Is the Future of Blockchain Uncertain?

 Blockchain has witnessed an exponential growth in its adoption and application, with blockchain’s worldwide market size slated to reach $67.4 billion till the year 2026 and a CAGR of about 68.4% between 2021 and 2026.

From robust customer identification to transparency across various sectors, including healthcare, blockchain is bound to reshape multiple industries and sectors. Organizations are recognizing their ability to boost business with blockchain. According to PwC, blockchain could expand the U.S. economy by an estimated $407 billion till 2030.

                   

Though it was blockchain’s emphasis on risk-free transactions that brought attention to it, security also emerges as a primary concern now that organizations are beginning to understand the technology.

 

For instance, in March 2022, gaming-based Ronin Network suffered a financial setback of $600 million in USD and ether (ETH) when a hacker attacked Axie Infinity’s bridge chain. The primary cause of the cryptocurrency attack was attributed to the exploitation of a smart contract's vulnerability caused by faulty account validation.

 

Instances like these and many others pose concerns regarding the survival of blockchain.

 

Can the Threat to Blockchain’s Existence be Overcome?

The hacking of the Ronin network exposed the associated weaknesses and impacts of poor coding on blockchain. An article by WIRED headlined "Blockchain has a bridge problem, and hackers know it" underlines the vulnerability of the blockchain bridge.

 

Hackers consider blockchain bridges easy targets. DeFi platforms and cryptocurrencies are similarly prone to cyberattacks. Even though the blockchain transactions themselves are secure, organizations and their customers are rightly skeptical.

 

Enterprises today can rely on AI to map transactions and pinpoint suspicious movements. Reinforcing bridges and enhancing security audits will play a critical role in mitigating threats from hackers.

 

Impact on the Environment and Sustainability

Both Ethereum and bitcoin are transitioning to proof-of-stake. However, they have been so far operating on the proof-of-work concept and need tremendous computation power. Blockchain networks run through great amounts of energy, so much that just one bitcoin transaction could keep a household running for over 70 days. The mining of bitcoin has been contributing to carbon dioxide emissions worldwide.

 

While the climate crisis is at large, the need to make blockchain technology sustainable is crucial. Multiple countries, including China, Iran, and India, are on their way to restrict crypto mining. The developers of Ethereum are beginning to shift to a proof-of-stake concept instead of the high energy consumption that the proof-of-work concept requires.

 

The proof-of-stake in blockchain is a next-gen concept that restricts energy consumption and decreases carbon emissions. Despite its advantages, it could take longer to demonstrate a tangible positive outcome. Many developers have successfully built green smart contract apps that work to lessen carbon footprints.

 

Talent Shortage in Blockchain

Blockchain adoption faces another roadblock in the form of a talent shortage. According to a study conducted by LinkedIn Corp. and OKX based on data from 180 countries between January 2019 and June 2022, the number of jobs available in the global blockchain industry is far greater than the number of skilled individuals available.

 

KPMG’s blockchain leader in the U.S., Arun Ghosh, thinks enterprises transitioning from proof-of-concepts to pilot blockchain projects could be contributing to the uptick in blockchain-related job roles.

 

Although there's an increase in demand and a willingness to offer higher pay, the availability of blockchain specialists is disproportionately lower than the demand for them. Blockchain still being an emerging and rapidly evolving technology is a significant reason for this.

 

Another caveat is the complexity that comes with using blockchain technology. In addition to providing training, organizations need to adopt blockchain-as-a-service in order to capitalize on the blockchain technology without the need to invest extensively in additional resources.

 

The Problem with Scalability on Blockchain

While decentralization is a significant advantage offered by blockchain technology, it also poses challenges about scalability, especially for large organizations.

 

Consider account transfers. Millions of transactions are processed by transaction networks per second, while Bitcoin can only process three to seven transactions every second. This makes it inadequate when processing enterprise-level applications.

 

An APQC study revealed that about 29% of organizations are either launching pilot projects in blockchain or are currently deploying them. To address scalability issues, several promising solutions have come up, including L2 solutions, the Lightning Network, rollups, scale-ready consensus mechanisms, and segwit.

 

 

No Interoperability

Interoperability is a substantial problem for blockchain since the interaction and communication between different networks are not standardized. Most systems operate in isolation and don't interact with other networks. If the information must go through a central agency or supplementary instruments, decentralized architecture will be rendered useless.

 

Developing universal standards is crucial as more businesses create their proprietary blockchain systems, enabling more seamless communications. Many businesses are working on interoperability plans to address the rift between various blockchain platforms and enable efficient information transfer.

 

What Does the Future Hold?

George Friedman once predicted the downfall of blockchain, mentioning that there is virtually no encryption technology that isn’t broken.

 

There is a lack of clarity on blockchain’s true impact on certain industries and what it will look like in the future.

 

This, however, doesn’t imply that blockchain wouldn’t exist at all. The technology has a vital role to play in the Metaverse and Web 3.0. It will pave the path for newer technologies, and industries like gaming, consumer goods, and fashion will continue to use blockchain to fill the gap between ecommerce and in-store customer experiences.

 

Blockchain technology is bound to grow and transform business operations. The success of blockchain relies heavily on the ability of enterprises as well as governments to recognize its benefits, overcome the above challenges, and educate stakeholders on its importance.

 

Leveraging the Best of Blockchain With Xoriant

Xoriant is a prominent technology partner for industry-leading cloud providers, delivering multiple services. Our core technology experts have successfully deployed projects and proofs of concepts for several blockchain cloud networks. We closely follow and adapt to emerging market trends and drive innovative solutions in the blockchain space.