Top 8 Challenges Facing Enterprise Blockchain Adoption

Top technology companies are also heavily involved in the blockchain technology: IBM has invested more than $200 million in the blockchain-powered Internet of Things (IoT) while Microsoft recently partnered with JP Morgan, a move that is expected to enhance the adoption of enterprise blockchain.

• However, the blockchain is still a nascent technology; it’s still maturing and for that reason, it’s bound to experience so many hurdles when it comes to adoption at the enterprise level. According to survey data, 23 percent of CIOs who were surveyed believe that the blockchain technology requires the most new skills to implement compared to any technology area, while 18 percent note finding talent that is skilled in blockchain is the most challenging thing.

An additional 14 percent strongly believe that in order to smoothly implement the blockchain technology then the culture and the structure of the IT department need to significantly change.

Through this primer we seek to assess some of the challenges that currently affect enterprise blockchain adoption.

• Enterprise blockchain has so much use cases across various industries ranging from manufacturing, finance, healthcare, consumer products, to retail. But despite this huge potential, there are a few challenges that currently prevent mainstream adoption. Here’s a detailed look at some of the challenges.

1. Costs

Data from a study conducted by Elite Fixtures shows that the cost of mining just one bitcoin in South Korea, one of the world’s biggest markets for cryptocurrency trading, stands at $26,000.

The biggest challenge to enterprise blockchain (which operates on a similar framework as bitcoin) is the associated costs in terms of implementation costs and the energy requirements. Additionally, hiring the right talent can be quite costly since the number of people who are skilled in this new technology is low.

2. Scalability

VISA, for instance, can process 1,667 transactions per second. However, Bitcoin can only process 3-4 transactions per second and requires 32 terawatt hours of electricity annually while Ethereum has a capacity of only up to 15 transactions per second.

• The inability to serve multiple users is one of the greatest challenges that currently face enterprise blockchain adoption. And when you consider the fact that the demand for blockchain solutions is on the rise then scalability is set to be a serious issue unless industry players find ways of ensuring the transaction speeds of enterprise platforms can remain high regardless of the number of users.

A study by IDC projects that the global spending on enterprise blockchain will hit $11.7 billion by 2022; the firm expects a five-year compound annual growth rate (CAGR) of 73.2 percent throughout the 2017-2022. That’s why we’re emphasising that enterprise blockchain platforms need to address the scalability issue so as to facilitate wide scale adoption.

3. Data privacy

The main idea behind enterprise blockchain is decentralization; that is the ability to remove middlemen from operations. Additionally, a robust enterprise blockchain solution is expected to be able to enhance transparency as well as data integrity.

• However, most organizations are not comfortable with the fact that their data will be accessible to everyone as this might pose a threat to their business operations. Consider the “TradeLens” supply chain solution, developed by IBM in partnership with Maersk. It is a blockchain-based solution which intends to keep track of essential shipping data on a worldwide scale and has even seen 94 organizations take part in the testing and development of the TradeLens supply chain solution.

But in regards to data privacy, most shipping companies won’t appreciate the fact that participants can easily access their data through the platform as this might make them lose their competitive advantages. Therefore, in order to facilitate mainstream adoption, enterprise blockchain platforms have to look for a way to address this issue of data privacy.

4. Interoperability

The existence of so many blockchain networks means there is no standard to allow them to interact with each other. This consequently results to the lack of inter-platform navigation among users on these existing enterprise blockchain solutions thus making it harder for mainstream adoption. It is not possible for a company to join Hyperledger fabric and still be able to utilize services on Microsoft Azure without any compatibility issues.

Clearly, more work needs to be done in regards to enterprise blockchain interoperability so as to facilitate mainstream acceptance.

5. Cybersecurity

Even though enterprise blockchain promises to mitigate threats from cyber-criminals, the sector currently suffers from various risks. According to a report by McAfee, the blockchain technology faces numerous attack vectors thanks to immature processes and defenses:

• Phishing- The report, for example, indicates that victims have lost $4 million in the Iota cryptocurrency phishing scam that lasted for several months.
• Malware (think ransomware, miners, and cryptojacking)
• Implementation vulnerabilities- this is a form of attack that is aimed against the blockchain implementation itself, as well as its supporting tools. A good example would be the Bitcoin wiki which is known for various vulnerabilities and exposures related to their official tools. These implementation vulnerabilities have thus resulted in denial of service (DoS) attacks, coin theft, data privacy issues among others.
• Technology attacks- In January last year, one of Japan’s first and most popular exchanges—Coincheck lost $532 million in NEM coins. This attack affected 260, 000 investors and trading had to be stopped.

This is just an overview of how cybersecurity is a serious issue to enterprise blockchain adoption. Industry players need to work more to address these issues.

6. Access to skilled talent

• Everything that has to do with blockchain is still relatively new and as a result, most organizations don’t have employees who understand the concept or better yet the impact of enterprise blockchain. They don’t have the right talent who can be able to choose the right enterprise blockchain platform to adopt and not to mention they don’t have a strategy in place that will ensure successful enterprise blockchain adoption.

Therefore, difficulties in accessing the right talent are making it hard for organizations to join the enterprise blockchain bandwagon.

7. Fear of Change

Business leaders are so used to the existing structures that they don’t see the need for an enterprise blockchain solution. They argue that these legacy structures work well and serve their customers in the best way possible, hence no need for change. On a similar note, the workforce is comfortable with the legacy structures and adopting a new enterprise solution means they will have to be re-trained and re-skilled.

This can lead to confusion among employees and sometimes friction when trying out a new solution. Consider the finance sector, for instance, who are used to technologies such as VISA, SWIFT among others in handling transactions. Therefore, adopting a new blockchain solution like Ripple can be a challenge in terms of re-skilling the existing workforce and putting in place new structures.

8. Lack of proper regulations

South Korea and China recently banned all initial coin offering (ICO) activities while the U.S. Securities and Exchange Commission (SEC) charged the founders of Floyd Mayweather-backed crypto-currency company- Centra with conducting a fraudulent ICO.

As mentioned earlier, the blockchain technology is still in its infancy and thus suffers from various inefficiencies. As a result, regulators are finding it hard when it comes to defining the legal environment for this new technology.

• For example, you know that the blockchain network is borderless as it includes various nodes that are spread far and wide. This means that once a transaction takes place on a given blockchain platform, it will be a challenge for regulators to clearly define the jurisdiction and therefore, cannot establish the exact legal obligations of the parties involved in the transaction.

In addition, recent events such as the EU’s General Data Protection Regulation (GDPR) and the Cambridge Analytica present regulators with difficulties especially on establishing laws that define how data should be stored and managed on a particular enterprise blockchain platform.

• No doubt about it- the blockchain technology has so much potential. It offers a viable solution to today’s complex, global supply chain, and will surely transform the existing economic and business models. However, the technology is still maturing and needs to overcome the above mentioned setbacks- technical, organizational, and regulatory- so as to achieve mainstream adoption.

To avoid these uncertainties, we suggest that organizations can start by adopting an experimental approach that will allow them to create options and as a result, gain knowledge in the process, inform their strategies, and, hence improve their value propositions.

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