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    Top 11 Blockchain Adoption Challenges and Solutions

    Blockchain technology has proven itself to be a major technological advancement that attracted many sectors worldwide. Every technological innovation comes strong at first, building hype among people by showcasing its best features. However, what happens when the hype fades? The technology’s major challenges come to light. Although blockchains are groundbreaking technology, they still have a long way to go before they catch mainstream attention. This article will go over the major blockchain adoption challenges and their possible solutions. 

    The Importance of Blockchain Technology

    Before we dive in, it’s best to discuss the importance of addressing blockchain’s challenges and the potential benefits this new technology can bring to many sectors. 

    Blockchains are described as distributed digital ledgers functioning on peer-to-peer networks. The dispersion of central points of power into a decentralized ecosystem is revolutionary. This is because it eliminates the need for intermediaries when conducting transactions between parties. Central organizations like banks will no longer control user data. 

    In addition, blockchains are highly secure and immutable. Transactions are conducted on the blockchain in a permanent way, with the ability to track and trace transactions. Sectors like medicine, government, finance, retail, gaming, and others are shifting their central system into decentralized ledgers. In fact, the broad awareness of blockchain technology is growing rapidly. However, its adoption is met with some issues. 

    Blockchain Adoption Challenges

    In order for blockchains to gain mass adoption, some challenges need to be addressed and solved before this technology can live up to its full potential. 

    Low Scalability

    Low Scalability

    The major bottleneck that keeps the blockchain from being able to accommodate high demand is its inability to scale accordingly. Blockchain’s scalability issues are considered to be the first and foremost problem facing the digital ledger. Scalability refers to how much a blockchain network can manage an increasing load of work. 

    Blockchains’ throughput is exponentially low compared to traditional payment systems such as Visa. Ethereum can process 20 transactions per second (TPS), while Bitcoin can only manage 7 TPS. These are negligible numbers when placed side to side with Visa’s whopping 24,000 TPS. 

    This is because blockchains, initially, were not designed to cater to high demands. Blockchains work fine for a small number of users, however, when mass integration takes place, the network won’t be able to handle it. Not to mention the blockchain trilemma, which is a belief that the blockchain cannot achieve decentralization, security, and scalability at the same time. One element has to be sacrificed for the other two. 

    Possible Solutions – Many developers are addressing blockchain’s scalability issues by implementing layer-2 solutions such as side chains, state channels, and rollups. Each one of these solutions increases the main blockchain’s throughput by processing transactions on a different chain. 

    High Energy Consumption

    Energy Consumption

    Energy consumption is another major blockchain adoption challenge. Most blockchains follow Bitcoin’s infrastructure and depend on the Proof-of-Work (PoW) consensus mechanism. Bitcoin mining requires huge amounts of computational power to operate. Mining is the process in which miners (or validators) verify transactions on the blockchain and create new cryptocurrencies. 

    Since blockchains are decentralized with no central authority, the overall network has to give consensus on the sequence of blocks that get added to the blockchain. Here comes the different types of consensus mechanisms. Bitcoin operates on the Proof-of-Work consensus, which is energy intensive. PoW requires miners to solve complex mathematical puzzles that demand massive computational power. 

    Some estimate that Bitcoin mining uses approximately 100 terawatt-hours of electricity. This makes its carbon footprint significantly large. Some countries, like China, have banned crypto mining altogether to reduce environmental damage. The U.S. has also proposed tax regulations on crypto mining in an attempt to reduce mining machines. 

    Possible Solutions – A change of consensus mechanism can significantly reduce mining energy consumption. Ethereum shifted from PoW to PoS (Proof-of-Stake) consensus in its latest upgrade, which significantly reduced energy consumption by 99%. Instead of solving mathematical puzzles, miners need to stake their crypto assets for a random chance to act as validators.

    Lack of Privacy

    Privacy blockchain adoption challenges

    One of the most attractive features of blockchain technology is its transparency which allows traceability and tracking of transactions. In many cases, this is an essential aspect. However, many sectors that deal with sensitive information can view the lack of privacy of the blockchain as a liability. 

