Blockchain adoption 2021: Challenges and solutions
Modern technology allows people to communicate directly, voice and video calls, emails, pictures and instant messages travel directly from A to B no matter how far apart they are – and we trust in the security of this technology.
Equally, more and more of us are using this technology to send money, as well as to buy and sell goods. But when it comes to money, people have to trust a third party to be able to complete a transaction. However, blockchain technology is challenging this by using maths and cryptology by using an open decentralised database of every transaction involving value. Whether this is money, goods, property, work, or even votes, this technology creates a record whose authenticity can be verified by entire communities and anyone with an internet connection can use it.
What is blockchain?
A blockchain is ledger-based peer-to-peer network where each peer has a ledger copy. By recording and tracking assets in a business network it allows for virtually anything to be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.
The ‘blocks’ in the term ‘blockchain’ are the information and the ‘chain’ is the database itself. This database is stored across lots of computers and links bitcoin and other types of cryptocurrency.
The information that’s stored on each block is information about financial transactions, who is making the transactions, and a unique code, which is designed to distinguish it from other blocks. As this is such sensitive information, it can’t be changed without the consensus of a majority of users. This means that the risk of fraud is minimal. However, while this is a secure database, anyone can see the contents of the blockchain.
Why is blockchain important for businesses?
Blockchain’s ledger makes it well suited to tasks such as real-time tracking of goods as they move and change hands throughout the supply chain. Using a blockchain opens up several options for companies transporting these goods.
The decentralisation of this data decreases many risks that the centralised systems are prone too. Equally, blockchain technology is cheaper for businesses, as it removed the third party between the server and the data and allows easier and faster access – whilst reducing human error – meaning less financial loss.
This exciting technology also allows for easier tracing. For companies that distribute products, it allows users to trace all transactions within the supply chain. And there are many businesses, especially within the financial sector who are seeking legal help around blockchain implementation.
However, blockchain technology isn’t without its challenges.
Main challenges with blockchain technology
Blockchain is a relatively new technology when compared with other technologies and is suffering from big challenges, including scalability and widespread adoption. Because all transactions in the blockchain have to be processed by everyone and everyone must have a copy of the global ledger it can lead to vulnerability and breaches, especially at the endpoints of transactions.
For example, a theft of nearly 73 million USD worth of customers’ bitcoins from one of the world’s largest cryptocurrency exchanges, Hong Kong based Bitifinex, demonstrated that the currency is still a big risk.
Today’s blockchains are the largest ever built, and as the technology continues to gain in popularity, blockchains are only going to get bigger. This has caused some experts to be wary, simply because these large-scale blockchains are untested.
And it’s not just security issues that could be holding businesses back. Some governments feel that allowing cryptocurrency would ultimately result in a loss of economic power and a shift towards decentralised economies globally. With a handful of countries, including China, Russia, and Columbia banning Bitcoin and other cyrptocurrencies altogether.
