Blockchain has been on the tip of everyone’s tongue in the tech world. With so many promising applications, it can often seem like the future is already here. Yet while industries like finance and supply-chain are betting big on blockchain, it is anything but a straight path to success. With anything new and revolutionary, different obstacles stand in the way of dethroning the way things “are done” for the way they “will be done.” Below is a list of 7 biggest obstacles blockchain companies will need to overcome in order to grow from ICO dreams to the Googles and Amazons of the next decade.
Today, institutions that are most essential to our lives are made up of centralized entities that have no intention of sacrificing any portion of their power in the name of progress. In the past, governments and financial institutions, such as JP Morgan, were very quick to dismiss this technology for many years. Since blockchain can no longer be ignored, there are still many people out there that seek to control, manipulate, and hinder it in order to preserve the status quo. While blockchain will bring about many revolutionary benefits, it will also displace millions of people that are currently in middlemen type positions. Yet before that can ever happen, blockchain applications need to gain massive adoption.
As more companies jump aboard the blockchain train, the need for skilled developers will only rise. While the number of blockchain developers grew by hundreds of percent in 2018, this number will only increase as time goes on. While the salary and perks of such a job are very attractive, there is a high barrier to entry. Not only does one need to learn how to code, but existing developers need to learn completely new programming languages to create very intricate products. While the perks may seem quite attractive to outsiders, established software developers making $150k+ may be hesitant to take on new hurdles for a minimum lifestyle upgrade.
Lawmakers have found it very difficult to regulate the cryptocurrency market and blockchain applications. This is because the laws we have today were written before smart contracts were ever created. Policymakers are now scrambling to quickly create legislation around a technology about which they know very little. This makes for a long and arduous process full of frustration. Questions regarding data ownership on the blockchain, liability, privacy, and jurisdiction need to be addressed in a way like never before. Ultimately, the main goal is figuring out how to regulate without stifling innovation. This is because countries know that those that will miss this trend will most likely experience brain drain and be discounted from the never-ending race of being a leading superpower.
The success of blockchains, like Ethereum, and traditional platforms, like the Apple App Store, can largely be attributed to the fact that they succeeded in finding two types of people:
Any platform that is unable to create this dual-sided marketplace cannot survive. Without dedicated developers, truly robust and useful applications cannot exist. Without the ability to gain users, any application, no matter how great, will not withstand the test of time.
From Mt.Gox to the most recent debacles of Bitfinex and Binance, cybersecurity and transparency seem to be a continuous struggle. While many centralized companies have been hacked and imploded in a far worse way, if blockchain is to be the “holy grail” of cybersecurity, these things cannot occur. Such problems are even more prevalent in smaller blockchains, where a 51% attack is much easier to carry out. These attacks jeopardize the integrity of an entire network and occur when any one party controls over 50% of the computing power (mining hashrate) of a blockchain. Such control would allow them to conduct various malicious acts that would affect all users of the particular blockchain. Every hack or fraud is another blow to the space and shakes investor confidence and trust in the ability of the industry to get itself together and off the ground.
No matter how hyped up blockchain seems, if it is not undoubtedly superior than existing applications, it will simply not withstand the test of time. Thus when, back in 2017, a popular collectible game known as Cryptokitties almost crashed the Ethereum blockchain, it brought to light Ethereum’s obvious limitations. For blockchains to scale, they will need to be able to process thousands of applications (far more complex than Cryptokitties) per second. Blockchains also need to be able to share information and communicate with one another through what is known as interoperability. Without these two critical components becoming a given for the space, long term survival is highly unlikely.
Large enterprises, such as insurance companies, have been pouring millions into blockchain to preserve their market dominance. While they are creating decentralized ledger systems that integrate all of the benefits of public blockchains (speed, efficiency, immutability, reduced costs etc.) they are keeping these systems private. Therefore, while such blockchain-based systems will yield massive benefits for the company and its customers, the control will still be in the hands of large enterprises.
While there are many obstacles that blockchain has to face, none of them are impossible. Every day, new solutions are coming out for old technical challenges as governments are hurrying to create legislation. While blockchain may be one of the hottest new trends of the day, it is essential to remember that all great trends start this way. From the rise of the first industrial innovations to the telecommunication and internet revolutions, blockchain is just another step to the long and bright future of humanity.