CHALLENGES AND BOTTLENECKS THAT ARE PREVENTING WIDESPREAD ADOPTION OF BLOCKCHAIN TECHNOLOGY

Blockchain technology holds endless potential to dramatically disrupt a broad spectrum of industries beyond the storage and transfer of value. Cryptocurrencies may be the most obvious application of the blockchain, but the transparent and immutable nature of the distributed ledger technology presents a multitude of practical use cases.

Blockchain technology is still at its infancy stage, because we have yet to see its mass adoption and mainstreaming.

After some number of years of focus mainly on the benefits of blockchain in various areas, in terms of speed, costs, streamline operations and increased efficiency, attention is now turned to the various challenges and bottlenecks that are preventing widespread adoption. In this presentation I will go into more detail in these bottlenecks and how the industry is trying to tackle these.

Slow and Cumbersome - lack of scalability

Due to their complexity and their encrypted, distributed nature, blockchain blockchains can be slow and cumbersome. Transactions can take a while to process, certainly compared to “traditional” payment systems such as cash or debit cards.

This is one major technology challenge of blockchain is related to the technical scalability of the network which can put a strain on the adoption process, especially for public blockchains.

Legacy transaction networks are known for their ability to process thousands of transactions per second. Visa, for example, is capable of processing more than 2000 transactions per second and Master Card can process upto 5,000 transactions per second. The two largest blockchain networks, Bitcoin and Ethereum however are far behind when it comes to transaction speeds. While the Bitcoin blockchain can process three to seven transactions per second, Ethereum can handle approximately 20 transactions in a second.

Bitcoin SV has improved on the transactional speed with constant upgrades. The most recent is the Quasar protocol upgrade which lifted the block size hard cap from 128MB to 2GB. This enabled the BSV blockchain to process 1,000+ transactions per second.

Unichain (4th Generation Blockchain Platform) is a highly scalable blockchain platform that takes advantage of cutting-edge technologies which has capacity of handling millions of transactions per second while reserving the decentralization and security. Unichain is firstly designed to serve the Uniworld ecosystem. Unichain uses Dpos-Hotstuff consensus algorithm which reduces the computational complexity, a block is finalized within 1-2 seconds.

UniChain propose the combination & modification of many advantage of cutting-edge technologies which has capacity of handling millions of transactions/second while reserving the decentralization and security for every decentralized application around the world.

Limited interoperability - lack of standardization

Another main challenge is the lack of interoperability between the large number of blockchain networks. Over 6,500 projects are leveraging a variety of – mostly standalone - blockchain platforms and solutions with different protocols, coding languages, consensus mechanisms, and privacy measures.

The problem is that with so many different networks, the blockchain space is in a ‘state of disarray’ due to a lack of universal standards that would allow different networks to communicate with each other.

In any one industry sector, many different chains are therefore being developed by many different organizations to many different standards. This defeats the purpose of distributed ledgers, fails to harness network effects and can be less efficient than current approaches.

The establishment of industry-wide standards with regard to various blockchain protocols could help enterprises collaborate on application development, validate proofs of concept, and share blockchain solutions as well as making it easier to integrate with existing systems. 

Integration with legacy systems

And there is the challenge for corporates of how to integrate blockchain with their legacy system(s). In most cases, if they decide to use blockchain, organization are required to completely restructure their previous system, or design a way to successfully integrate the two technologies.

Recently, new solutions emerged which enable legacy systems to connect to a blockchain backend. One such solution is Modex Blockchain Database, a product designed to help people without a background in technology, access the benefits of blockchain technology and remove the dangers posed by the loss of sensitive data.

Lack of blockchain developers

While the demand for qualified blockchain staff is increasing dramatically, the blockchain landscape suffers an acute shortage of an adequately trained and skilled /qualified people for developing and managing the complexity of peer-to-peer networks. Blockchain technology however demands additional qualification and know-how.

According to some, the demand for blockchain-related jobs has increased by almost 2000% between 2017 and 2020. Having a sufficient pool of qualified developers is a top industry concern.

Blockchain technology is still in its infancy and is still evolving. It requires time for the developer community to adopt it, and for educational institutions to introduce relevant blockchain-related courses. Though this will alleviate the market demand, the results however will become palpable only after students will finish their training and that will take some time. 

Environmental cost

And finally but not least important the huge energy consumption is another blockchain adoption challenge. The majority of blockchains present in the market consume a high amount of energy.

Most of the blockchain technology follow bitcoins infrastructure and use Proof of Proof-of-work (PoW) as consensus mechanism for validating transactions. These protocols require users to solve complex mathematical puzzles, and require tremendous computing power to verify and process transactions and to secure the network.

The growth of the Bitcoin network, as well as the Bitcoin mining industry, has not come without a steep cost to the environment.

Alex DeVries, blockchain expert at accounting firm Price Waterhouse Coopers, claims that massive amounts of e-waste will eventually be generated by outdated mining equipment, 98 percent of which he says becomes obsolete within one and a half years after their initial use.

Based on these estimates, as well as the estimated e-waste generated by the Bitcoin mining industry, Mr. DeVries has said that the footprint of a single transaction is the same as 780,650 Visa transactions or spending 52,043 hours watching YouTube.

Just one Bitcoin transaction uses the same amount of electricity as a British household for nearly two months, new figures have shown. 

The amount of energy needed to run the cryptocurrency has soared to record annual highs of 77.78 terawatt hours the same as the entire electrical consumption of Chile.

Reference

https://www.cnbc.com/2018/10/01/five-crucial-challenges-for-blockchain-to-overcome-deloitte.html

https://blog.aeternity.com/5-issues-companies-are-facing-with-blockchain-5eb0cac0dc59

https://www.financemagnates.com/cryptocurrency/news/btcs-energy-consumption-problem-may-be-much-worse-than-we-thought/