    The decentralized aspect of the blockchain means that each node operating the network has access to all blockchain transaction data. Blockchains are known for being “pseudonymous”, which means that the data cannot be traced to a specific person, but where multiple appearances of a person can be linked together. However, identification in the blockchain is relatively easy. 

    In addition, unlike other systems, the transparency of the blockchain makes room for public scrutiny. And the immutable nature of the ledger adds to this idea. For instance, a whole transaction history can be exposed and attributed to a specific person. Although this can serve as a benefit when identifying scam artists, it can be a disadvantage for some. 

    Possible Solutions – The blockchain needs to be remodeled in a way that limited access can be given to specific users. This can be seen in private blockchains. 

    Technological Inefficiency

    Tech inefficiency

    Another blockchain adoption challenge lies in the source code of blockchain applications. Blockchain technology is very new, and thus, many programming flaws are bound to appear. However, unlike other technologies, a flaw in code is significantly damaging. Programmers who code the blockchain are dealing with money, and a small loophole can compromise people’s funds. Hackers go through the blockchain scouring for mistakes to exploit all the time. 

    This also can be seen in smart contract vulnerabilities. Smart contract scams happen all the time because of weaknesses in code. Since not all users are prolific code readers, this might get over their heads. This is where the technological inefficiency resides by blaming programmers for false code. 

    Many decentralized applications (dApps) have also a matter of false coding and loopholes, and bug-induced losses at this scale can be very dramatic. 

    Possible Solutions – Extensive research, resources, and professional workforces need to be implemented in blockchain ecosystems to avoid risking people’s funds. This will become more available as blockchain technologies advance. 

    Large Skill Gap

    Skill Gap

    Building upon the last blockchain adoption challenge, flaws in source code relate to the lack of adequate skillset in this field. There isn’t many qualified personnel to manage blockchain technology. This is because technology is fairly new, and there aren’t many university degrees or higher education addressing this field. 

    There is a huge demand for blockchain talent that has increased by over 300% among established businesses and startups. Major firms such as Google, Amazon, Ebay, and Youtube have already gathered a Web3 dedicated team that includes blockchain specialists. However, the unavailability and lack of blockchain talent created a competitive market between firms. Some businesses are paying workers in the crypto sector over $1 million dollars a year. 

    Possible Solutions – The only way for workforces to catch up with the rapid advancement of the blockchain is to have dedicated Web3 courses, university degrees, developer toolkits, and a set of workshops, seminars, and crypto hackathons to further enhance blockchain skills. 

    No Regulation

    No regulation

    Many sectors and entities are still afraid to implement the decentralized digital ledger for its lack of regulatory oversight. Until now, blockchain assets are yet to be classified whether they are securities, commodities, or intellectual properties. This can create uncertainty among users about how to deal with blockchain-based assets. In addition, blockchain-related frauds are not always met with legal jurisdiction, as governments are still torn about what to make of them.

    In the U.S., federal agencies and regulators such as the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and the Treasury have all issued regulatory rules addressing blockchain assets, however, it has been difficult. 

    Among the considerations that are yet to be addressed by legal authorities are data hosting, data protection, royalties, estate and succession planning, and crypto taxation. 

    Possible Solutions – Governments are slowly regulating the crypto space as the blockchain advances. However, this might create another problem linked to the decentralization of the blockchain. Restrictive regulations might render the network more central, which is against Web3’s ethos

    Fraudulent Activities

    Criminal Activities

    This blockchain adoption challenge can be found in all sectors. Fraudulent activities have plagued many fields and the niche sector of the blockchain isn’t any different. However, because blockchain technology is fairly new, its reputation for being a space for fraudsters and scammers beat its reputation for being a revolutionary data-storing technology. 

    The anonymity provided by the blockchain and the lack of regulations has made it easier for fraudsters to assume they can get away with things such as wash trading, plagiarism, money laundering, phishing, impersonation, and many other illicit activities. 

    Possible Solutions – Bad actors will always be part of every ecosystem, blockchain-related or not. However, the marketing of blockchain technology has to step up in order to spread the truth about this groundbreaking technology, instead of making it appear as a criminal hub. 

