Over a decade later and the blockchain is stronger than ever. The blockchain is among the greatest innovations available today. However, despite its accomplishments, blockchain technology has faced various obstacles along the way. Here are some of the challenges in 2020.
Lack of blockchain scalability
The on-chain scalability of networks has put a strain on the adaptability process. Ideally, a blockchain is a time linked distributed ledger. Bitcoin and Ethereum have been left far behind in terms of transaction speed. Bitcoin allows seven transactions per second, whereas Ethereum can process 20 transactions in a second.
Notably, to solve the on-chain scalability problem, there is a need to create new consensus mechanisms that support different use cases. A few solutions have been introduced to try and address the issue of scalability. Inventions, like Lightning Network, have been created to add a second layer to the main blockchain to increase the transaction speed. Some experts predict that in 2020 there will be a layer of two solutions or new blockchains that will increase scalability.
Lack of regulation on the blockchain
In the 20th century, the system of the law, regulations, and structure that governs society did not get involved with proprietary issues leaving only the powerful in full control. This has resulted in the blockchain and cryptocurrency taking too much time to progress.
Regulators are rigid when it comes to blockchain growth. Also, regulators have always struggled to keep up with advanced technology, as in the blockchain’s case. So far, different jurisdictions have set various regulations for the blockchain industry.
Recently, the World Economic Forum’s Global Blockchain Council developed the “Presidio Principles: Foundational Values for a Decentralized Future” to help individuals and companies build trust and preserve the fundamental value of blockchain technology. The principles were co-designed at the World Economic Forum’s offices in the Presidio of San Francisco. Reportedly, the sixteen principles are aimed at protecting users and preserve the values of the technology.
Sheila Warren, the head of Blockchain and Data Policy at World Economic Forum, explained:
“During our council meeting, we realized we could help curb many of the mistakes and missteps seen so far if we were able to provide developers, governments, and executives with a ‘Bill of Rights’ style document.”
These principals have been created to help regulators develop laws and regulations to foster blockchain adoption ad growth.
Lack of awareness and understanding
Lack of understanding has been a significant hindrance to its adoption. Awareness is key to ensuring maximum adoption of any technology. To use its technology, one requires some knowledge and skill in dealing with technology. The lack of experience and education is hampering investment and exploration of ideas.
Many organizations do not understand what blockchain technology is or how to use it. Due to the technical approach, the companies concentrate more on the technology rather than the business approach to target both the technical minded and the business-minded. While there are many blockchain education institutions, more has to be done to spread knowledge and create awareness of the technology.
Fear of fraudulent activity
The blockchain’s ability to solve day-to-day problems is profound. However, a few individuals have managed to use the technology for illegal activities. By using blockchain projects and cryptocurrencies, criminals have swindled billions of dollars from unsuspecting investors forcing many to shy away from the technology.
In the first six months of 2020, scammers managed to steal over $14 billion. Fraudulent activities prevent new people from exploring the potential blockchain technology could bring in various industries. While measures like Know Your Customer (KYC), Anti-Money Laundering (AML), and educational measures have helped manage the situation, more needs to be done to promote widespread adoption.
Lack of blockchain developers
The blockchain is still under development and requires expert skills to keep the technology updated with simple changes. It requires highly skilled personnel devoted to making it a better environment for all.
Currently, there are many blockchains with each having a set of developers. Some developers have created inadequate projects that are prone to various attacks, which could lead to the loss of data or client assets. A few individuals have devoted their time and skills to testing multiple blockchain projects to ensure they meet expectations. However, with the high number of new projects, it might not be possible to test out all the projects.
Limited interoperability and cooperation
In other terms, the technology lacks standardization. Many projects are being undertaken. Most of these projects have been standalone, creating a lack of uniformity across the network. This has taken away the consistency from the primary process resulting in communication difficulties between different systems.
Also, since different organizations are developing their own blockchain and applications, there is limited cooperation. For instance, in one sector, many other chains are being developed by various organizations. This has resulted in failed harness effects on the network. Some might say it has led to the defeat of the purpose of distributed ledgers.
51% Attack
Blockchain technology is among the most secure systems available today. However, this has not stopped a few individuals from hacking different blockchain projects. There have been numerous instances when hackers have managed to take partial control of other platforms to either steal funds or crucial data. The attacks, popularly referred to as a 51% attack, have led to some losing faith in the technology.
Unintended environmental cost
The issue with implementing blockchain technology is the effect it has on the environment. To implement blockchain technology, massive consumption of energy is required. Most of the blockchain technology follows up the Bitcoin infrastructure that uses (PoW) proof of work to validate transactions. All the protocols require tricky mathematical puzzles with tremendous computing power to verify the transaction process and secure network.
The amount of energy consumed by computers to solve the mathematical puzzles is high, especially the energy needed to cool down the machines. While the blockchain is doing significant work, it is also doing more harm to the environment. There are currently a few projects that are using environmentally friendly measures to run their blockchain operations.
