Businesses should not Use Blockchain, But Why?
A simple banking transaction might involve 30 different ledgers in 10 countries. It is a convoluted maze of cross-border payments done through fiat currency. Blockchain offers an alternative to the status quo that could save banks billions of dollars annually. The website Bitcoin era app provides bitcoin traders with fast deposits, withdrawals, and trading strategies. These financial transactions are executed instantaneously and at near zero cost, which makes them highly attractive for enterprises with operational efficiency as their priority.
The problem with using blockchain is that it needs to be more scalable to handle the number of nodes needed for finance and tech companies to transact at any scale. In addition, the technology is very young and still in its initial stages of evolution. As a result, it will take years before significant technology companies can utilize blockchain and begin seeing the benefits.
Famous examples of companies that have integrated blockchain solutions include the likes of eBay, Amazon, Verizon, Citibank, HSBC, and many more. However, hundreds of other companies are only using blockchain for testing and development purposes rather than actually implementing more tangible solutions for enterprise-level problems. On top of these high-profile examples, enterprise-grade blockchain solutions are being implemented by a handful of startups. Blockchain technology still has a long way to go before it can match the speed and scale of transactions currently being carried out.
Most finance companies still use centralized systems for their back-office functions because blockchain still needs more computing power to process transactions at any meaningful rate. However, in time, blockchain will eventually become scalable, and most finance companies will start using decentralized technology. If these predictions are correct, major financial institutions need to upgrade their back office systems to keep up with new technology trends, or they might get left behind by their competitors. Let’s explore the reasons why businesses should not use blockchain.
1. Blockchain is Expensive
The most prominent use for blockchain is for financial transactions, but financial companies will need more time to embrace it. It is a new technology, and the costs associated with its implementation will be substantial.
Many startups in the industry are using the blockchain to test and develop their products before they start rolling out their solutions commercially. However, it requires a lot of computing power, so they have started utilizing cloud computing platforms to reduce the cost of implementing blockchain technology.
The cost of cloud services has gone through the roof lately as companies are now paying monthly fees, which would have been more affordable if they had used them earlier. Blockchain’s expenses are also high, at least compared to traditional computer systems’ costs.
Cloud services are much more affordable than they used to be, and plenty of options are available. For example, companies such as IBM have already started offering blockchain solutions for a fraction of the cost it would have taken them if they had implemented the technology earlier.
2. Blockchain is Slow
Blockchain is capable of processing network transactions much faster than centralized solutions, which means that it would save banks in terms of transaction costs over time. However, this still does not mean that businesses will opt for using blockchain immediately because it’s not that suited for most business-level transactions and processes yet. 3. Blockchain is complex:
Blockchain is an established technology that people can use to develop new products that streamline business operations. However, for any company to integrate blockchain into their workflows, it will require substantial development time and resources.
Businesses need a product or service that will provide them with a clear return on investment and solve their problems without adding more challenges. Blockchain is at such an early stage of development that it would be more effective for companies to wait until better solutions are available in the market before they consider using blockchain themselves.
Most blockchain solutions are closed systems. It means that if a company wants to use a new platform for its transactions, it needs to work with other companies that will use the same technology or risk running into compatibility issues.
4. Lack of Regulation
Some governments have taken steps towards regulating their financial regulations, while others have not done anything to improve the existing regulatory frameworks. It has created confusion among businesses which is why they cannot rely on blockchain in their operations at this point and time. Many countries worldwide are still developing their national blockchain strategies, and most still need to agree on how blockchain should be regulated internationally.
5. Blockchain is Challenging to Use
The technology behind blockchain still needs to be completely mature, and many of the services are still in their early testing phases. It means that businesses need to spend additional resources on staff training and back office operations, such as maintaining the security of their private keys, developing new policies, and setting up the entire system from scratch.
6. Lack of Awareness
Most companies need to be made aware of how they can use blockchain to streamline their business-level processes and improve their bottom line. Most companies that have started using blockchain solutions on a large scale are either tech companies or startups funded by venture capital firms with a keen interest in high-tech startups.