Blockchain limitations to consider today
Blockchain is here to stay, but in what form? Who will distribute blockchain the most? And who will it bother the most? Let’s take a look.
Some have said that blockchain is a network that is “trustless.” However, this statement does not imply that the parties participating in the financial transaction do not trust each other. Of course, blockchain is much more acceptable than a few years ago – due to improved security and traceability.
As blockchain becomes more acceptable with security – more business investments are increasing rapidly.
According to Statista, global spending on blockchain-enabled solutions will triple by 2024, reaching $19 billion compared to $20 billion in 2021. This distributed ledger system delivers secure data encryption and excellent fraud prevention by solving two essential business needs: transaction processing and record-keeping. So with all this in mind, why are some businesses or people hesitant to use blockchain?
First, the many benefits of Blockchain
Organizations can benefit from technology in every business by reducing paperwork, reducing expenses, speeding up procedures and removing the need for third-party facilitators. In addition, businesses increase operational efficiency by achieving their full potential with blockchain.
1. Decentralization is the first step.
Participants in a distributed network do not need to know each other, and each has access to data presented as a distributed ledger. Blockchain is a trend that is here to stay.
2. Impermanence.
In the long run, time and date stamps make data tracking easier. As a result, blockchain ensures that data audits are accurate.
3. Information security.
Due to the strong encryption and fast registration, the probability of hostile intrusion attacks is at a low level. In any case, compared to systems held on dedicated servers, hacking such a network is far more complex.
4. Cost savings.
Due to the elimination of facilitators, the capacity to quickly complete transactions is useful and productive. In addition, blockchain has automated data aggregation, simplified reporting and audit procedures. As a result, organizations – especially those in banking, financial services and insurance (BFSI) can save on operating expenses.
5. Traceability.
Retailers need to be able to trace the origin of their goods and manage their inventory more efficiently. Additionally, environmental pollution will no longer be a problem due to the transparency that blockchain can offer to the supply chain.
6. Reduces security risk on operating expenses.
Security Blockchain technology helps businesses reduce security risks and operational costs by causing disruption and business change. Businesses considering blockchain adoption need to research a better methodology and analyze available resources, just as they would with other technologies.
Limitations of Blockchain Distribution
When deciding whether or not to deploy it, it is critical to understand the obstacles that come with its implementation and the technology itself.
1. Inability to scale
Congestion of the network means that the more individuals or nodes that participate, the slower the transaction will be.
Here is an illustration:
Bitcoin can currently only handle about seven transactions per second, but some centralized payment systems can handle tens of thousands. For example, Visa says they process about 1700 transactions per second, and Mastercard does about 5k per second.
In a centralized design, the controlling entity does not notify other members of transactions, which increases speed. On the other hand, on the blockchain, the majority of nodes must approve the transaction.
As a result, before using blockchain-enabled products, companies should think about the performance element. Unfortunately, the slow capacity does not seem very CRM.
2. The problem of implementation
It all comes down to the initial cash inflows. Implementation costs can be prohibitively expensive for specific firms. Although most existing solutions are free, switching to a paid software version will incur licensing costs, general maintenance and more.
If organizations cannot allocate significant money, it may be preferable to delay the implementation of blockchain.
3. Lack of talent pipeline
According to estimates, the need for highly skilled blockchain developers is skyrocketing by 300-500% every year. It is a worldwide problem that affects countries globally, from the United States to Singapore.
Because this technology is still emerging, the development community will take some time to put together appropriate instructional programs and mitigate market demand.
The Blockchain Environment
In the decentralized environment, private keys owned by individuals can become a weak point. When generated during the creation of a wallet, they provide access to all stored data. Therefore, stolen data is a risk.
If lost, wallet access is gone forever.
4. Compatibility issues with older systems
If the blockchain solution is to be integrated with outdated systems that are already in use, there is a possible data loss or corruption risk.
5. Consumption of a lot of energy
With the resources needed to cool the equipment, prices only go up. The heat works well in winter (if you have snow) and heats the garage (and part of the house). But – if proof of work is your only option – you’ll have to pay for it with energy costs for cooling.
Blockchain: To be or not to be?
Due to its limitations – issues of scalability, implementation, private keys, integration with legacy systems, high energy consumption and lack of developer talent – blockchain can cause temporary business disruptions.
When considering whether to commit to blockchain or not – always consider all options.
Image credit: Karolina Grabowski; Pexels; Thank you!
