Big Four London-based accounting firm Deloitte has published a report which finds that mainstream adoption of blockchain technology still faces significant obstacles and challenges.
Although barriers to adoption are gradually decreasing, “for most enterprises, obstacles have kept the value of blockchain more prospective than actual, and commercial adoption thus far remains limited”.
Deloitte flags up such positives as IBM testing applications to speed up transactions. Also, the Enterprise Ethereum Alliance consortium has unveiled an open-source, cross-platform, standards-based framework. The third positive is that over the past two years, major technology vendors, including five of the world’s biggest cloud companies, have introduced blockchain-as-a-service offerings. Whilst US state legislatures have taken action on dozens of blockchain-related bills so far this year, and at least eight US states have already passed laws. Finally, the number of active blockchain consortia across industries has increased from 28 last year to more than 605 in 2018.
Deloitte believes that blockchain is in a phase of maturation and that mainstream adoption of the open ledger technology can be achieved through the following five vectors.
1. Increasing Output and Performance
“Because of its relatively poor performance, many observers do not consider blockchain technology to be viable for large-scale applications,” says Deloitte.
To resolve this issue, developers are creating new consensus mechanisms. Consensus is how participants in a blockchain network agree a transaction recorded in the digital are valid. In this regard, blockchain developers are exploring newer consensus mechanisms, such as proof of burn, proof of capacity and proof of elapsed time.
“The evolution of consensus mechanisms is improving blockchain speed significantly—good news for applications in domains such as trade finance, supply chain traceability, auto leasing, marine insurance, health care, and insurance,” says Deloitte.
2. Enhancing standards and interoperability
According to a Deloitte study, the cloud-based code repository GitHub features more than 6,500 active blockchain projects that use diverse platforms with multiple coding languages, protocols, consensus mechanisms, and privacy measures.
Standardisation could help enterprises collaborate on application development, validate proofs of concept, and share blockchain solutions as well as make it easier to integrate with existing systems.
There are already some standardisation efforts in place. For instance, Enterprise Ehtereum Alliance was founded in 2017 to create a standard version of Ethereum blockchain software for business. Hyperledger Foundation also supports many projects headed in that direction. One of them is the Interledger protocol, a means of routing payments across different ledgers that may be based on diverse technologies.
Another effort in this regards is the Decentralised Identity Foundation, a consortium founded to promote standards for blockchain-based identity systems. As far as interoperability goes, IBM and Microsoft, for example, are implementing data standards developed by GS1 in their respective enterprise blockchain applications for supply chain clients.
3. Reducing complexity and cost
“The costs and complexities involved with building and deploying blockchain solutions are significant obstacles to the adoption of the technology,” says Deloitte.
“Regulatory issues are another major barrier to blockchain adoption. In a recent Deloitte survey of blockchain-savvy executives, nearly two in five cited regulatory issues as a barrier to greater investment in blockchain technology,” says Deloitte.
Regulation is already beginning to happen. This year alone, some 17 US state legislatures have passed dozens of bills about the adoption of the blockchain. These bills cover areas such as the recognition of cryptographic signatures, the definition and use of smart contracts, and the usage of blockchains for maintaining business records.
The US Congress Joint Economic Report of 2018 endorsed blockchain and calls for a common and coordinated regulatory framework that creates clarity for developers. And regulators such as the US Financial Stability Oversight Council, a government body that assesses financial system risks, and the US Federal Trade Commission have formed working groups to examine how the technology will affect their objectives.
5. Multiplying consortia
“As a technology that facilitates transactions across a network, the value of a blockchain network increases with the number of users. That’s one reason why the growth of blockchain consortia is a bullish sign,” states the accounting firm. It explains that blockchain consortia are groups of companies that collaborate to advance shared objectives for the technology.
“A recent study counted some 61 blockchain consortia across a dozen industries globally—significant growth versus the prior year,” Deloitte notes. Participation in consortia or in creating consortia has also grown significantly. That helps increase adoption of the technology.
“Over time, the five vectors of progress outlined here may help enterprises lower the cost and risk of deploying blockchain while expanding the practical applications of the technology,” concludes Deloitte.