Blockchain enhances security, efficiency, and transparency, but developing and implementing this technology enterprise-wide can be challenging. Often, it leads to failure when approached with insufficient knowledge or a lack of planning. Our Head of Innovation, Dr. Luke Riley, describes the challenges involved and how to avoid them.
There is a clear appetite for enterprises to focus on the potential of blockchain, with the enterprise blockchain market predicted to reach $145.9 billion by 2030. Yet, challenges can arise when determining where and how to implement it. Before beginning a blockchain project, organisation’s must be sure that it can be applied to their use case and technology stack.
How can businesses understand if blockchain is applicable to their use case?
Due to the complexity of blockchain technology, the process for deciding whether blockchain is applicable to the use case requires both objective and subjective reasoning, some of which needs expert knowledge.
For example, deciding whether blockchain provides greater benefits over traditional databases for a particular use case involves objective reasoning. This includes factual, evidence-based considerations such as determining if there are multiple independent parties contributing data. Another objective factor to consider is whether the use case involves frequent data exchanges between different organisations that require a reliable, tamper-resistant record.
On the other hand, determining if a blockchain’s transaction speed was fast enough would require subjective reasoning. Other criteria that require subjective reasoning include energy consumption and resilience.
We recommend that businesses apply a clear methodology to determine whether a blockchain solution is necessary and then identify the most suitable blockchain for the use case.
What challenges do businesses face when implementing blockchain?
Blockchain offers numerous user benefits, such as:
- Inbuilt asset ownership
- Digital asset automation capabilities
- Provides much more auditable systems (then centralised implementation alternatives).
Yet blockchain is not without its challenges – overcoming these is essential for using blockchain effectively. Typically, they come from blockchain’s unique architecture, which presents a steep learning curve for technology teams.
It’s also important for technology teams who are new to blockchain to synchronise their software components with other businesses around the globe, while understanding the complexities of running back-end components (blockchain nodes) that can be interacted with via other businesses APIs and front-end components.
Other general challenges include:
- Security – blockchain technology can be susceptible to vulnerabilities or attacks via unprotected private keys, code flaws in smart contracts or interoperability bugs via cross-chain bridge hacks.
- Scalability – the blockchain network of choice needs to handle an increasing number of transactions without compromising its performance, security, or decentralisation.
- Complexity – blockchain requires high technical expertise to implement and maintain. Pairing this with the vast number of blockchains available, all with multiple programming languages, rules, strengths and weaknesses, increases its complexity and may hinder adoption.
- Interoperability – there are many different blockchain platforms — each with its own protocols and standards – and they often do not work well together. This can lead to inefficiencies and fragmentation and prevent the seamless transfer of data. There is also the interoperability issue between blockchain and enterprise software, where data doesn’t flow appropriately due to a lack of integration.
- Architectural – the numerous ways in which different blockchain components (wallets, middleware, bridges, smart contracts) can interact, means that it‘s incredibly difficult for organisations to identify the best way to link them together.
How can businesses decide whether to build their own infrastructure or use a third party’s infrastructure?
Knowing whether to build or buy a blockchain solution is an important step in an organisation’s journey to implementation. So, where do you start? Ultimately, it comes down to operational focus.
If an organisation‘s blockchain efforts are aimed at delivering complete ownership of the entire technology stack, then it makes sense to build an implementation in-house.
However, building internally can put pressure on internal resources. Teams must have the expertise, time, and operational infrastructure to support their blockchain efforts, all of which can be costly.
Using a third-party infrastructure can be appealing to organisations wanting to build and deploy as quickly as possible, as third-party infrastructure providers will have many value-add features available for immediate use. Third party providers may also be favourable to organisations operating in highly regulated environments like financial services, as these providers can manage legal or regulatory requirements. Another advantage is in reducing the cost of experimentation. Third parties have the capacity and knowledge to roll out blockchain infrastructure and features quickly, measure their effectiveness and iterate accordingly.
Finally, the time to market is going to be significantly faster than if an organisation was to build the infrastructure in-house. And with the blockchain ecosystem being so agile, buying rather than building will allow businesses to leverage external expert knowledge to pivot as the market evolves.
How can businesses determine if their infrastructure complies with the latest in blockchain standards?
Standardisation plays a key role in enabling innovation, collaboration and trust. Improving the utility and adoption of blockchain is reliant upon establishing a common understanding and framework for implementation. As blockchain technology matures, the need for standardisation becomes even more pronounced.
Organisation’s looking to implement this technology must ensure they adhere to current standards if they want to benefit from blockchain systems that are robust, reliable and interoperable.
This blockchain standard compliance checking process be done internally or externally. We recommend outsourcing this process as it enables businesses to leverage the expertise of a specialised team, without the overhead costs of managing a team in-house. Additionally, outsourcing is often more time effective as it removes the need to hire and train in-house blockchain developers.
Blockchain presents opportunity
For organisations, blockchain technology can unlock new revenue opportunities through access to new markets, lower costs by reducing process inefficiencies and create more resilient systems. But first, organisations must understand and overcome the challenges associated with implementation to determine if their business is blockchain-ready.
If organisations can identify the right use case and infrastructure solution, they can harness the power of this innovative technology.
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