In recent years, blockchain has captured the world’s imagination with its promise of transparent, decentralised transaction systems. This is most apparent in the financial sphere, where the technology is already being used in the form of cryptocurrency.
Although blockchain has the potential to transform the inner workings of countless industries, there are also significant challenges standing in its way. So, what are they?
In this article, we’ll discuss five challenges with blockchain technology.
- Low adoption & scalability
Blockchain technology needs widespread adoption to fulfil its potential. Many organisations still haven’t deployed blockchain across their operations, creating significant barriers to the effectiveness of the technology.
The high levels of computation needed to validate blockchain transactions mean that the corresponding networks can become slow and inefficient. And this problem is only exacerbated when the numbers of users and transactions increases. In other words, the technology isn’t yet fit for purpose in large-scale applications. While various strategies are being explored to overcome this challenge, it doesn’t seem like we’ll have a perfect solution any time soon.
- Unsustainability
Not only can blockchain networks be slow but they also consume a significant amount of energy. This has led to concerns about the environmental impact of the technology. Research suggests that mining Bitcoin may be responsible for producing more than 65 megatons of CO2 per year. The global Bitcoin community must explore more environmentally friendly solutions if the technology is to see widespread adoption.
- Vulnerable security
Many advocates position blockchain technology as a secure alternative to traditional transaction methods. However, blockchain networks aren’t without their security vulnerabilities. This is particularly the case for cryptocurrency networks, which hackers allegedly stole more than $1.5 billion from in 2023. Security vulnerabilities like these undermine public confidence in the technology.
- Dense complexity
Another challenge facing blockchain is the vast amount of technical expertise required to implement and maintain it. As it stands, very few people have the skills needed to engage with the technology successfully. Many people benefit from enlisting the help of blockchain and crypto experts to better navigate the industry. Increased collaboration between experts, academic institutions, and government bodies could help make these skills more accessible, but it’s a significant barrier to entry as things currently stand.
- Low interoperability
The lack of compatibility between different blockchain networks is another crucial challenge for the industry. Currently, each system has its protocols and standards, making it difficult for different platforms to communicate with each other. Users may need to use different techniques and procedures to interact across platforms, hindering simple collaboration.
Blockchain technology has the potential to transform the world. But this potential isn’t likely to be fulfilled until the industry overcomes the challenges we’ve outlined above.