    Security Problems

    Security Problems

    Some of the fraudulent activities come from the fact that the blockchain isn’t as secure as it claims to be. It is true that one of the most prominent features of the blockchain is its high security and immutability. Blockchains are in fact more secure than traditional central networks with single points of failure. 

    However, the distributed network is prone to attacks such as denial of service (DoS), Sybil attacks, routing attacks, double-spend attacks, and the most famous 51% attack. Some security breaches don’t relate to the blockchain’s design, instead, they emerge from the lack of user protection. 

    For instance, phishing scams are successful when users mistake malicious links with proper ones, which can compromise their crypto wallets

    Possible Solutions – In order to prevent these blockchain attacks, the network has to implement security protocols such as routing protocol, secure consensus mechanism, node monitoring, user security education, and mining pool monitoring. 

    Blockchain Interoperability

    Operability

    Blockchain adoption across many sectors and organizations increases the need for interoperability. Interoperability means the ability to share and access information across different blockchain networks without the need for centralized authority. 

    Organizations will most likely adopt blockchain technology with varying characteristics, catering to their needs. This means employing different consensus mechanisms, layer-2 solutions, governance rules, blockchain versions, and other characteristics. The lack of interoperability can make blockchain adoption a challenge, and almost a near-impossible task. 

    Possible Solutions – Many projects have emerged over the past year that bridges the gap between different blockchains, achieving interoperability. Many of them are trying to connect private networks to public blockchains, which will become useful for blockchain mass adoption. 

    Negative Public Perception 

    Public Perception

    The negative reputation and the lack of user trust create a significant blockchain adoption challenge. Many organizations and entities do not trust blockchain’s security, and some have even questioned whether Web3 is as decentralized as it claims to be. In addition, the majority of the public doesn’t even know of the blockchain’s existence. 

    Some of the negative stigmas around blockchains relate back to the Silk Road marketplace on the dark web. The marketplace was a platform for buying and selling drugs, unregistered weapons, and other illicit products. Silk Road users conducted transactions using Bitcoin and other types of cryptocurrencies because they promoted anonymity. Now, people relate cryptocurrencies and blockchains in general to criminal activities.

    In addition, there are a lot of myths and misconceptions surrounding blockchain technology, such as it being illegal, a scam, volatile, and other fallacies. 

    Possible Solutions – Just like with fraudulent activities, marketing blockchain technology has to be well-studied. Spreading false information surrounding the digital ledger only prolongs its adoption duration. Organizations need to properly educate their users, customers, and staff about the potential benefits and drawbacks of the blockchain. 

    Complex Operability 

    Interoperability

    Blockchains are hard concepts to understand. Words like consensus mechanisms, DeFi, sidechains, gas fees, mainnet, and other complex concepts can seem daunting for the traditional user. Before blockchain becomes widely adopted, users need to educate themselves and understand the principles of encryption and distributed peer-to-peer networks.  

    The fact that smart contracts are written in code is also a major challenge for most people. Not everyone is a programmer, which can create literacy issues. Users need to understand what they are signing up for when dealing with their lifelong savings. 

    Also, Setting up a crypto wallet requires a certain level of understanding of how crypto and blockchain actually work. In addition, operating a blockchain is time-consuming, not cost-efficient, and would need adequate financial and technical expertise. 

    Possible Solutions – Some third-party service, such as Blockchain as a Service (BaaS), facilitates the implementation of blockchain technology for companies.  There is also Wallet as a Service (WaaS) that enables companies to deploy fully scalable, secure, and customizable on-chain wallets to their customers.

    Addressing Challenges

    Although it might seem like the blockchain is facing a lot of problems, it is completely normal for a new technology to encounter some challenges. Nothing can start out perfectly without any flaws. 

    The concept of the blockchain and the decentralization aspect of Web3 is very alluring to organizations who are looking to disrupt our current flawed financing system. And so, many are investing in the technology in the hopes of it playing a crucial role in the public and private sectors. Blockchain technology is only scratching the surface and has many years of development to come.

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