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Blockchain is here to stay, but in what form? Who will blockchain benefit most? And who will it inconvenience the most? Let’s take a look.
Some have said that blockchain is a network that is “trustless.” However, this statement doesn’t imply that the parties participating in the economic transaction do not trust one another. Of course, blockchain is much more acceptable than a few years ago — because of improved security and traceability.
As blockchain becomes more acceptable with security — more business investment is fast expanding.
According to Statista, global spending on blockchain-enabled solutions will triple by 2024, reaching $19 billion compared to $20 billion in 2021. This distributed ledger system delivers safe data encryption and excellent fraud prevention by solving two essential business needs: transaction processing and record-keeping. So with all of this in mind, why are some businesses or people hesitant to use blockchain?
First, the Many Benefits of Blockchain
Organizations may profit from technology in every business by decreasing paperwork, lowering expenses, expediting procedures, and removing the need for third-party facilitators. In addition, enterprises boost operational efficiency by attaining their full potential with blockchain.
1. Decentralization is the first step.
Participants in a distributed network do not need to know one another, and each has access to data presented as a distributed ledger. Blockchain is a trend that is here to stay.
In the long term, time and date stamps make data tracking easier. As a result, blockchain assures that data audits are accurate.
3. Information security.
Because of the strong encryption and rapid recording, the likelihood of hostile intruder assaults is at an all-time low. In any case, compared to systems kept on dedicated servers, hacking such a network is far more complex.
4. Cost savings.
Due to the elimination of facilitators, the capacity to quickly conduct transactions is helpful and productive. In addition, blockchain has automated data aggregation, simplified reporting, and auditing procedures. As a result, organizations — particularly those in the banking, financial services, and insurance (BFSI) business, can save operating expenditures.
Retailers must be able to trace the origins of their items and manage their inventory more efficiently. In addition, environmental pollution will no longer be an issue because of the openness that blockchain can offer to the supply chain.
6. Reduces security risks on operational expenses.
Security Blockchain technology helps firms reduce security risks and operational expenses by causing disruption and business change. Companies considering blockchain adoption must examine a better methodology and analyze available resources, just as they would with other technologies.
Blockchain deployment limitations
When selecting whether or not to deploy it, it’s critical to understand the obstacles that come with its implementation and the technology itself.
1. Inability to Scale
Network congestion implies that the more individuals or nodes participating, the slower the transaction will be.
Here’s an illustration:
Bitcoin, at present, can only handle about seven transactions per second, but some centralized payment systems can handle tens of thousands. For example, Visa says they process about 1,700 transactions per second, and Mastercard does about 5k per second.
In a centralized design, the controlling unit does not notify other members of transactions, increasing speed. On the other hand, on the blockchain, the majority of nodes must approve the transaction.
As a result, before using blockchain-enabled products, businesses should think about the performance element. Unfortunately, the slow capacity doesn’t seem very CRM.
2. The Problem of Implementation
It all comes down to the first cash inputs. Implementation expenses may be prohibitively expensive for specific firms. Even though most existing solutions are free of charge, licensing costs in case of switching to a chargeable software version, overall maintenance, and more.
If organizations cannot allocate significant money, it may be preferable to postpone the implementation of blockchain.
3. Talent Pipeline Shortage
According to estimates, the need for high-skilled blockchain developers skyrockets by 300-500% each year. It’s a worldwide problem that affects countries globally, from the United States to Singapore.
Because this technology is still emerging, the development community will take some time to put together suitable instructional programs and alleviate market demand.
The blockchain environment
In the decentralized environment, private keys owned by individuals may become a weak spot. Once generated during a wallet creation, they provide access to all the data stored. Therefore, stolen data is a risk.
If lost, then wallet access is gone forever.
4. Compatibility Issues With Legacy Systems
If the blockchain solution is to be integrated with outdated systems already in use, possible data loss or corruption risks arise.
5. Consumption of a lot of energy
With the resources needed to cool down the equipment, prices are only rising. The heat works well in the 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 for it with energy costs for cooling.
Blockchain: To Be Or Not To Be?
Because of its limitations — issues with scalability, implementation, private keys, integration with legacy systems, high energy consumption, and the lack of dev talent — blockchain could cause temporary business disruptions.
When considering whether or not to make a blockchain commitment — always consider all options.
Image Credit: Karolina Grabowski; Pexels; Thank you!