Blockchain Limitations: What You Need to Know Today

Blockchain is here to stay. But in what form? Which people will most benefit from blockchain? Who will it most inconvenience? Let’s take another look.

Some people have claimed that blockchain is a “trustless” network. However, this doesn’t mean that all parties involved in an economic transaction don’t trust each other. Blockchain is accepted more than it was a few years back due to its improved security and traceability.

Blockchain is becoming more accepted with security, which means more business investment.

Statista predicts that global spending on blockchain-enabled services will triple between 2024 and 2024. It will reach $19 billion, compared to $20 billion in 2021. The distributed ledger system provides secure data encryption and fraud prevention. It solves two critical business requirements: record-keeping and transaction processing. With all this in mind, how can businesses and individuals be hesitant about using blockchain?

First, the Many Benefits of Blockchain

technology can be used to improve the efficiency of every business. This includes reducing paperwork, reducing expenses, speeding up procedures, and eliminating the need for third-party facilitators. Additionally, blockchain can help enterprises increase operational efficiency and reach their full potential.

1. Decentralization is the first step.

Participants in a distributed network don’t need to know each other and have access to the data as a distributed ledger. Blockchain is a trend and it is here to stay.

2. Impermanence.

Long-term, data tracking is easier when time and date stamps are used. Blockchain ensures that data audits will be accurate.

3. Information security

The likelihood of hostile intruder attacks is very low thanks to the high encryption and fast recording. Hacking such networks is much more difficult than hacking systems on dedicated servers.

4. Savings

Facilitators have been eliminated, which makes it possible to conduct transactions quickly and efficiently. Blockchain also automates data aggregation, simplifies reporting, and streamlines auditing. Organizations, especially those in the financial services and insurance (BFSI) industries, can reduce operating expenses.

5. Traceability.

Retailers need to be able to trace the origins and manage their inventory efficiently. Due to the transparency that blockchain offers to the supply chain, environmental pollution won’t be an issue.

6. Security risks are reduced on operational expenses.

Security Blockchain technology can help firms decrease security risks as well as operational expenses. It also helps to cause disruptions and business changes. Blockchain adoption is a decision that must be made by companies. They should also examine the best methodology and evaluate available resources.

Blockchain Deployment Limitations

It is important to fully understand the technical and implementation obstacles before deciding whether to use them.

1. Inability to Scale

Network congestion means that transactions will take longer if there are more nodes involved.

Here’s an example:

Bitcoin can currently handle seven transactions per second. However, centralized payment systems are able to handle thousands of transactions. Visa, for example, processes about 1,700 transactions per minute, while Mastercard processes about 5k transactions per second.

A central design does not notify any other members about transactions. This increases speed. However, transactions on the blockchain require approval from the majority of the nodes.

Businesses should consider the performance aspect before implementing blockchain-enabled products. The slow capacity is not CRM-friendly.

2. The Problem of Implementation

All it comes down to the initial cash inputs. For some firms, implementation costs can be prohibitive. Although most solutions are free, there may be licensing fees, ongoing maintenance costs, and other expenses if you decide to switch to a paid version.

It may be more cost-effective to delay the implementation of blockchain if organizations are unable to allocate large amounts of money.

3. Talent Pipeline Shortage

According to estimates, the demand for highly-skilled and skilled blockchain developers rises by 300-500% every year. This is a global problem that affects all countries, from Singapore to the United States.

This technology is still in its infancy so it will take time for the development community to create appropriate instructional programs and meet market demand.

Blockchain Environment

Private keys that are owned by individuals can be a weakness in a decentralized environment. They are accessible to all data once they have been created during wallet creation. The risk of having stolen data is high.

4. Legacy Systems and Compatibility

There are potential data loss and corruption risks if the blockchain solution is integrated with an outdated system.

5. Energy consumption

Prices are rising because of the need to cool the equipment. If you have snow, the heat heats your garage and part of your house. If proof-of-work is not an option, you will have to pay energy costs for cooling.

To Be or Not to Be Blockchain

Blockchain could lead to temporary disruptions in business due to its limitations, including issues with scalability and implementation, private keys integration with legacy systems, high energy consumption, lack of talent, and problems with high-level security.

Consider all options when deciding whether to make a commitment to blockchain technology.