8 benefits and 6 challenges of blockchain

8 benefits of blockchain technology

1. No need for intermediaries .Two people or companies are able to make an exchange without the oversight or intermediation of a third player to verify and secure the transaction, which massively reduces (or even eliminates) counterparty risk.
2. Transparency. Changes to public blockchains are publicly viewable by all parties creating a new standard of transparency.
3. Users are in control of all their information and transactions.
4. Durability, reliability, and longevity. Because blockchain is decentralised, the technology does not have a single, central point of failure. This makes it much more able to withstand malicious attacks.
5. Integrity of the process. Due to the way blockchain works with a fixed process and protocol, users can trust that transactions will be executed exactly as it should. All transactions are also immutable, meaning they cannot be altered or deleted.
6. Blockchain offers high quality data. It is complete, consistent, timely, accurate, and widely available.
7. Simplification. As all transactions can be added to a single public ledger, blockchain reduces the complexity of multiple ledgers being in use.
8. Transactions that are faster and cheaper. No more clearing processes that take several days through banks (as well as stopping at weekends and between 5pm and 9am the next day). Blockchain transactions can happen in minutes, be processed 24/7 and offer a greatly reduced transaction fee as a result.

6 challenges of blockchain technology

1. The technology is still emerging. In order to make blockchain widely applicable, issues including transaction speed, verification processes and data limits need to be resolved.
2. Control, security, and privacy. Private or permissioned blockchains and strong encryption do already exist but there are still some cyber security risks that need to be addressed before mass public use of blockchain really takes off.
3. Energy consumption. In the Bitcoin blockchain, the network’s miners are attempting 450 thousand trillion solutions per second in efforts to validate transactions. Consequently, this uses substantial amounts of computer power, consuming significant amounts of energy to run the network.
4. Integration with existing business operations. Blockchain solutions will require significant changes to or complete replacement of existing systems.
5. Cost. Blockchain offers tremendous savings in transaction costs and time but the high initial capital costs could be a deterrent. The transition cost for each company to move to blockchain systems could be significant. Cultural adoption is also a part of this cost.
6. Blockchain’s regulatory status is currently uncertain. This especially applies to currencies such as Bitcoin as modern currencies have been created and regulated by governments. As long as this is the case, blockchain currencies face significant challenges to be adopted by financial institutions and consumers.

----

This is the fourth article in a mini-series looking at the potential of blockchain to drive innovation and impact in business models. The other articles are:

1 Blockchain is the engine that will drive Impact Co's

2 What is blockchain? (A ludicrously simplified example.)

3 The potential of blockchain (and 3 use cases)

5 A short introduction to bitcoin

It is drawn from a part of the Futures work we do at Frame Labs where we work with companies that seek to understand, interpret and invent the future.

Other articles will be published in the next few weeks.

----