By Joaquin Moreno, Blockchain Practice Lead – Globant
Although blockchain technology is in its infant stage, there are several challenges that will need to be addressed. This article features six challenges the industry is facing in order to push blockchain technology towards a more mainstream adoption.
1) Regulation: Regulation impacts the direction that industry moves. Therefore, it is critical to understand how regulatory institutions are going to react to blockchain technology. We are starting to see the first movements on this topic. Some countries and states have taken the first step in creating a favorable regulatory environment for these technologies, however there is still a lot of work that remains. Bitcoin is viewed as “a bad word” for regulators, but if you look closer, the traceability of bitcoin is a feature that security agencies have been dreaming about for the last few decades. Therefore, how bad can it be at the end of the day? How will these technologies (transactions and smart contracts) be regulated? Where is the line going to be drawn? These questions are still unanswered, and it seems that it will take some time to have an answer.
2) Scalability: Current blockchain technologies allow a discreet amount of transactions per second. Within the below image, you will find a comparison between Bitcoin, Ethereum, Paypal, and Visa.
Image 1: Transactions per seconds on public blockchain vs Paypal vs Visa
There is still a lot of work to done in this space in order to get closer to the current transactionals solution on the market.
3) Privacy: For this topic, we need to differentiate between the two kinds of blockchains: a private and a public. Privacy is important in both cases. With the public blockchain, we need to be very careful about the information we want to publish, as anyone can have access to it. There are some cryptographic techniques that have been developed which allow you to store encrypted data and be the only person to access it. The question is, should the stored data be visible to a certain type of user? Currently, there is no answer to this question. For private blockchains, the problem is the same. Let’s suppose that you and I are members of a group of banks and we want to use a private blockchain. If I send you some information, would I want the other banks to see that information?
4) Storage: The blockchains currently on the market are not able to store much information; they cannot even store a 3MB .pdf file. If you need to store more information, there should be a way to connect the blockchain with a storage system. There are some distributed systems under development like Storj.io and IPFS (Inter Planetary File System) which help store information and keep the security levels offered by a blockchain.
5) Standards: In order for a technology to be massively implemented it requires compliance or adherence to certain basic standards or framework. The question here is: do industry leaders and companies want to set the standards within the innovation space opened by this new technology? If yes, will the standard be developed as fast as the innovation goes? In my opinion, there should be a connection framework that allows blockchains to connect between each other in a certain and standard way, but at the same time that shouldn’t be a cause for limiting the creation of new type of blockchain technologies.
6) Industry Consensus: The finance industry faces the challenge of using a system where everyone can potentially leverage a huge benefit (mainly cost efficiency). Are they ready to lose control over the servers/infrastructure and at the same time do it with someone else’s system (not their owns)?
This is just the beginning of this conversation, and I’m bullish on the creation of a healthy ecosystem where several blockchains will co-exist in an organic fashion.