Contact us anytime to know more — Abhishek P., Founder & CFO CISIN
Studies of adoption and acceptance often focus on "black box" technologies like electronic bank users don't need to understand its security mechanisms - instead, the focus should remain on what benefits accrue from it rather than how it works.
But in certain instances, technologies used as part of a product or service are used as differentiators that encourage adoption - a perfect example being Blockchain. A blockchain provides a distributed data repository that is always available, secure, and publicly accessible.
It relies on a distributed consensus protocol - just one such example being adopted widely throughout its applications in various sectors like series of posts banking services.
Blockchain Definition
Blockchain is a shared, immutable ledger that facilitates recording transactions and tracking assets across a business network.
Support may include tangible items (a house, a car, cash) and intangible ones like intellectual property (patents, copyrights, branding). Virtually anything of value can be tracked on blockchain networks while reducing risks and cutting costs for all involved digital assets.
Why Blockchain Matters
Business runs on information. The sooner and more accurate that this information can be received, the better off your business will be.
Blockchain offers immediate, shared, transparent data stored on an immutable ledger that is only accessible with permission by members of a blockchain network. Such networks allow for easy tracking of orders, payments, and accounts production as members share a single view of truth concerning transactions, providing greater confidence along with new efficiencies and opportunities.
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History
So far, most literature on Blockchain has focused more on its technical sophistication than its adoption aspects, which may impede or facilitate its use.
In this paper, we investigate cognitive factors that influence adoption decisions with particular consideration of user attributes. This study used a cross-sectional design to recruit 506 participants and test its hypotheses and analyze whether perceived threats, response costs, and efficacies, as well as self-efficacy, influence adoption intentions.
The analysis demonstrated this relationship between financial institutions. These factors vary in influence depending on users' subjective and objective knowledge, innovativeness, and innovativeness;
Their results contribute to an often neglected area: user perspectives on blockchain adoption. These findings shed light on the cognitive factors driving the adoption of blockchain-based technologies and user characteristics most likely to adopt this type of tech, such as data privacy and cybersecurity concerns.
Furthermore, this can give practitioners insight into which aspects of user behavior to consider digital assets when creating or marketing technology products and services.
Blockchain Adoption
Blockchains are constructed out of three components: a distributed database, a cryptographic protocol, and consensus mechanism.
The distributed database ensures that new data does not only reside at one central location but is replicated and distributed throughout its network of nodes.
Data immutability is a hallmark of distributed systems that fosters trustworthiness by eliminating intermediaries and increasing accessibility and traceability for network participants.
Protected by cryptography and organized in chains, data immutability increases reliability while eliminating intermediaries as potential points of failure. An increase in participants makes any attempt at altering data more complex; all users can access and control all networked information simultaneously, rendering control impossible.
As there are fewer participants involved in an attempt at altering it, immutability increases significantly; these networks can either be wholly or partly decentralized and allow a central authority to oversee transactions more efficiently in banking and financial services.
Disintermediation, accessibility, immutability, and blockchain control present advantages and risks.
They offer disintermediation benefits while increasing transparency, privacy and security risks, and system usage issues.
Public access to blockchains makes transactions transparent and traceable, reducing data misuse risks and increasing public confidence in the services provided. Immutability, transparency, and traceability all increase system security measures cross-border payments banking and financial services.
Also Read: What is the Future of Blockchain Technology?
What Are The Main Obstacles To Blockchain Adoption For Digital Transformation Projects, And What Can Be Done About Them?
Technical Complexity
Technical complexity is one of the primary obstacles to the adoption of blockchain technology. Blockchain technology involves concepts such as cryptography, consensus algorithm, intelligent contracts, and distributed ledger that are difficult to grasp, implement and maintain effectively.
Understanding, implementing, and maintaining such concepts require technical knowledge digital currencies crypto assets and expertise - payment systems not something readily available in early stages of development of this technology as there are no established frameworks or best practices that govern its integration and development; interoperability and security scalability issues often arise for projects using it.
Uncertainty In The Regulatory FrameworK
Uncertainty over regulations surrounding blockchain technology can also impede its widespread adoption. Due to its decentralized and global nature, the legal and regulatory frameworks surrounding it present unique challenges.
