The buzz around enterprise blockchain has gained traction over the past 2 years. Investors are increasingly taking note of this new tech kid. In fact, initial coin offerings (ICOs), the sale of cryptocurrency tokens in a new venture, currently stands at more than $5 billion.
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.
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.
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.
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.
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.
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.
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.
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.
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:
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.
Therefore, difficulties in accessing the right talent are making it hard for organizations to join the enterprise blockchain bandwagon.
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.
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.
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.
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.
Are you planning a security token offering (STO)?
Here at ICOSERVICE we offer a whole new suite of marketing services which will help our clients differentiate their businesses and take advantage of the opportunities in this new model of fund-raising. ICOSERVICE’s comprehensive marketing methodology helps companies and start-ups get started on the right foot with their security token offering initiatives as they embark on this journey. ICOSERVICE comprises of experts with varying skills from technologists, to digital marketers, to legal players, to blockchain enthusiasts and therefore partnering with ICOSERVICE not only helps you with the marketing side of conducting a proper STO but also evaluating and implementing blockchain technologies in your business domains and deliver real value.