By Blockchain, cryptocurrency, bitcoin. You’ve heard at least one of these keywords in the last decade or so. Blockchain being perhaps one of the more widespread keywords thrown around the financial & tech spaces today.
Many have hailed this technology as the future of financial services praising its decentralized nature & tamper-proof data storage system.
As we’ve repeatedly reported, many also have seen the light when it comes to the variety of different industries beyond that of the financial & tech arenas whereby blockchain could be beneficial, notably any industry wherein massive amounts of paper trails are incurred. Think healthcare, real estate and even the legal sectors are beset by outdated and costly methods of data storage.
So what’s stopping everyone from adoption blockchain? Well, most notably would be the slow transaction speeds as well as a general lack of standardization. These factors and others all pose a threat to the growth of blockchain technology.
Deloitte recently outlined five main hurdles that blockchain technology would need to overcome in order to achieve the widespread adoption we all so dream of.
Amped Up Performance
As most know, blockchain is based on the same principles of an accounting ledger. Transactions are recorded on a massive network that is decentralized which basically means it has no need for one central authority to be overlord to it.
As we know, this tech has huge drawcards when it comes to the tracking transactions and data.
Deloitte, however, had to this to say:
“Blockchain can be slow. In contrast to some legacy transaction processing systems able to process tens of thousands of transactions per second, the Bitcoin blockchain can handle only three to seven transactions per second; the corresponding figure for Ethereum blockchain is as low as 15 transactions per second.”
Deloitte continued:
“Because of its relatively poor performance, many observers do not consider blockchain technology to be viable for large-scale applications.”
So they went for the most obvious issue found with the technology today. Go figure. Let’s humour them, shall we? Why are these transactions so slow at this stage of the technology’s adoption around the world?
Well if you take the bitcoin blockchain, any number of people are able to participate on the network due to it being public Miners as we know and love work out the complex mathematical problem in order to validate the network transactions.
As we know, there needs to be general consensus across the network to determine the validity of any transaction in order for it to happen. This system, of course, does reduce the risks of malicious activities taking place on the network but ultimately it slows it down.
But, there are new models appearing that can speed up transaction speeds. Ripple, Stellar, Hyperledger are firms who utilised new consensus mechanisms which aim to speed up the processes, as Deloitte reported in their paper.
They go on to define what we know as proof of stake system. With proof of stake, a miner is required to have a certain “stake” in the digital asset in order to participate on the network.
“The evolution of consensus mechanisms is improving blockchain speed significantly — good news for applications in trade finance, supply chain traceability, auto leasing, marine insurance, health care, and insurance,” said the report.
Well, they’re not wrong which brings us to the next hurdle as described by the company.
Interoperability & Standards Enhancements
You probably guessed that was to be the next point on Deloitte’s wish list of challenges for blockchain to conquer. Yes, there is an ever-expanding amount of players on the blockchain scene with countless networks and this scares many who have not dipped their toes into the fountain of crypto. According to Deloitte, no standard currently stand which allows these players & networks to interact with each other. The industry calls this standardization “interoperability”. Deloitte stated that the lack of interoperability
“grants blockchain coders and developers freedom — and can give IT departments headaches as they discover that platforms can’t communicate without translation help.”
Their report went on to state the well known coding site GitHub has more than 6500 separate active blockchain projects, all utilising a range of platforms with varied languages, protocols, consensus mechanisms & privacy measures.
“Standardization could help enterprises collaborate on application development, validate proofs of concept, and share blockchain solutions as well as making it easier to integrate with existing systems,” as seen in the Deloitte report.
“Help is on the way as a growing number of industry participants work to enable cross-blockchain transactions, interconnectivity, and standardization.”
They’re not wrong. As we know, there are a handful of organisations whose sole goal is to create a standard version of blockchain & to encourage collaboration between each other.
Like Interledger, the protocol which was designed for this purpose, to grant payments between different distributed ledger networks.
“The efforts we are seeing represent a vector of progress for blockchain technology,” the Deloitte report went on the state.
