Blockchain and Bitcoin offer a solution to enable trustless transactions. Websites like BitQT offers trading features such as artificial intelligence, trading robots, market analysis, live client and much more for bitcoin traders. However, they will face challenges as these technological advances continue to grow in the digital economy. For example, Bitcoin’s use of a two-tier structure of public and private blockchains means that private blockchains must provide additional security measures such as Two Factor Authentication (2FA) for withdrawals.
There is also a dispute in cryptocurrency circles about whether government regulation is necessary or whether it will limit innovation. Private blockchains are a new advancement that streamlines the processing of private transactions.
Although the blockchain is an immutable ledger, it is not easy to store millions of records on one chain at the same time. Private blockchain allows organizations or companies to control their chains and only allow certain people or organizations to see the information on it.
The problem with security lies in the fact that anyone who has access to the private key can potentially steal all the information in that chain. The section listed below will explore the challenges facing bitcoin and blockchain technology right now with an ambitious focus on what can be done to work through them.
Legal challenges facing bitcoin and blockchain:
- Bitcoin is classified as a commodity rather than a currency by US regulatory agencies such as the Financial Crimes Enforcement Network (FinCEN) and is therefore subject to capital gains tax.
- Governments are also at odds over the oversight and safeguards that need to be implemented for cryptocurrencies, such as bitcoin. For example, the UK government has already announced its plan to apply VAT to bitcoin purchases, which are tax-free since they operate outside the banking system. If people cannot reach a consensus among governments, this can lead to slow adoption by businesses.
- Given the nature of the blockchain, there is a risk that private information will be made public if one were to gain access to the chain. That’s why businesses are turning to private blockchains. However, there are still ways that a person can gain access to someone else’s personal information or private key, especially if they have gained physical access to their computer.
Adoption challenges facing bitcoin and blockchain:
- The irreversibility of blockchain transactions means that bitcoin and blockchain transactions can be difficult to reverse if a mistake is made or users send payment to the wrong person.
Financial challenges:
- Cryptocurrency market volatility has risen, fallen and risen again in recent years. This volatility makes it difficult for bitcoin and blockchain startups to secure funding since they cannot provide financial reports citing stability. It is particularly problematic when trying to secure venture capital funding.
- Other potential funding sources include ICOs (Initial Coin Offerings), which allow investors to purchase a token that represents equity in the company. Some companies have been successful with this option, but others have experienced losses due to scammers posing as honest ICOs.
Companies that have overcome the challenges:
It should not be surprising that some companies have overcome their challenges while using Bitcoin and Blockchain technology. Some examples of these are Overstock.com, Dish Networks and Expedia. Overstock uses blockchain technology to allow its customers to trace the origin of their products as well as manage customer loyalty programs. They have reported saving millions of dollars annually in cost savings by switching to blockchain payments.
Dish Networks has implemented a solution with IBM called Adept to improve customer service and reduce time spent resolving disputes. The blockchain solution allows customers to track their packages throughout their journey and makes it easy for Dish Network employees to resolve issues with customers throughout the day.
Expedia has also gained attention for implementing blockchain in their backend for payments to hoteliers worldwide. It allows hotels to receive payment in Bitcoin, which increases sales and ultimately improves hotel costs. The implementation of the blockchain has since expanded globally. It has allowed Expedia to deal directly with hoteliers rather than using a third-party booking system that charges fees on top of their room rates.
How can companies work through these challenges?
Businesses can take many forms of 2FA and additional security measures to ensure they are safe while using Bitcoin and private blockchains in e-commerce solutions. Each business handles its blockchain differently. The first step is to find a suitable platform for your business. Some of the most popular blockchains in the world include Ripple, Ethereum and Hyper Ledger Fabric.
The second step is to find out what level of security they need. Each platform has different features regarding blockchain security, such as storage, interactions with other accounts, etc. Choosing which system parts to use is critical to a company’s e-commerce success. Unfortunately, there will be no way for companies to know if there are any vulnerabilities in their private or public blockchains until after they are implemented and tested.
While Bitcoin and private blockchains hold enormous promise to modernize business, there are many challenges that businesses must face. One of the most important questions is whether government regulation can curb the fierce innovation that drives digital growth across industries. As a result, innovators must find a way to navigate these challenges and continue to grow at the same time.
New research shows the potential for improved security for financial transactions using blockchain-related technologies. University researchers found that Bitcoin’s underlying technology for managing transactions could be more reliable than today’s financial systems due to its decentralized nature.
