Seven reasons why blockchain isn’t mainstream yet

Rage Review : Martha Bennett, chief analyst at Forrester Research, shared with us her understanding of blockchain technology, analyzing its negative impact on enterprises and how to obtain the greatest benefits of technology. The author of this article listed her seven major blockchain problems one by one, believing that these are obstacles to the large-scale application of blockchain. Finally, Bennett suggested that in the face of such an extremely complex technology with a wide range of impact, we should focus on a single use case and use experiments to explore the practical significance of the technology, rather than wasting millions of dollars on exploring the definition of the technology.

Translation: Annie_Xu

As more and more people invest in the much-hyped blockchain technology, we can’t blame lay observers for mistakenly believing that the technology’s time has arrived. There has been much talk about the potential of distributed ledgers to revolutionize core business processes, but like all cutting-edge technologies, blockchains also bring risks to business.

Speaking at the Forrester Digital Transformation Europe summit in London last week, principal analyst Martha Bennett outlined the biggest inherent risks of blockchain and how businesses can avoid them and unlock the technology’s potential.

Martha Bennett

1. Lack of clear definition

First, Bennett said that it is important to unify the definition of blockchain, and described blockchain as "a database that you can only write to once and can only add to, not overwrite. Blockchain is distributed and either fully replicable or partially replicable."

“It’s cryptographically protected, but it’s different than encryption. Information, transactions, and records on a blockchain are unencrypted by default. The reason for encryption is that you hash the transaction and match it to a specific hash value, so that if someone tries to tamper with the data, it’s immediately noticeable because the hash value is off.”

If you replace text ledgers with databases, you won’t be so scared to talk about it. So why is it so important? “The main message I took away from this is to make sure you are on the same page whether you are talking about blockchain or not; because blockchain is like the cloud or big data, it can be completely centric to your will.”

2. Security and risks

What makes financial services and insurance companies salivate is that blockchain can ensure transaction security and reduce risks, because anyone who can see the blockchain can immediately detect any modified records.

However, Bennett warned people:

"Blockchain also brings great risks because the information on the chain is in clear text by default. In other words, it can be decoded at will. So even if there is confusion, specific technology is required to obtain the information."

"If it contains too much private information, it could affect personal safety. If people can access the information, fraud could occur. Most importantly, it could violate privacy and data protection regulations."

“If everything that’s relevant to a transaction is on-chain, then I can trade information with you. Some of the companies involved in development have realized this, and a number of use cases are being investigated because of commercial confidentiality and antitrust issues. There are a lot of considerations around risk, security, and handling of information access.”

3. Key Management

Bennett discusses the recent spate of cyber thefts at SWIFT and how blockchain alone can’t prevent these types of thefts.

“You talk about a write-once immutable record, but people make mistakes. There will be fraudulent transactions on the chain, and there will be fraud wherever there is money. It may be easier to detect on the chain, but you can’t prevent it from happening.”

“People say fraud is impossible if it’s on the blockchain, but the reality is that what SWIFT suffered from was credential theft, you can steal the keys to the chain. Maybe you can track it better, but you can’t prevent it.”

4. Perhaps permissions and permissions

Bennett peppered the IT team with questions about blockchain.

“How many keys are needed for permission and encryption. How is trust achieved? How does the chain work? What consensus algorithm is used? Is encryption used? How many nodes are there? Is the data stored on-chain or off-chain?”

“These are important questions to ask when you’re talking to vendors. And then you find that a lot of startups can’t answer them.”

5. Enterprise Deployment

Just because a technology is mature and meets the needs of enterprise use cases, such as remittances, payments, post-trade processing, compliance ledgers, etc., does not mean it is suitable for enterprise IT environments. As Bennett said, "After all, the technology is not mature yet."

"It will take another five to ten years for widespread adoption because now we only have a pile of immature technologies. So your company may have talent, but when it comes to security, capacity and interoperability, they cannot meet enterprise requirements."

6. Storage

Anyone looking to deploy blockchain technology should first identify the storage problem.

Bennett said:

“You can store it on the chain, or on other peer chains. I see more and more people working on this. When a lot of computationally intensive transactions need to be replicated between different databases, there will be latency issues, so you may want to reduce the storage and computation pressure of the blockchain.”

7. Unified standards

Recently, Bennett said that there is a need to reach a unified standard and process. Although the 3R Alliance and others are working on this, large-scale cooperation among large global financial institutions is obviously challenging. "When was the last time more than 40 banks reached a unified process?"

Finally, Bennett gave a suggestion to those who study blockchain

“Start with a use case, not the technology. It breaks my heart to see millions of pounds wasted on projects that don’t make sense, so you have to get your hands dirty, try things out, and then feel the results.”