A look at the Most Difficult Challenges and the Best Opportunities of the Blockchain Technology

        A look at the Most Difficult Challenges and the Best Opportunities of the Blockchain Technology

Pooyan Ghamari

December, 2019

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        Table of Contents

Introduction ............................................................................................................................................ 3 What is the biggest challenge of the Blockchain? .................................................................................. 3 The lack of interoperability ..................................................................................................................... 4 The high costs of using the Blockchain technologies.............................................................................. 5 Blockchain in a challenging path.............................................................................................................6 What is the biggest opportunity of Blockchain?.....................................................................................7 Crowdsourcing ........................................................................................................................................ 8 Blockchain and supply chains ................................................................................................................. 9 Managing data and Blockchain ............................................................................................................... 9 Offering financial and banking services ................................................................................................ 10 Blockchain and the path of opportunities ............................................................................................ 10 Final Remarks........................................................................................................................................11 References ............................................................................................................................................ 12

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        Introduction

Blockchain is among those technologies that make the flourishing of many opportunities in different fields in the world possible by offering a very bright outlook. On the other hand, its novelty and the lack of expert workforce and awareness with respect to its complex structure lead to many challenges revolving around it. The lack of awareness with respect to Blockchain makes many businesses, states, markets, and industries move toward it with caution. In this article, we will take a look at the challenges and opportunities offered by the Blockchain technology to the world.

What is the biggest challenge of the Blockchain?

The fans of the Blockchain believe that this technology will soon revolutionize all the fields, including the financial world. The fact that this network is decentralized, paired with the transparency of functions and the security of data, will turn it into the number-one savior of businesses and different industries. The fans of Blockchain say that this technology will not just be beneficial for the world of financial businesses. However, in fact, it can be used in any field that deals with data and information, including the healthcare and real estate. However, all these can only be used as something to rely on when standards, criteria, and frameworks come to fore, and the path of the Blockchain technology in different fields is cleared globally. In fact, it seems that the lack of a legal framework for the Blockchain is currently one of the biggest challenges it faces, and it needs to be overcome in order for this technology to flourish and grow.

In order to flourish, the Blockchain needs legal frameworks that would support and encourage its growth. Many of the hesitations with respect to entering the field of Blockchain and using the technologies derived from it will be resolved with general and global laws, and more actors will come to fore. For example, can the internet be imagined without protocols and general, global laws? What

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        existed at the beginning of implementing the internet and the lack of coherent laws and protocols are all now also present in the world of Blockchain and its related technologies. It is as if we entered the 90s again. Therefore, there is a need for laws, coherent protocols, and frameworks in order for Blockchain to be used on a national and international scale, and this lack is currently the biggest challenge this newfound technology experiences; in addition, other challenges derive from it that could be problematic for the growth of Blockchain. (Burlakov, 2019)

Many of the other challenges facing the Blockchain technology are the result of the lack of legal frameworks that have been accepted by the states and the world. In the following parts, we will review challenges that are all the result of the lack of international standard laws and structure with respect to the Blockchain.

The lack of interoperability

Even though there are a high number of actors in the world of Blockchain that is itself growing constantly, there are concerns. These concerns are about the fact that there have been many networks based upon the Blockchain technology. However, these networks are not able to interact with each other due to the lack of legislation and standard international and national criteria. For example, reports indicate that in a website like GitHub, there are more than 6500 active Blockchain projects. These projects use platforms with different programming languages, and their protocols are different, and their security is provided in different ways. Now, if there are standardization and laws in the field of Blockchain, different projects and networks will be able to have interoperability, and the growth of Blockchain will be facilitated. Currently, a group of companies are attempting to create connections, transactions, and standardizing the Blockchain and the active networks based on its

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        infrastructure. For example, a computer protocol has been defined that allows for payments between distributed ledger networks. (Browne, 2019)

The high costs of using the Blockchain technologies

One of the criticisms posed at the Blockchain is the high energy consumption in its computation processes. The amount of electricity consumption in matters such as cryptocurrency mining is really high. A process in which powerful computers paired with manifold servers are used. It is obvious that such processes require high amounts of energy. For example, in South Korea, a country that is suitable and famous for mining cryptocurrencies, in order to mine only one Bitcoin, 26000 dollars must be spent. Some companies such as Microsoft, Amazon, and IBM are attempting to reduce the costs related to such Blockchain operations by inventing methods and solutions like the cloud technology. The lack of specific rules and regulations for miners and the lack of support by states for people who work in the field of Blockchain, all incur high costs. Also, if such activities do not exist in the world of Blockchain, high costs with respect to energy will be incurred on countries and states. So price, cost, and energy consumption are among other challenges in the world of Blockchain that could turn into a serious problem in case that there is no legal framework. (Browne, 2019)

In 2017, the energy consumption to mine Bitcoin all over the world was the same as the energy consumption of Denmark. It is obvious that this matter requires serious legal approaches so that a structure is created, and thus the problems of using Blockchain are resolved.

