Overcoming Challenges and Pitfalls in Blockchain Adoption

Blockchain?is one of the hottest topics these days and many businesses are starting to realize the benefits that this innovative technology can bring to business operations. Thus, there has been exponential growth in blockchain adoption in the past few years.

Blockchain has demonstrated incredible possibilities in streamlining traditional validation procedures that require transparency and scalability. As a business owner, you can make your business more cost-effective and efficient by implementing blockchain.

The technology is unique because it does not function on one computer, just like a regular database. Instead, several distributed processing nodes work together to run on it.

Can you imagine a world with blockchain wherein contracts are entrenched in digital code and kept in shared, transparent databases, secured from tampering, deletion, and revision? Yes, this is one of the major functions of blockchain technology.

Blockchain has a wide range of applications in healthcare, media, e-commerce, supply chain, transport, logistics, voting, retail, and education. The technology mainly solves the problem of trust in a multi-disciplinary network and ensures the data is secure and every transaction is connected with a suitable entity. Also, blockchain builds a decentralized network which implies that there is no central entity handling all information.

While blockchain holds great promise, its adoption can be slowed by numerous challenges. In this article, we will explore some of the challenges of blockchain adoption and the ways through which they can be overcome.

How does Blockchain Technology Work?

Blockchain is one of the most innovative and disruptive technologies of all time. It has the potential to completely revolutionize the manner in which we interact with the digital world. But how does it work? This question has been on the minds of many ever since bitcoin and other cryptocurrencies took birth.

Blockchain implementation is fairly new, and it can be difficult to wrap your head around how it works. Let us take a look at how this technology works and how it is being implemented today.

You can interpret blockchain as a vast digital logbook. Simply put, blockchain technology is a decentralized, usually public,?digital ledger. This digital ledger comprises a record of all transactions on the blockchain.

The?Harvard Business Review?stated that blockchain technology is at the heart of?Bitcoin?and various other virtual currencies. The technology provides a secure way for users to deal with each other without involving any intermediary such as a bank, government, or third party.

The simple analogy to comprehend blockchain is a Google doc. When a document is built and shared with various groups of people, it is distributed and not transferred or copied. This builds a decentralized distribution chain providing access to the document to every individual simultaneously. Every document change is recorded in real-time, making it completely transparent.

However, blockchain is more complex than a Google doc. It involves three key components:

• Blocks:?Blocks?are the growing list of records linked together via?cryptography. These blocks of digital information that are linked together in the public ledger create a chain of auditable but unalterable data.
• Miners:?Miners?are responsible for creating new blocks on the chain through the mining process. They employ special software, and hardware and sometimes stake their token holdings to verify a nonce that produces an accepted hash.
• Nodes:?Nodes?are a kind of electronic device that manages and maintains the copies of blockchain and network functions.

Key Challenges of Blockchain Adoption

Despite the potential benefits of blockchain, there are still numerous challenges that must be addressed before it can be widely adopted. Let us now understand the growing pains of this technology before it can reach its full potential.

Scalability

The capacity to manage numerous users at a single time is a sore spot when it comes to mass blockchain adoption. For example, Bitcoin and?Ethereum?now comprise the highest number of users on the blockchain network, and it is needless to say, they face a hard time dealing with low transaction speed and high transaction costs. Scalability must be dealt with quickly, as it can make the adoption of the technology challenging.

High energy usage

Blockchain-based payment systems, such as Bitcoin, make use of a?proof-of-work?consensus mechanism?to verify transactions. To maintain the system, proof of work requires computational power to verify transactions (mining) which consumes a lot of electricity. This may pose a challenge as sustainability becomes an increasingly important objective of many businesses.

Inappropriate skill sets

As we are all aware, blockchain technology is still fast-evolving. Very few people possess the required skills to develop an end-to-end infrastructure using the blockchain framework. Therefore, a business might find it hard to hire the right people or receive expert recommendations and guidance.

