Blockchain is undisputedly one of the revolutionary technologies of the 21st century.

Many organisations across industries are integrating blockchain into their businesses for good. Those who are pondering over implementing the technology in future should understand what the technology is, along with the benefits they can reap, and the challenges they can face throughout the implementation process.

Benefits of Blockchain

Decentralisation is one unique aspect of the blockchain technology; its other benefits include privacy, accuracy, cost, and security.

• Decentralisation: Blockchain does not depend on a central point of control and hence does not store any of its information in one location. It is usually copied and then spread across a computer network, which makes it difficult for cybercriminals to hack. The absence of a central authority makes the blockchain system trustworthy and more secure.

• Privacy: Data generation is a continuous process in today’s digital age where regular internet users agree to uncountable cookies that monitor their online activities, giving away some of their personal details to social media platforms. This personal data is then used by companies to market their products and services more efficiently. The situation with blockchain is a bit different though. Many blockchain networks function as public databases that can be accessed by anyone with an internet connection to view list of the network’s transaction history.

However, the users can access information about the transactions but cannot access others’ identity or information on the network. This confidentiality is recorded in the form of a unique code called “public key”.

• Accuracy: A network consisting millions of computers approve all the transactions on a blockchain network, allowing no human interference in the verification process at all. This results in less human error and exact record of information. If at all, should a computer make an error on the network, then the error is only made to one copy of the blockchain. And if the error has to spread across the rest of the blockchain, then the same has to be made by a minimum of 51% of the network’s computers, which is next to impossible.

• Cost: Usually, people have to pay charges to a bank to verify a transaction. This involvement of third-party verification is absent in blockchain, which saves that extra money.

Challenges involved in blockchain implementation

On one hand where blockchain holds many great features, there are a couple of challenges involved in its implementation on the other.

• Security: Many financial institutions across the world have launched probe into digital currencies. A research report from the Bank of England states, “Further research would also be required to devise a system which could utilise distributed ledger technology without compromising a central bank’s ability to control its currency and secure the system against systemic attack.”

• Privacy: As previously discussed, blockchain offers complete privacy and protection from hackers; it also allows unlawful trading and activity on the network.

Example: A 2018 study conducted by a blockchain analysis start-up found there was a fivefold increase in the number of massive illegal operations working on the Bitcoin Blockchain between 2013 and 2016.

• Inefficiency: Bitcoin is a perfect example to explain how blockchain – despite its helpful characteristics – is inefficient in one aspect.

Bitcoin’s Proof-of-Work (PoW) protocol is a bit time consuming process. It takes nearly 10 minutes to add a new block to the blockchain network. This means that only seven transactions per second (TPS) are managed at the given rate. Apart from Bitcoin, other cryptocurrencies like Bitcoin Cash and Ethereum perform much better than Bitcoin. Bitcoin Cash takes 60 TPS and Ethereum takes 20 TPS, but they are still limited by blockchain.

• Cost: Though Blockchain can save money on transaction fees, the technology is definitely not free. The PoW system, which is used by Bitcoin to authorise transactions, consumes enormous amounts of computational power. In reality, the power from the millions of computers on the Bitcoin network is nearly the same as what Denmark consumes on a yearly basis. This kind of energy costs a lot of money and charges vary from region to region, which could be from just £700 to a shocking £34,635.

Additionally, the software required to run the technology needs to be customised for every single organisation and expertise in the field will have to be employed. This adds to more expenses.

There is not even a grain of doubt when it comes to the plusses of Blockchain and its potential to transform businesses in the future. However, the aforementioned challenges clearly state that the technology still needs improvement.

Explore more by attending the Blockchain Expo Global event @ London Olympia 25-26th April.

Blockchain Expo Europe will also take place at RAI, Amsterdam on 19-20 June 2019. Blockchain Expo North America will take place at the Santa Clara Convention Center in the heart of Silicon Valley on 13-14 November 2019.

Blockchain Expo Europe will also take place at RAI, Amsterdam on 19-20 June 2019. Blockchain Expo North America will take place at the Santa Clara Convention Center in the heart of Silicon Valley on 13-14 November 2019.