The blockchain which is also termed as Distributed ledger technology is an unarguable ingenious invention. One of the biggest buzzwords in technologies of the current times. One can easily find Blockchain as if in keynote speeches at conferences, Google search, trending video, and even your favorite gym.
Well with the innovation in evolving technology, blockchain attracts companies of every size. Real adoption of blockchain is in for insurance companies, food supply, finance, law enforcement, identify cross border transactions & many more. Blockchain technology has the potential to make transactions more secure& transparent. Despite developing unique and various use cases, there is a slew of challenges. That needs to be solved before adopting blockchain on a large scale.
Let’s have a look at the five major challenges blockchain is facing in 2020.
The Major Limitation and Challenges of Blockchain
- Functional scalability issues
- Brain drain because of high energy consumption
- Lack of security and legal uncertainty
- Regulation in the ecosystem
- Low awareness and understanding
1. Functional Scalability Issues
One of the hurdles in Blockchain is implementation issues. To get a clear insight, let understand through the example of bitcoin. For example, the bitcoin blockchain is expanding at 1 MB per block every ten minutes. Currently, it has a size of 241 GB. While an Ethereum full archive node currently takes up over 3 terabytes of data.
While another issue could include time taken issues. IN the case of the blockchain development the validation takes several minutes. Because the maximum capacity of transection of bitcoin is around seven transactions per second. Blockchain networks are slow, which make it’s unviable for large scale application.
2. Brain Drain because of High Energy Consumption
Ever since its inception Bitcoin trust minimizing consensus has been enabled by its proof of work algorithm. The machine performing needs around 200 GB of storage space in every node that is part of the blockchain network. Along with that other requirements are 5 GB upload & 500 Mb download every day.
0.2% of the total electricity is used by miners presently. If it continues to increase then, Miners will take more power than the world can afford by 2020. This is the main reason many organization is avoiding blockchain.
And to control the situation, blockchain can utilize the Consensus method to validate the transitions. As consensus algorithm requires very little energy to process. And this is a genuine way to bring blockchain technology in business again.
3. Lack of Security and Legal Uncertainty
Another factor that challenges Blockchain is the lack of talent to build a decentralized application. No matter what perks blockchain technology has a flaw in coding or loophole is one of the significant challenges in it. Because of false coding and loophole, one can use this deception and can hack the system easily.
Not only that but Blockchain Decentralization can redefine data privacy. As anonymous features of the blockchain not only attract experts but criminals too. Because the nature of the network is decentralized so that no one can know your true identity. This is the main reason for targeting bitcoin, as it is used as a currency in the black market and the dark web. While many criminals use cryptocurrency to purchase an illegal weapon. To stop the increasing criminal connection halt blockchain implementation.
4. Regulation in the Ecosystem
The Fourth major key challenge of blockchain is a decentralized ecosystem. As many organization uses blockchain technology as a means of transaction. But as there is no specific regulation about it, no one follows any rules when it came to the blockchain. It results in significant risk for anyone who wants to get involved with blockchain.
A well-decentralized ecosystem consists of multiple layers, and many layers are still are under development.
5. Low Awareness and Understanding
Many professional experts in finance have less or no knowledge of blockchain. That is another challenging factor in its evolution. 99% of people failed to understand blockchain or bitcoin or cryptocurrencies. Well, you can not blame the mass, as much of the blockchain discussion tend to be technical. As in the world 0.5% of the world using blockchain technology. And in that blockchain app development company is one of them.
To make it viable a new tact is required to skip its painful explanation. So that more people can use it and it gets a chance to fight for its existence.
Blockchain technology is still evolving. However, to implement on large scale it involves an array of serious challenges that need to be addressed. The current focus to make this new, innovative technology widely available.
Also, many of the issues get resolved based on how they get implemented.
Today, private and permissioned blockchain is being integrated. At the top, hybrid of various blockchain protocols are adopted to achieve what’s needed. This also nullifies many of the above-mentioned limitations. Hence, anything that is built on the blockchain is very transparent and everyone involved is accountable for their actions.