Blockchain is the new buzzword in town and everyone seems to be transfixed by it. Proponents of this new innovation tout it as the next big thing in the technological landscape that will revolutionize the way business is done and financial transactions take place.
Given the nascent stage of the technology, there’s a certain sense of anticipation regarding the full-scale utilization of this innovation. Experts believe that it’s not only the financial industry that’s going to be affected by it, but other sectors like healthcare, real estate, and law which are beset by a huge trail of paperwork and rely on old traditional systems are also bound to benefit from blockchain.
However, there are many impediments right now which are hindering the efficient adoption of blockchain by enterprises. Analysts believe that the technology still lies in the “potential” stage and has not reached the output stage. While there’s a general consensus among experts that the technology has the potential to change the way business is transacted, it still remains in the realm of possibilities.
But the apparent possibilities and benefits have led many companies to invest big time in this relatively new technology, which is expected to touch $2.2 billion in 2018.
According to a Deloitte report, there are five areas which require attention and progress is being made in each area to foster efficient adoption of blockchain:
Increase in speed and output
Speed is one of the main stumbling blocks for blockchain. While Bitcoin blockchain can process three to seven transactions per second, it is around fifteen transactions on the Ethereum one, which is way less when compared to some legacy processing systems and this is the main reason why some experts feel that this technology is not viable for large-scale applications. Developers are working on this aspect to develop newer consensus mechanisms that can reduce or eliminate time- and energy-intensive mining and reduce the number of nodes that must validate a transaction for it to be considered final. These mechanisms come with really exotic names and are being used by prominent blockchain platforms including Hyperledger, Stellar, and Ripple.
Need for Standardization
Another major hurdle in the wider adoption of this technology is the lack of standard which can allow a whole plethora of blockchains to interact with each other. The industry terms this standardization as interoperability. According to the report this apparent lack of interoperability “grants blockchain coders and developers freedom — and can give IT departments headaches as they discover that platforms can’t communicate without translation help.”
“Standardization 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,” the Deloitte study points out.
Simplifying the cost structure and complex nature of the technology
While there’s no dearth of ventures ready to fund blockchain applications, numerous applications have been developed and a larger number are in the offing. One of the most cited concerns regarding Bitcoin’s blockchain network is its over-reliance on intensive computing power, which in turn uses a whole lot of electricity and electricity doesn’t come cheap.
Apart from the cost issues involved, the study goes on to add that complexity of the whole process is another major hurdle and a cause for concern. But things are changing with big players like Amazon, Microsoft, and IBM working on using cloud technology for cutting cost and making it easier for developers to use the cloud technology to develop and operate blockchains.
“New cloud offerings have been coming to market at an accelerating pace and have the potential to lower the barriers to developing and operating blockchain networks,” the study notes.
“Cloud providers are releasing blockchain templates intended to automate the setup of basic blockchain infrastructure; vendors claim this can reduce application development from months to days.”
While blockchain is generally being welcomed everywhere, there’s still that lack of clarity when it comes to the regulatory framework. One such grey area is smart contracts. Smart contracts are self-executing contracts that run on blockchain networks like Ethereum. But Deloitte study highlights that most of the applications don’t fall under the purview of the existing regulations and there is a need for collaborative and coordinated effort on part of the government and the industry to push for rapid adoption for blockchain.
However, Deloitte points out that some progress is being made on the regulatory front, with 17 U.S. state legislatures either mulling or passing bills related to blockchain adoption.
“There is a lot of work still to do before the major regulatory hurdles to blockchain adoption are cleared,” emphasizes the Deloitte report. “But momentum is building.”
Increasing the chain of consortia
As the chain facilitates transactions that take place across a network, its value increases with the increase in the number of users. Now, we are witnessing an increasing trend among companies who are collaborating to advance their shared objectives and aims. The study points out that there has been a considerable growth in the number of companies coming together to achieve their goals, with figures pointing at nearly 61 blockchain consortia across a dozen industries. R3 is one such consortium whose membership has grown from 42 in 2015 to over 200 in 2018.
The study points out that it’s not only financial companies which are forming consortia, but companies from other sectors are also following suit. One such example is the Blockchain in Transport Alliance that includes leading players from the logistics sector and the MediLedger blockchain platform on which major players of the life-sciences sector are collaborating to keep counterfeit goods out of medical supply chains.
While the stage is set and with each passing day we move a bit closer to the full realization of this breakthrough technology, it remains to be seen when this innovation will be ready for mass adoption.
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