Over the past three years, Blockchain has grown from a murmur in hacker communities to a rising crescendo that has begun to hit a mainstream audience. Suddenly, it’s become a hot topic for everyone from finance specialists to technologists to the neighbor who just spends too much time surfing the Web. The promise of blockchain is so great that it is hard not be lured in. After all, effortless payment transactions, transparent voting systems, and ‘safe’ foreign aid are just a few of the world’s problems that blockchain might be able to solve. See more here. The momentum is so great that at times the ‘blockchain revolution’ seems inevitable. In reality, we’re just at the early days, and no amount of media attention or hype will guarentee the promise that we see in blockchain.
While all the overarching signs are positive, here are three potential reasons why blockchain could fail to live up to its potential.
As with any hot technology, everyone wants in. This is great from the consumer side, but much less so from a business perspective. The consumer’s attention is split between many companies and products. Imagine if there were hundreds of cellphone operating systems or 50 ride-sharing platforms. None of the systems or apps would have reached the virality required to serve as a comprehensive solution. Taking ride-sharing as an example: users would be stuck using something different in every city, and they would likely abandon ride-sharing all together. Now imagine this scenario with hundreds of cryptocurrencies or blockchain voter-registration systems. Communicating between blockchain systems and legacy systems is already a challenge itself, so adding another level of complexity by requiring many systems to talk with each other would be less than ideal.
“There is no one blockchain to rule them all. The various blockchain flavors are still early and unproven. People are implementing lots of different versions of untested code and concepts sometimes with limited understanding of the unintended consequences. This isn’t to say we find ourselves in a negative situation with all of this. Chaos can create change. In 1996, both Amazon.com and Pets.com looked like a fantastic investment. Today only Amazon.com looks like a great investment. There is no obvious winner and loser from our vantage point today. I think this is why incumbents are doing lots of proofs of concept, but we’re seeing little from them at scale. Scale is coming from the edge, from the innovators—and the biggest risk there is, is ignorance“
As Simon explains, there is a lot to divide the attention of users and investors, but perhaps scalability serves as the true litmus test for the mainstream audience to engage more directly with blockchain. The blockchain, and applications that can create both utility and an engaging interface for consumers, will ultimately win out.
Any article detailing the risks of blockchain would be remiss without a mention of regulatory risk. While one of the major selling points of blockchain is its ability to be secure and unregulated, at some point blockchain will face regulations if by nothing other than the virtue of the industries and systems it is set to disrupt. Finance, insurance, law, and politics are some of the most entrenched and highly regulated components of society. As blockchain begins to influence these areas more substantially, further regulation will be inevitable.
This regulation does not have to be a bad thing. In fact, it might even provide the trust and security that allow more consumers to embrace blockchain. The trick is that regulation is often incredibly political and by nature favors certain groups over others. This can be seen on an international and national level and it is critical to avoid, especially at the onset of blockchain’s transformation of society. Over-regulating blockchain may directly conflict with the ethos and politics of those building its foundational systems and may simultaneously undercut some of blockchains biggest value propositions.
While blockchain has tremendous potential, it is important to recognize that it is far from inevitable. It is up to blockchain leaders such as early adopters, entrepreneurs, policy makers, and scholars to set the scene. But as with all new products and systems, it is everyone else that has the final say. Opinions expressed here by Contributors are their own.