Blockchain technology is often criticized based on impressions of its shortcomings. For example, in 2019, there were widespread reports underestimating blockchain as a marginal technology not worthy of attention and investment.
After countless small and medium-sized blockchain startups closed in 2019. The justification that these occurrences were due to a 'blockchain fatigue' is only partially true.
In 2020, the first indications are that large companies began to perceive blockchain technology as a real solution and applicable to several problem points in their business models.
Walmart, IBM, Maersk, Facebook, FedEx and Salesforce are just a few of the companies that have confirmed their goal of adopting blockchain technology. And indeed, some have already launched solutions based on this technology.
The partnership between IBM and Maersk, which uses blockchain in a logistics solution, won its first deal with new transportation giants later this year.
On the other hand, Walmart Canada recently opened the largest blockchain-based freight and payment network in the world, which addresses pain points in the retail giant's supply chain.
Facebook proposed Libra, the stable currency asset, with the potential to transform the social media conglomerate into a global banking institution.
Likewise, the People's Bank of China has indicated that its sovereign digital yuan is almost ready for global use. In that regard, Chinese leader Xi Jinping encouraged the rest of the country to embrace the opportunities generated by blockchain to boost the country's innovation.
Blockchain and cryptocurrency challenges
Regardless of the positive trends regarding blockchain adoption in 2020 to date, blockchain technology and cryptocurrencies face some considerable challenges that need to be overcome before their mass adoption.
In this article, we explore the three main challenges that blockchain technology and cryptocurrencies face in 2020. These include:
- The immaturity of blockchain and cryptocurrency technology
- Bad reputation
- Clash with laws, regulations and other society control systems
The immaturity of blockchain and cryptocurrency technology
When it comes to technology, there is a natural tendency to overestimate the effect of emerging technology in the short term and underestimate it in the long run.
With that in mind, the immaturity of blockchain technology and cryptocurrencies creates significant challenges that need to be overcome before mass adoption is realized.
Immaturity problems are connected:
Usability –It is widely recognized that buying and selling cryptocurrencies is still a challenge.
Essentially, if you want to operate in the crypto ecosystem you need to participate in a verification process, which many people consider to be an impediment to your participation in this environment.
Complicated security procedures are not attractive for mass adoption.
For this reason, the need to develop intuitive procedures for the purchase and storage of digital currencies remains a crucial issue for this sector.
Interoperability – Similar to the days of the Internet's emergence, when private intranets were more popular, blockchain is characterized by the absence of interoperability between different platforms.
However, partnerships like Ethereum and Hyperledger can inspire interoperability between different blockchains for the future.
The real-world adoption of blockchain and cryptocurrency technology depends heavily on this capability.
Safety – Typically, blockchain systems are more secure compared to conventional computer structures.
However, hackers can still breach applications, systems and companies that offer blockchain services, such as cryptocurrency wallets.
For example, in 2019 a crypto exchange platform, QuadrigaCX, lost $ 250 million to hackers due to its centralized business model.
Scalability – Although some platforms, such as Ripple, indicate that they have the capacity to handle the high volume of transactions, most platforms still have a long way to go in terms of scaling their solutions.
For example, Ethereum, the pioneering platform for smart contracts and decentralized applications (dApps) processes only 15 transactions per second.
Although the platform is exploring updates like the one in Istanbul, the issue is not fully resolved because this update still faces several delays.
Interoperability can play a crucial role in meeting this challenge, as it would allow users to take advantage of different blockchains and achieve scalability.
Mention of terms blockchain and cryptocurrency makes us think of dishonest actors, criminals and fast-growing Ponzi schemes that employ emerging technology to perpetuate millionaire fraud.
Likewise, heated disputes and discussions between blockchain platforms give rise to a global bad impression regarding the blockchain and cryptocurrency ecosystems.
However, we are seeing exciting partnerships, such as the Token Taxonomy Initiative, a neutral platform that is being tested by the Enterprise Ethereum Alliance.
While this is a step towards building a reputation, it is still not enough.
More collaboration is needed for this transformation to take place. Improving public perception of blockchain and cryptocurrency ecosystems is a key part of the quest for their mass adoption.
Clash with laws, regulations and other society control systems
One of the main reasons why blockchain technology and cryptocurrencies are having to work so hard to achieve mass adoption is due to the fact that they represent a confrontation with conventional models of the economy and society.
Regulation is the most notable obstacle for blockchain innovators. Essentially, regulators favor conventional operators over disruptors.
Obviously, blockchain technology and cryptocurrencies present new challenges for regulators looking to protect consumers and markets.
However, statutory agencies in the world's largest economies have largely denied the use of this technology. This ends up stifling attempts at innovation and growth.
For this reason, the first major economy that embraces the blockchain in a meaningful way and creates a regulatory system that promotes innovation, while safeguarding users at the same time, will drive the expected growth of the blockchain.
In conclusion, as is the case with something as transformative as blockchain, the future cannot be predicted, but achieved.
Now more than ever, blockchain or cryptocurrency projects will take the lead in building and transforming this environment.
About the author
Fares Alkudmani has a degree in Business Administration from Tishreen University in Syria, with an MBA from Edinburgh Business School, Scotland. Since January 2019, he works at the cryptocurrency company Changelly as general manager for Latin America.