What started as a secure environment to handle cryptocurrencies and their associated transactions, Blockchain technology has come a long way in finding its purpose through different areas of interest. Currently, there are hundreds of startup companies using blockchain solutions for industries such as trade finance, healthcare, cloud storage, cybersecurity, and many more. Distributed ledger technology is being explored by different industries around the globe for the profitable functioning of their businesses and to add transparency between them and the stakeholders/customers.
While blockchain is transforming the financial sectors through its role in various business activities such as asset management, claims processing, global payments, trade processing, trade settlement, and so on, the technology does come with a set of challenges.
The costs associated with blockchain solutions depend on several factors such as transaction size, time, and network blockage. For example, during the advent of Bitcoin whenever the network was busy the transaction fee increased tremendously. Also, during major Bitcoin rate fluctuations and significant world events, the user fee increased accordingly. Similarly, for any applications using blockchain, the costs are directly dependent on the transactions. In addition to that, the costs associated with blockchain storage will always be expanding since each individual node must maintain a ledger of all transactions.
Ever since its inception, the blockchain’s massive energy consumption still remains a major drawback. As per the design, since the blockchain uses proof-of-work (PoW) to achieve consensus, it requires heavy computational power to solve mathematical calculations which verify a transaction and store it in the block. While this mechanism promises tamper-proof storage, it does consume a large amount of energy. It has been roughly estimated that Bitcoin mining consumes about 0.2 % of global electricity per year and is predicted to increase over the years.
However, there are some recent innovations that can possibly reduce extensive energy consumption through blockchain transactions. NEO is a recent technology that is designed to build a scalable network of decentralized applications. Unlike the proof-of-work mechanism, NEO uses delegated Byzantine Fault Tolerance (dBFT) consensus which is proven to be energy efficient. Another notable distributed ledger-based solution is the Hyperledger project.
Integrating blockchain technology into an organization’s already existing legacy system could be a tedious process. Apart from safeguarding the transactions and tamper-proof storage, it is difficult to handle the different organizational functions using blockchain solutions. Hence the system would require many additional changes which could take a significant amount of time and work. Also, the blockchain is designed in such a way that it includes a significant amount of data with every transaction, which makes the streamlining process more difficult.
Despite the above-mentioned limitations, Blockchain is one of the most significant advancements in terms of cybersecurity. Over the years it is evident that the technology could surpass all barriers and find its use in various conventional applications.