Blockchain is here to stay, but in what form? Who will benefit the most from blockchain? Who will be most troubled? Let’s take a look.
Some people say that the blockchain is a “trustless” network. However, the statement does not imply that the parties to an economic transaction do not trust each other. Of course, blockchain is more acceptable than it was a few years ago due to improved security and traceability.
Commercial investment is rapidly increasing as blockchain becomes more acceptable in terms of security.
According to Statista, global spending on blockchain-based solutions will triple by 2024, from $20 billion in 2021 to $19 billion. This distributed ledger system provides secure data encryption and excellent fraud prevention by addressing two key business needs: transaction processing and registration. Keep. So, with all this in mind, why are some companies or individuals reluctant to use blockchain?
1. The many benefits of blockchain
Organizations can leverage technology in every business by reducing paperwork, reducing expenses, speeding up procedures and eliminating the need for third-party facilitators. Additionally, companies are improving their operational efficiency by leveraging blockchain to realize its full potential.
1. Decentralization is the first step.
Participants in a distributed network do not need to know each other, and everyone has access to data presented in the form of a distributed ledger.Blockchain is a trend who is here to stay.
Timestamps make it easier to keep track of data in the long run. Thus, blockchain ensures that data audits are accurate.
3. Information Security.
Due to strong encryption and fast registration, the probability of a malicious intruder attack is at a minimum. In any case, hacking into a network like this is much more complicated than a system kept on a dedicated server.
4. Cost savings.
The ability to trade quickly is useful and productive due to the elimination of facilitators. Additionally, blockchain features automatic data aggregation, simplified reporting and auditing procedures. As a result, organizations, especially in the banking, financial services and insurance (BFSI) sector, can reduce their operating expenses.
Retailers need to be able to track the origin of merchandise and manage inventory more efficiently. Also, since blockchain can provide openness to supply chains, environmental pollution will no longer be an issue.
6. Reduce the security risk of operating expenses.
Blockchain security technology helps companies reduce security risks and operating expenses by driving business disruption and change. Companies considering blockchain adoption should research better methods and analyze available resources, just as they would with other technologies.
Limitations of Blockchain Deployment
When choosing whether to deploy it, one must understand the hurdles posed by its implementation and the technology itself.
1. Unable to evolve
Network congestion means that the more individuals or nodes participating, the slower the transactions.
Here is an illustration:
Currently, Bitcoin can only process about seven transactions per second, but some centralized payment systems can handle tens of thousands of transactions. For example, Visa claims to process about 1,700 transactions per second, and Mastercard about 5,000 transactions per second.
In a centralized design, the control unit does not notify other members of transactions, increasing speed. Conversely, on a blockchain, a majority of nodes must approve transactions.
Therefore, companies should consider performance factors before using blockchain-enabled products. Unfortunately, slow capabilities don’t seem to be very CRM.
2. Implementation issues
It all boils down to the first cash inflow. For some companies, implementation costs can be prohibitive. While most existing solutions are free, there are licensing fees, overall maintenance, etc. when upgrading to a paid software version.
If the organization cannot allocate a large amount of funds, it is better to postpone the implementation of blockchain.
3. Talent shortage
It is estimated that the demand for highly skilled blockchain developers is soaring by 300-500% annually. This is a global issue that affects countries around the world, from the US to Singapore.
Since this technology is still in its nascent stage, it will take some time for the development community to implement a proper educational program and meet market demands.
In a decentralized environment, private keys held by individuals can become a weakness. Once generated when the wallet is created, they have access to all stored data. Therefore, stolen data is a risk.
If lost, access to the wallet is lost forever.
4. Compatibility issues with older systems
If a blockchain solution were to be integrated with outdated systems already in use, there could be a risk of data loss or corruption.
5. Consume a lot of energy
With the resources needed to cool the equipment, the price will only go up. Heating works well in winter (if you have snow) and heats the garage (and part of the house). But — if proof-of-work is your only option — you’ll have to pay the cooling energy costs for it.
Blockchain: to exist or not to exist?
Due to its limitations (scalability, implementation, private keys, integration with existing systems, high power consumption, and lack of development talent, etc.), blockchain may cause a temporary downtime in activity.
Always consider all options when considering whether to engage in blockchain.
Image Credits: Karolina Grabowski; Pixels; Thanks!