If Blockchain is to reach a proper growth, we should think about its energy consumption on national and international levels. With solutions to decrease and regulate Blockchain energy consumption, using distributed ledger technology will enter a new level. (Burlakov, 2019)

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        It seems that the current Blockchain, due to the lack of protocols, rules, and specific ways, is like an improper patch that does not know how to attach itself to different parts of the industry, market, and businesses, or perhaps it should be said that the actors in these fields do not know how to find a place for Blockchain in their operations. The Blockchain that will be constantly used in the future will be a new and beneficial technology like the internet and will look nothing like how it looks these days. Getting over its challenges requires legal support. In any case, the Blockchain technology will play an important role in the future sooner or later. Now, it would be a good place to quote Linda Pawczuk, a senior counselor of Blockchain and cryptocurrencies at the Deloitte center:

“We believe executives should no longer ask a single question about Blockchain, but rather a broad set of questions reflecting the role Blockchain can play within their organizations.”

The lack of specific legal frameworks for Blockchain prevents it from moving forward in a straight and upwards path. When you do not know towards where you are exactly growing, any point can be turned into a dead-end that would look like the final destination.

Blockchain in a challenging path

The Blockchain indeed has many capacities for growth in the world. However, if like anything in the world that has a negative and positive side, we do not look at its dark side, and the challenges on its way are not addressed, the possibility of its growth will also decrease. The lack of legal frameworks for Blockchain makes everyone in this field be faced with restraints. For example, startups that are supposed to deal with all the problems in implementing new technologies such as Blockchain, do not know where they should be headed and what signs are telling them to stop. These restraints are available on national and international scales, and this makes the growth process of Blockchain to

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        slow down. For example, in Japan, creating a new cryptocurrency is fully accepted, while this move in another country like India will be faced with prison time.

Mike Cernovic, a social media figure, author and conspiracy theoretician say: “The Blockchain is a distributed network that solves all the problems that we have of finance, but more broadly, it is like a philosophy. It is a way of life.”

What is the biggest opportunity of Blockchain?

There are numerous opportunities in the field of Blockchain. Among the biggest opportunities that this technology offers the world is that it can be used in different fields. In fact, Blockchain, much like the internet, is an ideal infrastructure for connecting different technologies with each other and using them in different fields. The features of this network, like data transparency and security, make it a good choice for any place in which there is a trace of data, information, and the connection between them.

It seems that the biggest chance and opportunity that Blockchain offers and, based on which it can offer different and unique opportunities, is the possibility of its presence in different fields. Blockchain has four main aspects and services, from which many other branches can be derived:

? Smart contracts;

? Digital currencies;

? Recording and keeping data;

? Offering financial services.

These main four aspects are very interesting and can offer numerous services and opportunities in different fields to the world. For example, in the field of digital currencies, many services in transactions, financial transfers, financial management systems, loaning, and thousands of other functions are all possible with the help of Blockchain. With the help of facilities and opportunities that smart contracts offer, a variety of financial, social, political, and economical

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        relationships take place among companies and people. Private markets, the possibility to manage bonds and securities, loaning systems, outsourcing, and many other things will be facilitated with the help of Blockchain. Managing and storing data are present in almost any industry and market. With the help of the Blockchain technology, we can offer the world the possibility of securely managing data in the field of medicine and healthcare, voting systems, protecting copyrights, and numerous other fields. In fact, the biggest capacity and chance that Blockchain has is offering its various services and different functions, and this feature is a great chance for this technology to grow and develop even more. It is also a quality that makes it possible for this technology to provide many capacities for the world.

The variety of services and the possibility of creating different branches in other fields make it possible to use Blockchain in numerous domains. In the following, some of these domains will be addressed. The services and opportunities that Blockchain offers are in different forms. However, the following items are the most general benefits and advantages that are present in the main four opportunities of Blockchain, i.e., smart contracts, digital currencies, keeping and recording data, and offering financial services.

Crowdsourcing

Crowdsourcing is one of the practical manifestations of implementing smart contracts. Smart contracts are completely automatic contracts and can create a connection between industries and people without the need for middlemen and outside intermediaries. Smart contracts lead to the connection of people and companies without the need for middlemen, and for this reason, they have a great capacity for offering new business models. With the help of smart contracts, we can run campaigns to manage crowdsourcing affairs. Implementing smart contracts in this way can help the transfer of money, shares, and data.

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        Blockchain and supply chains

Managing the supply chain is among the things that requires a lot of transparency in data circulation and trades. By defining certain recognition codes for different items in the supply chain and registering them in the Blockchain network, it will be possible for all the stakeholders of a buying and selling project to trace the route of products and better manage the supply chain. All the data about the moving process of products in a supply chain are registered in a secure database, and therefore very beneficial results will come from them. It is not only the buyer, seller, distributor, and executive actors of a product to come to fruition who will benefit from the supply chain in this way, but also customers and consumers will be informed of this route in the future and in addition to their satisfaction due to this awareness, companies, and producers will benefit from more loyal customers and consumers to their brands.

