Blockchain will become a mainstream technology- but there are hurdles that must be overcome
If blockchain were to fail, it would have been long dead. The fact that the technology has grown leaps and bounds since its inception ten years ago is proof that more progress is assured and inevitable. Given the advantages it has proven over-centralization, it’s more of when blockchain will be successful than if it will be successful.
Over the last three years, the growth observed, especially in the DeFi industry, proves that blockchain is indeed the future of products and services globally. The success of established platforms and coins such as Bitcoin and Ethereum further cements that we are on the precipice of global migration to decentralized networks.
In addition to these facts, the glaring concerns of the public against the uneconomical and potentially unethical practices of centralized services are the market cry for a far more robust, secure, and decentralized system. Despite the apparent demand for decentralization, blockchain technology still needs to overcome challenges in critical areas that determine any platform’s overall health and success.
Overcome slow transaction speeds
As Deloitte puts it, blockchain transactions can be slow. The average transaction rates (TPS) of platforms such as Visa is around 1,700tps, whereas Ethereum, arguably the most successful protocol, still operates at speeds of about 15tps. The stark comparison shows just how much blockchain is required to grow before it successfully topples existing centralized platforms.
Fortunately, the explosion of DeFi services has encouraged the improvement of throughput in the entire ecosystem. New protocols are producing throughput that can rival centralized platforms and even surpass some of them. We have platforms like Stellar, EOS, and Ripple that have crossed over the 1,000tps mark; others such as Neo are hitting 10,000tps, while AlephZero claims to hit 50,000tps in certain network conditions.
Arguably, the main innovation that allows the new protocols to overcome throughput challenges is moving transactions from the mainchain to sisterchains or parachains, allowing multiple transactions to be carried out away from the mainchain before being added later on. Because blockchain is a continually evolving ecosystem, other innovations may help increase these speeds even further.
Mass adoption requires adequate provisions for the diverse and dynamic demands of users. As seen in centralized markets, the market has unique preferences for various services, which, in decentralized markets, may be provided by different chains that are inherently incompatible, as noted by Deloitte. Thus, there is a need to achieve true interoperability for efficient service provision across existing and upcoming protocols.
To this end, the industry is adopting new ways for chains to communicate. An emerging trend in new protocols and blockchain platforms is support for cross-chain transactions through cross-chain technology. This allows value transfer across chains of different protocols enabling seamless transactions across the blockchain ecosystem.
True interoperability ensures that, even with unique preferences, users can still transact or communicate from their more miniature protocol ecosystems to the larger blockchain ecosystem.
The economic benefits laid out in blockchain platforms are truly compelling; however, the reality on the ground is quite alarming when you consider reports such as Elite Fixtures, which highlights that mining one Bitcoin can cost up to $26,000 in places like South Korea.
The sustainability and economic viability of blockchain must be proven and demonstrated before the masses can adopt disruptive technology. Fortunately, the ever-evolving ecosystem is already working on energy solutions that are sustainable, cost-effective, and friendly to the environment.
Supportive services such as those by Perpetual Industries are working on green energy mining solutions to make crypto mining efficient and economical. The success of such projects will likely result in a significant drop in the average and highest price of mining globally. Because these solutions are sustainable, the market appeal of blockchain solutions may also increase.
Regulations around blockchain technology are still unclear globally, hindering investment into blockchain solutions. Most laws around blockchain technology only focus on the cryptocurrency aspect of it. There are no clear regulations on how to standardize and enhance service provision through blockchain. Rules on smart contracts and international transactions can help improve the quality of blockchain services globally and competently compete with existing centralized services. It will also clear doubts by investors concerning the future of blockchain pertaining to regional and global laws.
A Deloitte report highlights the collective impact of blockchain technology instead of a competitive impact in the supply chain industry. Most blockchain solutions are self-serving in that these platforms focus on improving their services and products without proper consideration of the entire ecosystem.
Through a collaborative approach to blockchain, the industry can attract more users and improve its services. If the collaborations can benefit more from intra-protocol to inter-protocol, the efficiencies in the blockchain would be more significant.
Another approach that is possible is collaborative works between different projects with a common industry-changing goal. This could potentially help in the standardization, education, and further innovations in the blockchain ecosystem. For example, if the initial protocol had made collaborative provision, specific challenges such as interoperability would not have emerged.
Still on course
Despite the listed challenges, blockchain is moving in the right direction for mass adoption of its services. The industry is aware of its challenges and is continually working to overcome them, as highlighted in some of the explanations above. It is only a matter of time before these solutions are implemented in the ecosystem, propelling blockchain to mainstream technology.
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