The potent combination of blockchain and artificial intelligence can revolutionize healthcare, science, government, autonomous driving, financial services, and a number of key industries. But, as with any emerging technology, blockchain faces numerous challenges to widespread adoption.
As Bitcoin reached peak media hype, we became captivated by the economic possibilities blockchain technology could enable. Nakamoto’s paper in 2008 paints a picture of a financial utopia where we transact money globally without reliance on third parties, resonating with those who resist restrictions imposed by a central capitalist system. But this ideal is much further away than we think.
Discussion continue today about blockchain’s ability to lift people out of poverty through mobile transactions, improve accounting for tourism in second-world countries, and make governance transparent with electronic voting. But, just like the complementary – and equally hyped – technologies of AI, IoT, and big data, blockchain technology is emerging and yet unproven at scale.
The following roadblocks remain to blockchain’s widespread adoption and application:
1. UNEQUAL DISTRIBUTION OF COMPUTING POWER
Bitcoin transactions on blockchain require “half the energy consumption of Ireland”, claims Michael Mainelli, Executive Chairman of Z/Yen. This surge of electricity use is simply impossible in developing countries where the resource is scarce and expensive. Even if richer countries assist and invest in poorer ones, the UN is concerned that elite, external ownership of criticial infrastructure may lead to a digital form of neo-colonialism.
2. LACK OF TRUST OUTSIDE OF DIGITAL CURRENCIES
Bitcoin inspired the explosive attention on blockchain, but there isn’t currently much trust in the technology outside of digital currencies. Jon Eberly, CEO at Clock Four, emphasizes that “adoption at scale will depend on the trust of non-technical business users”.
3. AGGRESSIVE AND MISGUIDED INVESTMENTS
Like the internet, blockchain technology is most powerful when everyone is on the same network. The internet grew in fits and starts, but was ultimately driven by the “killer app” of email. While Bitcoin and digital currencies are the “killer app” of blockchain, we’ve already seen aggressive investments in derivative cryptocurrencies peter out.
Many technologies also call themselves “blockchain” to capitalize on hype and capture investment, but are not actual blockchain implementations. But, even legitimate blockchain technologies suffer from the challenge of timing, often launching in a premature ecosystem unable to support adoption and growth.
4. SLOW ADOPTION RATES OF EMERGING TECHNOLOGIES
Many emerging technologies from prior eras have yet to be integrated into today’s enterprises and institutions. Organizations that did not adopt disruptive technologies of 2007 are ill-suited to adopt the ones of 2017. Despite early investment fervor from venture capitalists, Blockchain investments have broadly experienced a measly start and may be fizzling out.
With technologies still in their infancy, blockchain companies are slow to deliver on promises. This turtle pace does not satisfy investors seeking quick ROI.
5. CYBERSECURITY RISKS & SOFTWARE FLAWS
The operational risks of cybersecurity threats to blockchain technology make early adopters hesitate to engage. Additionally, bugs in the technology are challenging to detect, yet caused outsized damage. Getting the code right is critical, but this requires time and talent.
6. MASSIVE INFRASTRUCTURE & REGULATORY CHANGES
The final, and perhaps largest, challenge to blockchain adoption is the massive transformation in architectural, regulatory, and business management practices required deploy the technology at scale. Even if such large-scale changes are pulled off, society may experience a culture shock from switching to decentralized, automated systems after a history of only centralized ones.