Security

We all know one of the key strengths of blockchain technology is its security feature. However, like any other technology, it also has a few security loopholes. One of the security flaws of blockchain is the?51% attack?on the network in which hackers can take charge of the network and exploit it if they have to. They can also modify the transaction process and confine people from building a block. Of course, the process is extremely expensive and large networks like Ethereum and Bitcoin haven’t registered such an attack to date. However, on smaller and newer networks, where the hash rate required to verify a block is lower, a 51% attack is possible.

Lack of standardization

As blockchain is still a new technology, there has been no agreed-upon standards for how it should be applied in businesses. The lack of standardization makes it challenging for various blockchain networks to interoperate with each other.

Overcoming the Challenges

There can be many ways to tackle the potential pitfalls in blockchain technology.

1. Education and awareness: As distributed ledger technologies are still new to many people, it is the responsibility of businesses that plan to use blockchain to educate people about the utility, strengths, and design of blockchain technology. Creating educational resources, conducting webinars, and various other educational events can help raise awareness.
2. Collaboration and standardization: More organizations working in the industry must collaborate on the technology to encourage the development of education and applications. Many groups have been created to enhance collaboration in the space and influence standardization.
3. Side chain and PoW blockchain alternatives: Side chains, proof-of-stake networks, and layer-2 blockchains are the solutions to scalability issues. The layer-2?scaling solution?constitutes a processing speed of more than 1,000 transactions per second (TPS). Side chains also help promote?interoperability?by backing data exchange with various other blockchains.

Additionally, scaling solutions must be developed to address the challenges of blockchain technology and make it more accessible to businesses and end users.

To allow you to better understand blockchain, we would like you to explore ChainUp’s all-in-one blockchain technology solutions suite.

ChainUp and its Role in Blockchain Adoption

ChainUp?offers businesses comprehensive blockchain technology solutions covering infrastructure development and ecosystem support. Built on a mission to empower businesses with blockchain, it serves clients both in blockchain-related industries as well as traditional industries. Its easy-to-integrate solutions and in-depth technical support will facilitate blockchain adoption for businesses at any point of the journey.

Its sophisticated product lines include:

Digital Assets Exchange Systems:?Built according to user preferences and customized by region, ChainUp’s digital assets exchange systems offer clients the option between plug-and-play SaaS deployment or fully privatized deployment. SaaS deployment allows clients access to pre-built cloud systems to minimize operational and personnel costs and enable fuss-free adoption. With mass volumes of liquidity aggregation, ChainUp also provides the world’s largest cryptocurrency liquidity pool with volume quality comparable to the world’s top crypto exchanges.

NFT Trading System:?With instant plug-and-play integration and easily customizable configurations for various business models, ChainUp’s NFT trading system includes comprehensive features to buy, trade, and store digital collectibles, artworks or other assets. As an extension of ChainUp’s digital assets exchange systems, it also boosts a one-click system creation to help clients complete platform deployment in record time with certain features able to go online within 6 hours.

Wallet Solutions:?With 20+ compatibility modules and over 200 different functions, ChainUp’s wallet solutions offer clients the most secure and user-friendly applications. The solutions include comprehensive features such as financial management system, flash exchange, referral system, and mining system.

Digital Assets Custody:?With extensive management of 200+ main chain currencies and provide technical product support, wallet interfaces, main chain asset custody, node solutions, co-managed wallets, loans, financing, and other financial services. Its portfolio management system is exclusive for business owners to improve operational efficiency and automation of accounting and performance reports.

ChainUp values risk management and security to the highest standards and has in place comprehensive security and risk control strategies to ensure all of its products and services meet complete compliance requirements.

Final Thoughts

Undoubtedly, blockchain technology has incredible potential to transform any business. However, it is also true that there are several challenges in blockchain adoption which is the norm for every novel technology. Technological developments generally require a long time to mature and attain stability. Similarly, blockchain will also have a slow trajectory of adoption in the coming years.

Moreover, with blockchain-as-a-service providers like ChainUp to facilitate fuss-free, easy-to-integrate utilization, the technology will see more adopters. ChainUp aims to provide its clients with a full array of ecological service support like technology, compliance, and security.

For more information, follow ChainUp on?LinkedIn and?Twitter.