Cost & Complexity Reductions:
Yes, yes we all know that one of the biggest criticisms about bitcoin’s blockchain & other digital currencies blockchains is the fact that this technology requires insane amounts of processing power & of course electrical power.
We know miners require massive computer rigs with many a server to keep the networks running at full steam and obviously, the process ain’t cheap.
Recently a study by Elite Fixtures revealed that the cost of bitcoin mined in South Korea cost $26 000.
But it’s not just the cost. The complexities according to the Deloitte report are another concern for them.
Deloitte in their report highlighted the arrival of cloud technology blockchain networks which could lower the barriers of entry pertained with developing & operating new blockchain networks. Chances are if you don’t have someone investing in your company and therefore helping you get set up properly, you might not succeed.
“New cloud offerings have been coming to market at an accelerating pace and have the potential to lower the barriers to developing and operating blockchain networks,Cloud providers are releasing blockchain templates intended to automate the setup of basic blockchain infrastructure; vendors claim this can reduce application development from months to days” said the report.
The Deloitte report also mentions Hyperledger’s open-source platform Sawtooth which as we know allows the developer the ability to write blockchain applications in their choice of code and the knowledge of the core system is not a requirement and this not a barrier to entry.
“There is a clear trend toward easier-to-use blockchain tools and platforms,” said the report. “This vector of progress is likely to foster greater adoption of blockchain technology over time.”
Regulation:
Yes, last year’s spike caused many regulators to become uneasy about the speculative nature of the cryptocurrency industry.
Deloitte in their report goes on to highlight the sporadic adoption of new concepts and methods found within the blockchain arena whereby the window for fraud could is left wide open. Smart contracts, for example, are self-executing contracts which run on networks like the Ethereum. These contracts, of course, contain the set of conditions under which buyers and sellers are in agreement with without the use of paper trails. Which we know to be far more efficient and private but Deloitte highlighted in their report that existing regulations do not, in fact, cover smart contracts which could inhibit investment in blockchain on a grander level. Yep, noted but we also know that much progress is being made on the front of creating new regulations with 17 US state legislatures being mulled over or being passed as bills which related to blockchain adoption, well down to Deloitte for highlighting that in their report too.
“There is a lot of work still to do before the major regulatory hurdles to blockchain adoption are cleared,” said their report. “But momentum is building.”
Well, we don’t disagree with them as we know that all this is currently happening with lawmakers around the world making more efforts every day to aid in the proper regulation of the crypto arena.
Alright, stop, collaborate.
Finally and Deloitte’s last point in their report. Collaboration. Deloitte believes that more firms need within the blockchain space need to collaborate in order for the technology to be better promoted with the end goals being better development of applications & education.
Once again. We, already know that many groups have formed with goals in line with increasing collaboration in the blockchain realm. Groups have also formed in order to encourage standardization and as mentioned earlier, this could alleviate the interoperability between networks.
“As a technology that facilitates transactions across a network, the value of a blockchain network increases with the number of users,” said the report. “That’s one reason why the growth of blockchain consortia is a bullish sign.”
Many of these groups which contain hundreds of member firms exist, for example, Hyperledger, the Enterprise Ethereum Alliance, R3 & RiskBlock Alliance just to name a few.
A study conducted by tech research agency Gartner back in March revealed that the number of blockchain consortia currently in operation sits at 61 which is more than double up from last year’s 28. Many of these groups, however, are running out of cash-flows such as Hyperledger and R3.
“Not all consortia are building applications, and not all are equally effective,” said the report “But growing participation by enterprises, technology providers, regulators, and governments is a vector of progress in the development of blockchain that will help increase adoption of the technology.”
Deloitte concluded their report by stating:
“Over time, the five vectors of progress outlined here may help enterprises lower the cost and risk of deploying blockchain while expanding the practical applications of the technology.
Agreed, and these things are happening. More developments in processes, regulation & technology are happening today.
“Over time, the five vectors of progress outlined here may help enterprises lower the cost and risk of deploying blockchain while expanding the practical applications of the technology.
So come on people isn’t time we all worked together to bring this technology to the widespread global adoption it deserves?
Do you agree with Deloitte’s arguments? Let know us.
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