Different countries and areas may have differing laws and regulations related to it - these could cover data privacy laws, consumer protection rules, instant payments, taxation rates, or anti-money laundering requirements - leading to inconsistency or confusion during projects that involve multiple stakeholders or cross-border transactions.
Organizational Resistance
Organizational Resistance. The third barrier is organizational resistance, caused by existing processes and stakeholders.
Blockchain technology requires a paradigm shift in how organizations collaborate and operate; cryptocurrency space it challenges roles traditionally performed by intermediaries, central authorities, and legacy systems; blockchain networks require high degrees of trust among their participants; adoption may cause those unwilling to change or lose control to become resistant - potentially resulting in conflicts wide range among organizations due to cultural, political or operational differences.
Business Value
As a fourth barrier, it can be challenging to demonstrate and evaluate the business value of blockchain technology.
While its reputation for innovation and disruption is widespread, not all scenarios and use cases require or can benefit from it; some may be better served using existing or alternative technologies instead. Therefore, projects using this emerging technology must have a clear vision, strategy, roadmap, and timeline on how it will create value for them and their clients, as well as reliable metrics to demonstrate impact and return on investment.
Skills Gap
The skills gap is another crucial challenge for blockchain adoption. Blockchain requires various disciplines ranging from technical to legal expertise, making its adoption challenging due to a shortage of professionals capable of designing, developing, and deploying blockchain-based solutions.
LinkedIn predicted that blockchain would be one of the most in-demand skills; unfortunately, there were not enough qualified candidates available to meet demand; companies struggled to attract and retain the talent necessary for successful implementation projects involving this blockchain technology.
User adoption
User adoption is the sixth barrier, dependent on end-user awareness, acceptance, and understanding. Many are unfamiliar with relatively new blockchain technology; thus, they may be unaware of its risks, benefits, or implications; some users may have misconceptions or reservations regarding complexity, privacy, security, or legality issues surrounding blockchain tech; to overcome this barrier effectively blockchain projects must educate and engage their end users while offering user-friendly intuitive interfaces.
What Are The Main Obstacles To Blockchain Adoption?
Challenges
Many business leaders are becoming intrigued with blockchain technology due to its growing buzz. Adopting it poses many obstacles, not just related to inefficiencies in technology itself but also lack of regulation or limited awareness.
These obstacles must be overcome to make blockchain technology widely accepted and ubiquitous
Technological Challenges
Blockchain technology is a beautiful asset, yet it still has some technical limitations that prevent wider adoption.
Notably, Bitcoin and other blockchains have inefficient technology designs that limit scalability, speed, energy use, and interoperability; even Ethereum attempts to address some of these deficiencies; however, not enough.
Low Scalability
Scalability is a central issue with blockchains; their limited scaling capacities cannot meet high transaction volumes due to a scalability dilemma that many believe will thwart blockchain systems' operations at scale.
Another significant difficulty for current platforms lies in finding an ideal balance among decentralization, scalability, and security - something they often achieve for limited user bases but struggle with once mass integration occurs - something Ethereum and Bitcoin currently both face head-on.
Lack of Speed
Processing speed is also an issue; as user numbers increase, network performance slows down, and transactions take longer to process.
Technology may become less appealing due to high transaction fees; encryption may make the system slower; completion of transactions could take several hours or days; therefore, it is best suited for large transactions where speed isn't a primary consideration. Adoption issues could become significant obstacles shortly.
High Energy Consumption
Energy usage by blockchain technologies poses a formidable barrier to their adoption, particularly given the global climate debate.
Most blockchains based on Bitcoin infrastructure utilize Proof of Work as their consensus algorithm; this requires significant computing power, which is energy intensive.
Lack of Standardization
Unfair regulation is another obstacle to broader adoption. Standardization is necessary to scale any technology across the globe.
All networks that utilize Blockchain must speak the same language for effective transactions and understand each other - this holds especially when new technologies emerge as standards are gradually built upon through experience.
Lack of Interoperability
As more companies adopt Blockchain, many may be tempted to build their system with unique characteristics (governing rules, blockchain versions, and consensus models).
Unfortunately, these separate blockchains do not communicate well with each other, and there currently is no standard that allows this. Interoperability refers to being able to see, access, and share information between network blockchains without the need for a central authority or intermediary; without it, mass adoption becomes nearly impossible.
