Learn about the current limitations of the blockchain and other adoption challenges ahead.
- There is no doubt that the future of Blockchain contains many uncertainties and challenges. While it's here to stay, how it eventually matures, how it is widely used and under what circumstances it gets adopted are all questions to be answered in the future. For this video, we'll discuss several near-term obstacles to broad Blockchain adoption. These challenges are not in any particular order. The first challenge is simply that most people have no idea what the Blockchain is and have never been exposed to it.
Building on that, even those that have heard about it struggle to understand it. In a 2016 survey of business executives by Deloitte, a Big Four consulting firm, 40% had little or no knowledge of it. Of those that had some understanding, many didn't understand its potential. When a new technology emerges, the first obstacle is knowledge and understanding. With the Blockchain, a much more complex concept than many, it's going to be a while before a critical mass of appreciation is reached.
We'll need to get there before we see more rapid innovation and adoption. The second challenge is technical. Simply said, the Blockchain is new. It requires time to mature. There are currently issues with transaction speed, verification, data management. Remember, a lot of data is generated and needs to be stored on the Blockchain. And despite a promise of high security, there are still security and privacy challenges. We'll also need to overcome the complexities of integration.
If Blockchain is going to coexist with other technologies in organizations, which I suggest will be necessary, a lot of innovation will need to emerge to make that happen. Integration will also require a way for different distributed ledgers to talk to each other. We'll need a set of standards, that is uniform engineering or technical criteria, methods, processes and practices, a prerequisite for any global adoption of new technology.
We don't yet have them for the Blockchain, but initial standardization work is now underway, particularly by the ISO or International Organization for Standardization. Associated with technical limitations today is the large energy required for transactions, specifically in a Bitcoin-driven Blockchain. You'll recall that every transaction requires some participating computers to solve complex mathematical problems. At scale, there is significant cost to this.
Blockchain transactions are also anonymous and irreversible, two important concepts that challenge basic technological requirements in systems today. It's not that we can't overcome these, we just have to figure out how to manage them. Finally, in the technical space, the Blockchain is complex to develop and use. Specialized skills are needed for example, to program on Ethereum or Slock.it. Even managing a smartphone wallet with Bitcoin, requires some technology savvy.
These technical challenges are not trivial. The third and final challenge is a category that includes cultural adoption, regulatory acceptance, and resistance to change. Looking only at the financial industry, it's clear that both digital currencies in general, and the Blockchain in particular, have the potential to seriously upset the status quo. For example, without the need for banks and financial oversight, sending Bitcoin directly to individuals and organizations is a notable disruption.
Financial organizations may need to accept something that ultimately reduces their value. Adopting digital currencies means changing regulations, laws, policies, treaties, and agreements, not only between organizations and within countries, but also between countries at an international scale. Add Blockchain to the mix and we are creating serious challenges to the very nature of how organizations are managed and how they trade with each other.
At the extreme, new Blockchain entities could exist without any authority and oversight, in effect nullifying every control that exists today to support an ecosystem of global trade. Finally, societal and organizational culture will struggle with adopting the radical nature of the disruption that the Blockchain can bring. There may be reluctance to accept the degree of change needed by many organizations. I suspect many will only evolve kicking and screaming, or will ultimately fail as others move quickly, forward into a different future.
It's sobering to be exposed to these challenges, as none of them are easy to overcome. As Kevin Kelly notes in his 2016 book, The Inevitable, when executives were first introduced to the promise of the Internet in the 1990s, many discounted it. They said that consumers would never trust it for buying products or doing online banking. Many thought that content would remain the domain of powerful media companies. They could not see the disruption that was coming and focused on what they believed were insurmountable obstacles to adoption.
We might be there again. There are a lot of reasons to believe the Blockchain will have a difficult time being adopted, but there are a serious number of reasons it might just be bigger than the Internet itself.
Jonathan begins by describing some of the current challenges with the Internet, including existing risks and security problems such as identity management. Next, he describes how traditional online databases function, so that you have a basis for how the blockchain redesigns this function. He then describes how the blockchain becomes a potential solution for many of the existing limitations of online databases. Since the blockchain has its genesis in Bitcoin—the digital currency—he provides some background on that too. He also discusses how blockchain technology actually offers new capabilities beyond simply solving old problems. To wrap up the course, Jonathan shares steps you can take in your organization to understand the implications of the blockchain.
- Risk and security challenges
- Rethinking the traditional database
- What is the blockchain?
- What problems does the blockchain solve?
- Transforming transactions
- Examples of the blockchain in action
- Obstacles to blockchain adoption
- Risks to existing solutions and enterprises