be given the utmost attention.

3. Key management

How about the recent cases of cybercriminals infiltrating the global SWIFT payment system and how the blockchain could not prevent this?

You talk about one-time immutable records, but people make mistakes. Fraudulent transactions will still appear in the chain because where there is money, there are always hackers. Thanks to the chain, it becomes easier to detect them, but the chain cannot completely eliminate fraud.

Some argue that using the blockchain is impossible to penetrate the SWIFT system. Actually, it is not. After all, we face the theft of accounts, but you can also steal the keys for the chain with the same success. Yes, the blockchain helps detect these kinds of transactions, but it cannot prevent them.

4. Authority and access rights

Here, too, a number of questions arise that IT professionals have yet to answer in the event of a transition to the blockchain. For instance, how many key sets do I need to have for rights management and encryption? How is authorization revoked? How does the chain work? What algorithms and conventions are used? How many nodes?

When you ask suppliers these important questions, you will find that many cannot answer them.

5. Enterprise deployment

Today, the technology to enable payments, money transfers, post-sales support, and journal compliance seems mature to enterprises. But this does not mean at all that they can be easily integrated into the corporate environment. On the contrary, technology, in general, today, is only in its infancy.

Their full-scale distribution can be expected only in five to ten years because today, we have only a set of very immature technologies at our disposal. In companies, bright and talented people are engaged in improving them, but the issues of scaling, security, and interoperability have not yet been resolved.

6. Storage

Anyone who aims to implement blockchain technology must think about organizing data storage.

The storage can be built directly into the chain, located somewhere else, or even hosted on a parallel blockchain. All this remains the subject of research.

With intensive processing of transactions and their replication to several databases, you will inevitably encounter delays, so some part of the storage or organization of calculations will have to be moved off the chain.

7. Compliance with common standards

Agreements on common standards and processes need to be developed. Certain steps in this direction are already being taken. For instance, the R3 consortium has been formed, bringing together the world’s largest financial organizations, but issues of interaction still give rise to certain difficulties. When was the last time you managed to implement the same procedure in 40 banks? The same applies to logistics companies and startups.

Conclusion

It’s easy to get caught up in the hype of the latest technological advancements. But before diving headfirst into implementation, it’s crucial to take a step back and focus on the practical applications of the technology. Countless projects have unrealistic expectations, resulting in wasted time and money. To avoid this fate, it’s imperative to prioritize use cases over technology, exploring and testing different scenarios to ensure success.