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The rising popularity of bitcoin and other cryptocurrencies has brought attention to the technology that underpins them Distributed Ledger Technology (DLT), sometimes known as blockchain. However, there is a lack of understanding of how blockchain works, which leads to strongly heated ideas and expectations from this technology.
Regardless of one's opinion, several studies have indicated that blockchain adoption beyond the Proof-of-Concept stage is lacking. Here are a few roadblocks to blockchain adoption beyond proof-of-concepts.
Lack of an Enabling Infrastructure
One of the most significant barriers to blockchain adoption has been a lack of infrastructure support. One of the most major roadblocks is the computer power and energy necessary to deploy blockchain, particularly in public, permission-less networks. Furthermore, while protocols and network providers have grown and improved significantly, many application providers that use these networks are still in the early stages of development.
This circumstance is analogous to the early days of the Internet when infrastructure and access were major issues. Another barrier to adoption is the lack of established protocols, which makes interoperability across networks built on different technologies difficult.
The Regulatory Litmus Test is Passed
Although private and permissioned networks are gaining traction in the regulatory business, banks and financial institutions have yet to acknowledge and accept crypto financials.
According to study, a large number of central banks are looking into blockchain systems for remittance transfers, interbank payments, and other applications. About 36% of central banks see blockchain as having the potential to help with regulatory compliance, but just 18% specifically mention looking into it for audit trails such as tracking of payments and asset transfers.
However, there is no clear strategy or goal for how this technology can be used in the public sector. This means that resources and funding for testing and deployment are constrained. Some studies also point to the widespread belief that the bulk of government services are operating admirably and that there is no reason to pursue a comprehensive revamp of their systems that would require large investment.
Data protection standards should be considered in distributed ledger networks with regulated organisations, and data should only be stored and processed in areas that are permitted by legislation. This, however, only works if all network members have their nodes running in places allowed by the rules.
Quantifying Benefits is a Difficult Task
At the enterprise level, blockchain adoption is primarily driven by budget-strapped business and IT departments that are unable to adequately quantify the benefits. As a result, the technology is regarded as a new toolbox or a difficult business case. According to surveys, "unknown costs/benefits" is still a major concern for central banks and, to a lesser extent, private businesses.
Blockchain applications may be found in a variety of businesses and locations. This technology can help processes with a lot of paperwork and a lot of different stakeholders gain a lot of efficiency. Neither central banks nor businesses believe that blockchain lacks real-world applications. This implies that, despite the numerous obstacles that must be addressed before the technology can be broadly adopted, its potential benefits are clear.
Contrary to the significant attention the technology has been receiving, it seems blockchain is a solution waiting for the right problem statement.
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