We are in the process of digitalization since the 1960s. Previous digital technologies were used to improve business processes mainly by delivering the same results in a faster and safer manner.
Blockchain, however, presents us with something different from previous generations of technology — an exchange of value. This innovation has pushed Blockchain to the priority list for businesses across the world.
According to a report from the International Data Corporation (IDC), Blockchain spending is anticipated to reach approximately 12 billion USD by 2022. Many have realized the disruptive potential of technology, looking to use it to stay competitive in the market.
Naturally, as every innovative technology, Blockchain has certain challenges to tackle before reaching mainstream adoption.
In order to get the most value out of blockchain, we need to be able to solve issues in areas of legality, technology, and cooperation.
The lack of common standards and clearly defined regulations is a number one limitation on blockchain’s ability to scale. Standards need to be established by the governments, with complete legal definitions.
Blockchain industry is facing increasing regulatory pressures. As the market capitalization grows, governments are starting to pay more attention. The uncertainty regarding regulations comes in many forms and will have consequences. Certain countries have already made cryptocurrencies illegal within their borders. For example, Bitcoin is completely legal only in 110 out of 251 countries.
The global nature of the blockchain is the reason why many legal questions still remain unanswered. And while the governments are taking it slow and steady in the development of new regulations, the current regulations are causing headaches to the blockchain businesses trying to stay compliant. But even if we become fully compliant with the regulations today, there are no guarantees we will be tomorrow. Blockchains are immutable, and if the regulations change, there may be troubles in the future as they cannot be updated, changed or amended.
Even when governments try to take a slow, steady, and reasonable approach to regulation, issues arise. For example, since blockchains are immutable, what happens if they meet regulations today but fall foul of future regulations? No one will be able to update, change, or amend them.
The creation of an ecosystem is the next step towards a critical mass required to make many use cases feasible. Blockchain has a vast potential laying in the network effect, and increasing the size of the network can bring numerous benefits. But, this would require a massive amount of cooperation across different businesses.
Natural competitors would need to cooperate to make this happen, which poses one of the hardest elements to solve on the road to mass adoption. Agreeing on how the system and investment will be managed poses a big problem as the industry remains highly fragmented and in a perpetual state of division regarding protocols, technology, legality, ethics, and other matters.
Blockchain is still a relatively immature technology and has limitations to its current viability. Huge energy consumption and transaction speed of certain cryptocurrencies are creating a misconception that blockchain is not viable. But in reality, the technology is defined by a series of choices the product designers make. Those choices impact everything from energy consumption and transaction speed to block size and security.
The Potential of Blockchain
The potential of blockchain technology lies in the following:
Blockchain’s short-term value lies predominantly in cost reduction. When the results come, we can expect to see the birth of transformative business models.
In long-term, Blockchain could open new opportunities and jobs in the majority of industries, help create safer online systems and improve overall speed, security, and management of our data in crucial areas such as government, healthcare, and finance.
The world’s economy is changing. Trust and integrity are more valuable than ever in the digital world. The blockchain, together with smart contracts and digital currencies will make the trade and regulatory processes safer, faster, efficient, and scalable. And the economy will continue its path towards decentralization as more and more small players, supported by the digital technologies, join the market.
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