The blockchain is supposed to be a revolutionary technology, changing the way we think about everything from financial transactions to cybersecurity. Yet only something like 3 percent of Fortune 500 companies are currently using the blockchain as a core part of their business.
We might be seeing slow and steady progress, with consumers warming up to the idea of using cryptocurrency, but there’s still something fundamentally stopping businesses from launching into more investments.
So what’s holding things up? We spoke with Rajat Mishra, Cisco VP of and pioneer of various blockchain initiatives, to find out.
Why Blockchain Isn’t Seeing Further Adoption
These are just some of the reasons the blockchain isn’t seeing more than its current level of adoption.
Predictions and reality
As explained by Rajat Mishra, it’s dangerous to think too far into the future, because technologies tend to emerge in unique patterns, with new and different iterations, rather than new versions of old systems. In his words, “Tomorrow is not a bigger version of today. It is a different version than today.” Because the blockchain is so fundamentally different from the systems it’s trying to replace, companies are reluctant to make the transition. On top of that, the blockchain could easily be just a technological stepping stone to some kind of system that’s even more efficient—so companies might be waiting to see how it develops from here.
The focus problem
There’s also a problem of focus when it comes to the blockchain’s goals. There are three main advantages to using the blockchain: it works fast, it’s low-cost, and it’s decentralized. The problem is that it’s hard to develop a single chain that can accomplish the best of all three; instead, most applications try to focus on one (or maybe two). In other words, if you develop a system that’s fast and decentralized, it’s probably going to be expensive, and if it’s affordable and decentralized, it will probably run slow. Some authorities have presented alternatives, such as a Tangle (explained well by UKcryptocurrency) but these solutions are far too new to tell whether they can be viable long-term alternatives.
Records in the blockchain are limited in terms of size and frequency, with estimates that the transaction processing capacity is between 3.3 and 7 transactions per second. Fortune 500 companies would hypothetically need to process hundreds, or even thousands of transactions per second, making the blockchain wholly inefficient. There are several proposed solutions to this problem, including a fork or overall efficiency improvements, but right now, business owners are skeptical that the blockchain can operate on the level they need it to.
Despite having proven itself as a reliable technology, and one with enormous potential, the blockchain is still relatively new and immature. Company leaders are always reluctant to invest in a technology that’s too new; the first iteration of any technology is ripe with bugs and hasn’t been improved or streamlined. In Mishra’s words, “it’s always risky to integrate a technology that hasn’t had time to mature. It’s a risk startups are willing to take, but big companies tend to play things more conservatively.” On top of that, there may be unforeseen problems that can emerge when the tech is applied to a larger scale or network (which we’ll get into in the next section).
The blockchain is full of unknowns. While early adoption of Bitcoin and other cryptocurrencies has been largely successful, you never know when a rogue consumer trend or fad could undermine the integrity of the network. Take, for example, the CryptoKitties fad from late last year—inexplicably, crypto users began trading Ethereum for digital representations of unique cats. Think of it like collecting Pokemon cards in the blockchain era. It’s innocent fun, for the most part, but at one point, CryptoKitties represented 15 percent of all trading traffic on the Ethereum network, resulting in transaction delays and rising transaction costs for other users on the system.
The lack of talent
Companies are also facing a major talent shortage. Big companies tend to move slowly, but if they want to capitalize on the power of the blockchain, they’ll need to have a team of developers working hard to come up with a custom solution for their business. The problem is, there’s a major shortage of blockchain-capable developers, and most of them are already working for existing coins (in the hopes of getting rich, or supporting a new mainstream fiat currency). This is forcing companies to either hire blockchain coders at more than double their normal salary, or resort to hiring basic developers and hoping they can learn the blockchain on the job. Neither is efficient, so companies are reluctant to move forward.
Companies also don’t want to deal with the nightmare of having their customers navigating the blockchain world. Mishra, with experience in everything from strategy and software to consulting and sales, understands just how important that user experience truly is. When a customer forgets the password to their account with a given business, recovery is fairly easy; they can submit a request to reset their password, get a temporary link via email, and create a new password. But in the context of the blockchain, passwords, customer security, and user interfaces are more complex. Depending on the application, customers might be expected to house important files on a local hard disk or keep tabs on a long cryptographic sequence. If they misplace their information, it could be nearly impossible to recover. On top of that, companies would have to invest in customer and partner training to get everyone up to speed—and that takes time and money.
Remember, part of the reason the blockchain is considered so revolutionary is because it has the power to undermine the systems that currently exist. Because its transaction costs are negligible and don’t require an outside authority, it undermines the entire financial industry, which makes money because it’s needed to process financial transactions. Most banks are too big to adapt quickly but realize the fast adoption and growth of the blockchain could undermine their core business; accordingly, they’re less than motivated to nurture the technology to higher adoption rates.
Time and Patience
Unfortunately, there are no quick fixes to any of these problems. It’s going to take time for visionaries like Rajat Mishra and developers to improve upon the blockchain’s current model (and compensate for its weaknesses), and time for companies to see the value in investing in the technology.
However, in the next several years we’ll likely see:
- An improvement to transaction processing efficiency, which will overcome the scalability problem and make it possible for big companies to use the blockchain at the volume they need.
- A surge in blockchain talent, thanks to the rising demand for blockchain developers from major companies around the world.
- Evolution of the platform, which may lead us to a new type of blockchain, or some completely novel solution that compensates for the blockchain’s flaws.
- Consumer and corporate confidence, which will lead to smoother interfaces, mainstream adoption, and less skepticism when discussing the possibilities for the technology.
It may be several years before businesses are able to tap the enormous potential that the blockchain has to offer, but such is the lifecycle of such a groundbreaking new technology. Despite all the benefits that regular crypto traders are seeing, there are legitimate obstacles preventing big companies from adopting it—but thankfully, no single obstacle is unconquerable, given enough time and commitment.
By Peter Daisyme for Due.com.