TMCnet Feature
November 05, 2019

What's missing for Blockchain to become mainstream?

Blockchain must be one of the most discussed technologies of recent years. Since its conceptualization and first introduction back in 2008, the digital ledger has garnered interest from all kinds of experts and executives across industries. There are hundreds of thousands of articles theorizing about Blockchain’s disruptive potential and there’s a long list of expected benefits that might come out of it.

In fact, there’s so much faith in it that 53% of companies are now seeing Blockchain as a critical priority. This is leading to major investments in its development, with an estimated spending of $2.7 billion by the end of 2019. But, so far, there weren’t major breakthroughs to justify such a figure. Why are businesses hiring developers, teaming up with Latin American software outsourcing companies, or fighting over Blockchain experts to develop solutions based on it?

What’s more important - will those investments finally pay off? Will we see a mainstream Blockchain adoption across industries? Since it hasn’t happened yet - what’s holding it back? Let’s take a look at the current state of Blockchain and its main challenges towards massive adoption.

The reality behind the optimism

According to research by the China Academy of Information and Communications Technology (CAICT), 92% of Blockchain projects ever created already failed after an average of 1.22 years’ lifetime. That’s a huge turn off for executives considering the ledger as a potential solution for their processes - especially because we’re still discussing how to measure the ROI of a Blockchain project.

That’s a big deal, as almost a third of executives feel that the uncertainty around ROI is a major barrier towards Blockchain’s implementation. In fact, 43% of them think of Blockchain as overhyped, maybe because the promised benefits are nowhere to be seen. Does this mean that its adoption is doomed?

Not quite. It’s true that the expectations surrounding Blockchain’s disruption potential might be mismatched with its current possibilities. But that doesn’t mean that the digital ledger is a waste of time or money. The reality is that today, Blockchain isn’t mature enough to provide a major change for business operations. Rather, it’s application is limited to small-scale operations and assistance in certain processes that it can’t replace - yet.

One could argue that these caveats are what’s preventing Blockchain’s critical mass. And while they certainly impact the adoption process, they are just the tip of the iceberg. There are other factors at play, 3 of which can better explain why companies aren’t still massively pouring money into Blockchain development. Here they are.

High adoption costs

It’s pretty evident that the uncertainty surrounding ROI is a major barrier, especially since creating a working Blockchain can be really expensive. There are several reasons why this is so. First and foremost, and as it happens with every nascent technology, projects tend to be longer and more complex than anticipated. There’s still so much to be developed around Blockchain, which means that there are issues during development that simply can’t be foreseen or challenges that hadn’t appeared before.

Tackling those roadblocks can take significant time and effort, even for Blockchain experts. And since we’re talking about it, expertise is yet another big factor in ramping up the costs of these projects. That’s because Blockchain developers are in short supply and their role is naturally essential for the development of Blockchain applications.

Thus, developing a Blockchain application seems more like an exclusive endeavor than something anyone can do. It’s easier for big enterprises like Amazon and IBM (News - Alert) to throw money at its development since they can bet for the top talent and have enough time to walk the walk to success. Small and medium-sized companies, on the other hand, can’t compete with the tech giants nor have the budgets necessary to contribute to Blockchain’s adoption on a bigger scale.

Limited scalability

Blockchain has been traditionally imagined as a major disruptor for the finance industry, especially for banks. Its perceived benefits have naturally put the ledger there, mainly because of its strengths in regards to privacy, anonymity, and data security. However, though all of those things have already been tested successfully, there’s another factor that’s preventing financial organizations from using Blockchain.

That’s Blockchain’s limitation in terms of scalability. This is an essential issue that stems from the ledger’s own architecture. On one hand, the size of its blocks impacts the speed at which the network can process transactions. As a reference, Ethereum can process 15 transactions per second while VisaNet handles an average of 150 million transactions per day.

On the other hand, there’s Blockchain’s immutability that promises to keep stored data indefinitely. But, if the network is to become mainstream, it’s worth worrying about what will happen when millions of users store their blocks on the chain. This “Blockchain bloat” will have a direct impact on the whole chain when managing the networks.

Lack of regulation

The distributed nature of the digital ledger was seen as a God-sent by a lot of people. With it, Blockchain freed them from central authorities that controlled their information, guaranteeing their anonymity. And while this can be a good thing, there are businesses that are unwilling to use this technology until some ground rules are established.

That’s especially true for industries seeking to use Blockchain as a base for their transactions. Since there isn’t a central figure that could arbiter should an issue arise, the ledger depends on the information stored on its blocks. However, betting on that requires a cultural shift that companies don’t want to make yet, especially because the “unhackable” label that was pasted on Blockchain isn’t that real.

So, it’s only natural for companies to wait for Blockchain to mature and for government organizations to weigh in and regulate the ledger’s activities and responsibilities. There’s much at stake, so a lot of businesses are playing it safe and waiting to see what will happen before jumping on Blockchain’s wagon.

Some final words

A recent McKinsey article states that a major-scale adoption of Blockchain could happen between 2021 and 2023. However, that estimation is based on the need for standards alone (while it also clarifies that such adoption will depend on the industry and its type of assets). Of course, reality seems more complicated than that.

The uncertainty around ROI, the high cost of development, the architectural limitations to scale, and the lack of confidence from a significant portion of the executives all come into play to put that estimation at risk. There’s something no one can deny up to this point - Blockchain still is an emerging technology that has more potential than real uses.

As of today, the idea of Blockchain disrupting our modern business world is more a fantasy than a reality. Without undervaluing the ledger’s contributions to the tech world, it’s hard to think that the world is ready for Blockchain on a massive scale. In other words, it doesn’t seem like the technology is about to become mainstream, simply because we haven’t fully researched it.

As big enterprises keep teaming up with Blockchain developers and South American software development companies to further new projects, the technology will start to reveal its true face and value. Until then, we’ll have to keep a vigilant eye on how it evolves.

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