Any emerging technology goes through a hype stage. It takes a while to get the kinks out and for pilots and proofs of concepts to prove use cases and shift the curve to broad adoption. The power and disruption of blockchain is evident in the news almost daily, and people are beginning to understand how blockchain distributed ledger technology works. I’ve previously blogged about soaring investments in pilots and proofs of concepts (POCs) on its security and examples of use cases. Even so, there are several issues currently slowing adoption.
Blockchain adoption is currently crossing the chasm, and I believe the next two years will be critical for resolving issues now slowing broader adoption.
What Are The Obstacles To Adoption?
1. Regulations
Regulatory entities often lag technology innovation, and that’s certainly the case with blockchain. New products and services are evolving based on blockchain transactions, but there are currently no regulations on how the transactions should be written. Although auditability and transparency are promised benefits of blockchain, highly regulated industries may need to develop new regs for blockchain. Its distributed ledger transactions are likely to necessitate changes to industry regulations governing financial reporting as well as auditing processes. Information-sharing regulations will likely need to be altered to protect companies as well as their investors and their customers. In addition, laws will need to be enacted that govern blockchain’s smart contracts.
I believe the services industry will play a crucial role in ensuring that companies adhere to industry and government regulations when using blockchain. Historically, service providers have guaranteed this assurance of continual regulatory updates in services to their customers. Deloitte has already stepped forward and launched KYC-as-a-Service for its customers that use blockchain and need to adhere to “Know Your Customer (KYC) regulations.
2. Standards
As with regulations, we currently lack one common set of standards for writing transactions on a blockchain. In fact, there are three open source consortium organizations, each with its own standards and code. Part of this evolution is complicated by the wide variety of usages for blockchain and the most appropriate form standards will need to take in addressing these use cases. The regulations that evolve to regulate this environment will help drive the adoption of standards and may well drive these consortiums together.
3. Need More Validation
Another obstacle to adoption is executives’ fear that the technology has not been tested enough in pilots and POCs. Ultimately, what are blockchain’s limitations? Early POCs validate its scalability, but what are its limitations for handling a large volume of enterprise transactions and data? Different applications will face different scalability issues as adoption increases. And how much time and computing power will be necessary to process a huge number of transactions?
Early POCs also validate blockchain’s security for tamper-proof transactions. But some executives are concerned about whether the private information in a blockchain could still be shared outside the blockchain. So, there are issues around trusting the technology. Various vendors are working on creating strong encryption and security mechanisms, and several blockchain entities and consortiums are evaluating different methods to ensure the technology is trustworthy for protecting private information.
The Obstacles Are Not Roadblocks
In short, the primary challenge to adoption is that blockchain is still a nascent technology. Thus, there are unknown factors or vulnerabilities. But they won’t stop it from being widely adopted. Trust will grow. Regulations will be enacted and standards will be adopted. As I said earlier, I expect crucial changes will occur over the next two years that will shape the way blockchain is applied in businesses and also make it easier to implement.
Like any emerging technology, blockchain will evolve. But because of its potential disruptive power in all industries, I believe it will evolve quickly. Certainly, the service provider industry will take an active role in furthering adoption of blockchain.
When your company considers applying blockchain to create new value in your business, make sure you allow the business to drive the investment. In other words, first look at the business problem or needs that could benefit from blockchain and then apply the technology. Don’t do it the other way around.