The Regulatory Challenges
Lack of clarity regarding regulations is another significant barrier to blockchain adoption. Existing regulatory regimes cannot keep pace with rapid advances in Blockchain and cryptocurrency.
There are no specific regulations about it, and therefore, nobody knows any set rules for it.
Criminal connection/activities
Blockchain technology's decentralized nature creates an anonymous environment, making transactions anonymous for illegal activities.
This has resulted in various cyber crimes/illicit activities such as hacking crypto exchanges, scam projects, asking for cryptos as ransom, and using them on the black market as currency.
Privacy Is Not Respected
Blockchains present another challenge when it comes to privacy. Blockchain technology and public blockchain networks are widely renowned for their transparency, providing a public record of transactions that can easily be verified.
While this transparency may seem desirable at first, it may pose threats to the user or organization's privacy; some companies work within certain boundaries regarding user data protection or trade secret protection and prefer not to use widely adopted protocols like Blockchain.
Problems Of Security And Trust
Security issues could impede Blockchain's adoption as another barrier. Blockchain provides numerous security advantages; however, like any technology, it does have its risks that need to be considered when making any decisions regarding implementation and use.
Ethereum allows developers to implement decentralized applications (dApps) upon its system. Many of them contain false coding or loopholes that would enable hackers to take over systems - creating another major impediment to the widespread implementation of this technology.
Lack of trust among users also becomes an issue with widespread implementation.
Educational Challenges
Blockchain technology is still relatively novel; therefore, those possessing the expertise required for its usage and development remain rare, while many people remain unaware of its existence.
Skill Gap
A key challenge lies within this skills gap. Competition among qualified individuals to manage blockchain technologies is fierce; therefore, qualified staff are in short supply and cannot support its use effectively.Talent acquisition in this field can be both complex and expensive.
Lack of awareness
Owing to its relatively recent introduction, blockchains are only gradually being adopted by organizations. A recent survey reported that only 12% of participants said utilizing or providing services through blockchains; 34% have not even started exploring this emerging technology and are unaware of its possibilities.
Bitcoin = Blockchain?
Bitcoin blockchain and distributed ledger technologies (DLTs) are relatively new and in their infancy.
Due to market fluctuations and mainstream media coverage of cryptocurrency trading activity, it's understandable why people don't understand its actual utility. Unfortunately, people often associate Blockchain with Bitcoin - although other cryptocurrencies also share similar traits - leading them to think this term refers to money laundering or illegal trade activity - yet widespread adoption should occur after a better public understanding between Bitcoins and other cryptocurrencies exists.
How To Accelerate Blockchain adoption
My previous blog explored several possible solutions to various challenges facing us today. Technology innovations should address issues like inefficient design, lack of scalability and speed, no standards or interoperability, and excessive power consumption.
Privacy, trust, and security concerns necessitate careful regulation that doesn't limit technological innovation. Through education and communication efforts, public awareness should increase while perceptions of lacking skills should diminish.
Technological Advances
The challenges associated with blockchain adoption illustrate the need for technological improvements. The sector must find solutions for its most pressing obstacles.
I addressed some more thoroughly in my blog post titled "Blockchain Technology Challenges - New Third Generation Solutions," so I won't rehash them here. As we've seen, the blockchain community is doing its part to address technical challenges such as power consumption and speed using improved technology.
Refining Consensus Algorithms
Proof of Work (PoW) has been at the core of Blockchain's global revolution. Unfortunately, its drawbacks in areas like scalability and speed, as well as energy usage, show it cannot support the continued development of Blockchain.
Other refined consensus methods must be utilized to validate transitions; Ethereum has recently started moving toward using PoS algorithms which require less energy processing power.
State Channels
State channels allow users to transact directly between themselves outside the Blockchain (known as "off-chain"), significantly decreasing the need for "on-chain" operations and transaction times.
Accelerated chips may be utilized to speed up confirmation and transaction times.
Side chains
Side chains are another means to improve scalability. They are designed to ease the load on blockchain networks by sending transactions through side chains connected and placing their results onto the main chain.
Sharding
Sharding is another scaling solution designed to spread out the workload across multiple nodes of a blockchain network.
