The blockchain technology has taken the world by storm. Initially, blockchain was synonymous with Bitcoin and cryptocurrencies in general but it’s now in most industries and it’s changing the way we have done things for ages. From cost efficiency and speed to privacy and security, the advantages of the blockchain over most traditional technology networks are immense. Industries using the blockchain have recorded great progress and include healthcare, logistics, supply chain management, insurance and financial services industry.
Despite the progress, there are still some challenges that plague the blockchain which if not addressed could hinder its mainstream applicability.
These issues are diverse and affect different sectors in different ways. They are:
This is by far the biggest challenge facing the blockchain. In the initial years, the blockchain was not mainstream and it could comfortably handle the number of transactions that were being processed. However, with the rise in the popularity of cryptocurrencies and the increase in the number of fields of application, the number of users has quadrupled and continues to rise every day. Scalability is, therefore, the most pressing challenge and the blockchain community has developed various solutions with varied success. They include increasing the block size to accommodate more transactions, implementing Segregated Witness in which signature data is separated from the transaction data and recorded on a side chain and turning to the more efficient Proof of Stake consensus algorithm. Some of the solutions have been successful while some have brought about division and hard forks such as Segregated Witness which divided the Bitcoin community and led to the hard fork which resulted in the formation of Bitcoin Cash.
Privacy is a fundamental principle of the blockchain and continues to spark heated debate on the extent privacy should be upheld. In most blockchains including Bitcoin and Ethereum, transactions are recorded on the public ledger which is accessible to anyone. However, it protects the user data through encryption and unless you know a user’s address, you can’t pin down any transaction to them. Privacy-centered cryptocurrencies such as Monero and Zcash have a different approach in which a user chooses whether or not to share details of the transaction. Users are divided on whether one should share the details by default for transparency or whether one should have the option to withhold the details to promote privacy.
At time of press, there were 1558 cryptocurrencies according to cryptocurrency indexing site, coinmarketcap. The astronomical rise in the number of cryptocurrencies is an indicator of the great growth in the industry but it also presents a unique problem; the need for interoperability between the different blockchains. This would eliminate the needless hustle associated with switching from one cryptocurrency to another. Various solutions have been suggested and some have achieved great success in their bid to provide a platform in which the different blockchains can interact and exchange information freely. This has led to the formation of the Blockchain Interoperability Alliance whose members include ICON, Wanchain and AION.
ICOs have risen in prominence as crowdfunding avenues of choice and billions have been invested in various startups by investors who are eager to cash in on the cryptocurrency craze. This has however turned into a fertile ground for fraudulent business people who have made away with millions of dollars’ worth of investment. This is largely because the regulatory bodies are yet to come up with comprehensive laws and regulations to govern this sector. With the government playing catch up, investors have had no one to protect their interests and with most of them being unable to spot fraudulent ICOs, they have continued to lose their hard earned money. For the blockchain to go mainstream and win the confidence of the skeptics, the government has to formulate regulations that will protect every party in the blockchain industry.
Written By: Steve Kaaru