“Blockchain” is a word that spells innovation and disruption yet brings along with it scepticism and apprehension. The industry might be having a hard time trusting a technology that is built on the premise of infusing trust into the system, but with baby steps it is inching toward its adoption. When it comes to the finance industry in particular, the adoption of blockchain technology has crossed the innovator stage and reached an early adopter stage. Blockchain is emerging as a solution for a plethora of industries. Picked up by companies in Logistics, travel and Manufacturing industries, it shows signs of adoption in other industries as well. But the question remains, what are the factors or misconceptions that have been impeding the adoption of blockchain?
Misconceptions about Blockchain
- Distributed ledger = compromised data privacy: This is one of the biggest misconceptions that has plagued blockchain adoption. People assume that since blockchain is a distributed ledger, details of all the transactions conducted on it would be visible to all peers, leaving data privacy compromised. But this is certainly not true as people misunderstand how transactions are stored on blockchain. In reality, the hash of the transactions are stored on the ledger. Hash is generated through a one-way cryptographic function which converts the transaction details into a string of numbers. In the case of documents, one can just store the cryptographic signature while storing the actual document in a data lake (which could be encrypted/decrypted using a public key/private key). Blockchain helps in making sure that the file remains untampered when accessed again, as the signature changes if the file is edited even the slightest bit.
- Blockchain is just for the finance industry: There is still the notion among players in the nonfinancial industry that blockchain applications are for implementation in the financial sector alone when its potential extends far beyond the financial world. Blockchain, in simple words, is a list of records that can be used for storing any type of data that is generated in other nonfinancial entities. It has a promising future in the travel, manufacturing, logistics, and healthcare industries.
- Blockchain = Bitcoin: Blockchain technology came into the limelight through the popularity of Bitcoin, which has been more prominent than blockchain and people fail to differentiate between the two. This confusion makes prospective users think that blockchain is more a cryptocurrency than a distributed ledger technology which promises security and transparency to the system. The negativity created around Bitcoin (being considered an outlawed currency) affects the perception about blockchain. However, blockchain adoption for enterprises is totally different from its uses for Bitcoin and the principle is being adopted for use cases in various industries.
- Blockchain is costly: There is a popular belief that blockchain is quite expensive when compared to existing central databases or cloud-based solutions. On the contrary, blockchain technology is cheaper as the underlying technology is free for everybody to use. The blockchain solution is adopted by a network of users which may share the cost of implementation, thus reducing the cost burden on a particular player in the ecosystem. Companies belonging to different industries incur heavy cost of transaction due to involvement of intermediaries. On the other hand, one of the main promises of blockchain is disintermediation, which could also help in bringing down the cost of transaction.
- Blockchain cannot be interlinked: A firm can use different blockchain depending on what others in its supply chain are using. So, there is an emerging need to be able to interlink multiple blockchains being used by a particular organisation in order to enable cross-chain transactions. While currently not possible, companies are researching this in the hope of achieving it in the near future. A company like Wanchain aims to build a cross-chain protocol in order to facilitate cross-chain and intra-chain transactions.
It is quite natural for a new technology to face scepticism and criticism from all sectors as it proposes to disrupt the old way of carrying out business but it would be unwise for the firms to be in a state of complacency. If the industry players look beyond the preconceived notions (whether right or wrong) and try to really understand how blockchain technology helps their business, then it has the capability to revolutionize many business processes. Blockchain implementation at this stage should not be perceived as a capital expenditure toward an untested technology, but rather it should be seen as an opportunity to stay ahead of others in the technology curve.