This technology divides it into several shards with a small group of nodes assigned - an approach used by Polkadot, for instance, built around this concept of sharding.
Multi-layered structure
Multi-layered structures offer another approach for expanding scale, as they separate data storage and transaction processing into their separate functions.
Cardano, CPCChain, and other similar projects represent such approaches.
Proofs of zero-knowledge
CoinJoin and Ring Signature protocols were created to address this challenge of privacy. Zero-knowledge proofs provide an exciting solution; these mathematical tools allow one to demonstrate something without divulging its source data.
Baseline protocol uses Zero-Knowledge proofs and other cryptographic instruments and techniques to synchronize business processes on Ethereum Mainnet while protecting privacy, confidentiality, and data security.
Also Read: What Are The Other Examples Of How Blockchain Is Positively Impacting The World?
Private Blockchains
Private networks such as Corda, Hyperledger, and Quorum offer businesses an alternative solution to public blockchains regarding privacy concerns.
These networks support small numbers of participants with known identities who can conduct private transactions between nodes. Such networks are known as Permissioned Blockchain networks because participation requires prior permission.
Private blockchain protocols offer a valuable means of connecting multiple companies or departments within an organization, with limited access and sensitive information remains protected as it should.
TradeLens by Maersk was built using the IBM Blockchain Platform with permissioned Blockchain to ensure immutability, privacy, and traceability for shipping documents.
Hybrid Approach
Integrating public and private blockchains for optimal results is also possible using hybrid blockchain approaches.
A public blockchain could store encrypted proofs of work on private networks connected by known stakeholders, then vice versa.
Standards and interoperability
Over the past several years, there has been an upsurge in interoperability initiatives to connect various blockchains and bridge gaps between them.
Most often, this involves linking public and private chains; ultimately, these systems will prove more beneficial for business leaders than approaches that focus exclusively on public blockchains and cryptocurrency-related tools.
Regulatory Frameworks
Regulators around the globe have been caught off-guard by the rapid advancement of blockchain technology and now find themselves scrambling to respond.
While regulators in an increasing number of countries are taking steps to respond to an industry rapidly shifting and growing, no cohesive regulatory approach exists for Blockchain. Instead, there exists an unwieldy patchwork of regulations across regions or even within one nation with its own set of rules and regulations for operation.
Raising awareness and skills quality
Barriers to the widespread adoption of blockchain technology stem from a lack of awareness within organizations, skills gaps, and misperceptions surrounding its workings.
Convincingly making a business case to adopt Blockchain could result in its more widespread implementation once awareness grows about this emerging field.
Raising Awareness
The blockchain community must educate the public on distributed ledger technology, its design, and its strengths.
Blockchain companies can raise awareness by developing educational resources or hosting webinars, or organizing educational events such as Coinbase Learn (an example of one of the world's premier blockchain companies educating).
Blockchain-as-a-service
BaaS has the potential to break through this skills barrier and provide organizations with access to Blockchain's advantages without investing in expensive blockchain skills.
Users need to understand basic technology - for instance, how smart contracts operate versus distributed ledgers' complexity - to take full advantage of BaaS services.
Is Blockchain secure?
Decentralized security and confidence are made possible by blockchain technology in many different ways. At its core, all blocks are stored chronologically - always added at the "end" (or end) of the blockchain chain - meaning any modifications of previous blocks cannot occur anymore once one of them has reached the "end."
Any change to data will alter its hash value within its origin block. Each block stores the hash value from the previous one; any alteration in one would affect subsequent blocks and be rejected by the network as hashes no longer match up.
Imagine that a hacker is running a node in a network of blockchains and wants to steal cryptocurrency from other users.
To convince other nodes of their validity, they would need to convince them that they are the original copy. They must also control over 50% of the network to insert documents at just the right moment. This type of attack is known as 51%-attack as it requires over 50% ownership to be effective; timing plays a crucial role as by the time they take any action against individual blocks they want to be altered, they may already have passed them by before any attack could even begin!
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Conclusion
Blockchain technology can transform many industries and sectors by providing transparent, decentralized, trustless transactions.
But despite all its benefits, widespread blockchain adoption remains a challenge in digital transformation projects. Here we explore some primary barriers preventing its widespread implementation for digital transformation projects.