Managing data and Blockchain

Blockchain can be used as a secure infrastructure to store data in different fields, such as medicine and healthcare. Blockchain is a network with a capacity to store great volumes of data and keep them safe and secure against changes and manipulation. The fact that data in the Blockchain are tamper-proof minimizes the possibility of tampering and fraud in this network’s data to zero. By launching secure and electric data registering systems, medical organizations can benefit from connections and transferring and trading data as well as storing them in Blockchain. The result of the Blockchain’s presence in the field of healthcare leads to the better management of documents and minimizing of bureaucracy.

Fraud in the management of medications and the challenges present in the field of managing medications are other great challenges in the world of medicine. However, with the presence of Blockchain, registering micro and macro data in

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        a precise and tamper-proof manner will increase the possibility of fraud and scam in the field of drugs and medications. (Maltseva, 2018)

Offering financial and banking services

In 2017, a consortium was formed by virtue of which the largest banks in the world got together in order to benefit from Blockchain in their banking affairs. Among the members of this group, we can refer to well-known banks such as Barclays, HSBC, Credit Swiss, State Street, and some other banks. This consortium is currently considering making its banking transactions take place faster and with more security. Many of the international transactions can take place faster and simpler via Blockchain, and its advantages in banking are very clear. For example, implementing cryptocurrencies in international transactions can improve the processes in this field to a great extent. (Martin, 2018)

In fact, the advantages and features of Blockchain that were mentioned not only create an opportunity for its growth and presence in different fields, but also provide many opportunities for different fields of commerce, economy, science, politics, and society. The CEO of Ripple, Brad Garlinghouse, believes:

“As I was looking around, to me, what was happening in the Blockchain and crypto world was a movement.”

Blockchain and the path of opportunities

Awareness of banks, financial institutions, and active companies in the field of financial affairs and economy with respect to Blockchain is among the opportunities that this newfound technology experiences in the current world. For example, Ripple is among the cryptocurrencies that have made their way to banks and financial institutions, and this shows that a great opportunity has been provided for the Blockchain to introduce itself in the best way to the world of finance management. The use of cryptocurrencies such as Bitcoin and Ripple in banks and transactions of financial institutions shows that the voice of Blockchain is being heard at least in the world of economy and commerce. In

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        different countries, too, cryptocurrencies have also been looked as a way to escape the volatilities of actual currencies in passing different political and social events. It seems that the gates of the world from the side of the economy, financial affairs, and commerce are being opened to the Blockchain, and after its successful presence, it can be implemented in other fields as well. (Blenkinsop, 2019)

Blythe Masters is one of the activists in the field of financial and technological management of different companies. He says:

“Blockchain technology represents a generational opportunity to mutualize database infrastructure across entities within financial services. What that translates into is an enormous cost-saving, risk-reducing, and capital-enhancing opportunity.”

Final Remarks

The world of Blockchain is very complex. This new world contains opportunities that are talked about all the time, and numerous capacities of this technology can be implemented in various fields such as economy, politics, and commerce. Still, the Blockchain and opportunities and threats that it can have with itself are among the controversial topics in the world. Companies and a lot of natural entities have realized the capacities of Blockchain. This awareness has also taken place among states and banks. However, each one, according to the perception and the situation in which they are, prefer to set their view on Blockchain in a different way. In fact, some see Blockchain as a threat, and some consider it nothing but opportunities. In any case, Blockchain, much like any other phenomena, has a dark and a light side, which means that it has challenges for the world as well as many opportunities for its growth and of course, many advantages for the world.

The unique features of Blockchain, such as the transparency of functions, tamper-proof aspect of data, and variety of functions it offers, make it possible

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        for this technology to offer many opportunities to industries, businesses, and different fields. This feature is an ideal chance for this technology to grow, and also for the world to implement it in different ways. There are challenges on the path of this new technology. The lack of international and national rules and regulations with respect to this technology and the lack of certain and global protocols for its functions lead to the formation of a halo of hesitation revolving around its implementation by legal and natural entities. We should wait and see exactly when this halo of hesitation and ambiguity with respect to Blockchain will disappear. This technology gets going in its path of maturation and evolution in its life cycle.

References

Browne, R. (2018), Five things that must happen for blockchain to see widespread adoption, according to Deloitte, CNBC, viewed 4 December 2019, <https://www.cnbc.com/2018/10/01/five-crucial-challenges-for- blockchain-to-overcome-deloitte.html>

Budaman, M., Hurley, B., Khan, A., Gangopadhyay, N. (2019), Deloitte's 2019 Global Blockchain Survey, 2019, pp. 3-17, Availablefrom: Deloitte [5 December 2019]

Burlakov, G. (2019), 7 Challenges to Blockchain Adoption in 2019, Technorely, viewed 4 December 2019, <https://technorely.com/blog/blockchain-adoption-challenges/>

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 Blenkinsop, C. (2019), Economic Turmoil: The Chances and Challenges for Blockchain and Crypto, Cointelegraph, viewed 5 December 2019, <https://cointelegraph.com/news/economic-turmoil-the-chances-and- challenges-for-blockchain-and-crypto>

        Maltseva, D. (2018), How will Blockchain create wild new opportunities in the business world, Medium, viewed 4 December 2019, <https://medium.com/coinmonks/https-medium-com-dana-m-how-does- blockchain-create-wild-new-opportunities-in-the-business-world- d6da6e2311f3>

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