Blockchain, mostly known as the backbone technology behind Bitcoin, is one of the hottest and most intriguing technologies currently in the market. Since 2013 Google searches for “blockchain” have risen 1900%. Similar to the rising of the internet, blockchain has the potential to truly disrupt multiple industries and make processes more democratic, secure, transparent, and efficient. Entrepreneurs, startup companies, investors, global organizations and governments have all identified blockchain as a revolutionary technology. What are the most important benefits & challenges associated with the implementation of blockchain technology?
9 benefits of blockchain technology
- Disintermediation & trustless exchange
Two parties are able to make an exchange without the oversight or intermediation of a third party, strongly reducing or even eliminating counterparty risk.
- Empowered users
Users are in control of all their information and transactions.
- High quality data
Blockchain data is complete, consistent, timely, accurate, and widely available.
- Durability, reliability, and longevity
Due to the decentralized networks, blockchain does not have a central point of failure and is better able to withstand malicious attacks.
- Process integrity
Users can trust that transactions will be executed exactly as the protocol commands removing the need for a trusted third party.
- Transparency and immutability
Changes to public blockchains are publicly viewable by all parties creating transparency, and all transactions are immutable, meaning they cannot be altered or deleted.
- Ecosystem simplification
With all transactions being added to a single public ledger, it reduces the clutter and complications of multiple ledgers.
- Faster transactions
Interbank transactions can potentially take days for clearing and final settlement, especially outside of working hours. Blockchain transactions can reduce transaction times to minutes and are processed 24/7.
- Lower transaction costs
By eliminating third party intermediaries and overhead costs for exchanging assets, blockchains have the potential to greatly reduce transaction fees.
7 challenges of blockchain technology
- Nascent technology
Resolving challenges such as transaction speed, the verification process, and data limits will be crucial in making blockchain widely applicable.
- Uncertain regulatory status
Because modern currencies have always been created and regulated by national governments, blockchain and Bitcoin face a hurdle in widespread adoption by pre-existing financialinstitutions if its government regulation status remains unsettled.
- Large energy consumption
The Bitcoin blockchain network’s miners are attempting 450 thousand trillion solutions per second in efforts to validate transactions, using substantial amounts of computer power.
- Control, security, and privacy
While solutions exist, including private or permissioned blockchains and strong encryption, there are still cyber security concerns that need to be addressed before the general public will entrust their personal data to a blockchain solution.
- Integration concerns
Blockchain applications offer solutions that require significant changes to, or complete replacement of, existing systems. In order to make the switch, companies must strategize the transition.
- Cultural adoption
Blockchain represents a complete shift to a decentralized network which requires the buy-in of its users and operators.
Blockchain offers tremendous savings in transaction costs and time but the high initial capital costs could be a deterrent.
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