5 steps to widespread Blockchain adoption

Blockchain is undoubtedly one of the biggest buzzwords today, and many believe that it is set to revolutionise the way that we do everything from finance, to healthcare and beyond. The fact that it is decentralised, immutable, and secure means that it has significant advantages over other types of technology.

Use cases that have been presented so far cover industries from law to real estate, and it seems that this new technology could remove the need of paper trails and outdated legacy technology. The problem is that slow transactions speeds, and regulatory issues, are putting somewhat of a dampener on the sector and are threatening to stunt the blockchain’s growth.

What are the five main hurdles that blockchain technology has to overcome in order to see widespread adoption?

Better performance

Blockchain works like an accounting ledger except it has the ability to record transactions across a vast network, it is completely decentralised, and requires no authority to supervise it. This makes it particularly suited to tracking financial transactions and other kinds of data, but there is a fundamental issue.

Blockchain can be slow and as it grows in popularity; transaction speeds are set to get even slower. Some legacy transaction systems are capable of processing tens of thousands of transactions every second, whereas Bitcoin can only handle between three to seven in the same amount of time. Because of this relatively low performance, at the moment blockchain lacks the scalability that is required for it to be viable for large-scale applications.

The solution is to create “proof-of-stake” systems where a crypto-miner is required to have a certain stake in the asset in order to participate. It is hoped that this will speed up transaction times by weeding out those who are not full-time users.

Interoperability

With more and more stakeholders partaking in this ever-expanding industry, some people are concerned that such a number of different networks will result in a situation where no standards exist that would allow them to interact.

This level of standardisation is called ‘interoperability’ within the industry, and the lack of it means that blockchain coders and developers are given freedom, but IT departments get headaches. Discovering that two platforms are unable to communicate translates to a lot of additional coding and behind-the-scenes work that may or may not produce an effective result.

On GitHub alone, there are more than 6,500 active blockchain projects that use a range of different platforms, languages, protocols, and consensus measures. Whilst this level of innovation is good, some level of standardisation needs to be developed in order to facilitate interconnectivity, cross-blockchain transactions and of course, standardisation.

Reduced complexity

One of the other main concerns about the Bitcoin blockchain network is the fact that it requires huge amounts of intensive computing power and electricity to run. In order to mine, miners must use enormous, highly complex rigs with many servers just to keep the network ticking over - this does not come cheap.

Taking into account that since November 13 till November 25 Bitcoin price has decreased from $6,350 to $3,874 losing almost 40% of its price, such volatility is regarded as a serious threat to miners. Several studies have put the price of mining just one Bitcoin at over $26,000, which is more than one Bitcoin is cur- rently valued at. According to the research, in Canada the net cost of Bitcoin mining is $3,965, in Iceland - $4,746 and in the USA - $4,758. China is the only country where Bitcoin mining is still profitable. Its net cost there amounts to $3,172. To be able to be truly accessible to all, transaction and mining costs need to be significantly reduced.

Firms such as Amazon, IBM and Microsoft are currently working on ways of improving the cost and complexity that is involved in blockchain technology through the Cloud. It is hoped that these could lower the barriers to developing and operating blockchain networks, as well as automating the set-up of basic blockchain structures.

Supportive, not restrictive regulation

As the price of cryptocurrency rocketed towards the end of 2017, regulators became uneasy and concerned about the speculative nature of this new market. With the popularity of the ICO came strict bans in South Korea and China, as well as the SEC in the US taking legal action against individuals for fraudulent behaviour.

But it is not just the ICO that suffers from a lack of regulatory clarity, smart contracts are also shrouded in uncertainty which could inhibit investment in the technology that uses them.

This does appear to be changing however as a total of 17 US States have made legislatures that either mull over, or have passed bills regarding blockchain adoption. Furthermore, the island of Malta introduced three new Acts that provide legal and regulatory certainty for ICOs, blockchain, and cryptocurrency related businesses.

Increased collaboration

Last but not least, firms in the sector need to increase collaboration for the technology to promote both education and development within the sphere. Several groups have been formed seeking to increase collaboration and standardisation, and these include R3, RiskBlock Alliance, Enterprise Ethereum Alliance, and Hyperledger.

Whilst not all of these consortiums are building applications, they are amongst the first to work together for the good of the industry as a whole.