Challenges Associated with Blockchain and Ways to Overcome Them

Challenges Associated with Blockchain and Ways to Overcome Them

Editorial Team Avatar
Mar 3, 2021
7 min reading time

Blockchain is one of the rapidly developing technology in this world. Like any other technology, blockchain comes with several challenges, and that’s the reason behind its slow adoption in many industries. There are several leader’s organizations and business leaders who are ready to adopt this technology. Still, few sets of challenges need to be fixed since they are responsible for the technology’s slow uptake.

Challenges for Blockchain Adoption

Blockchain tends to normally be touted as one of the technologies foreseen to revolutionize several industries, including the finance sector, healthcare, etc. However, many issues, such as lack of standardization, tend to threaten its growth. Here are some of the major challenges that affect the blockchain for enterprise and its solutions. To begin with, the blockchain tends to have its environmental cost.

Blockchain tends to rely on encryption to give its security and establish the consensus over a given network, which normally is distributed. This, therefore, means that several of the blockchain algorithms need to be run for one to prove that a certain user has the permission to develop or write the chain. These complex algorithms require large amounts of computing power and thus come with high costs. For instance, one of the common blockchain examples, which is Bitcoins in the year 2019, was claimed to have consumed huge amounts of power required to run the energy, which proved to have cost the management a huge amount of resources.

In addition, other factors such as security essentials increase the cost of maintaining and running the technology, which most industries cannot afford. Blockchains are found to consume an exorbitant amount of energy because of the algorithm followed for its creation. Blockchain adoption consumes a lot of energy because of the algorithm used in its development.

Solution to the Power Consumption Problem

power consumption
Source: TheCable

There are two applications that can provide the solution of reducing the power consumption in the blockchain. This includes moving away from the proof of work validation methods and instead adopting the proof of stake and the proof of authority techniques. This method consumes significantly less energy-intensive than the proof of work validation normally used in blockchain algorithm development. The adoption of these techniques in blockchain applications results in a decrease in blockchain energy consumption.

For instance, the Energy Web Foundation is developing a new design of proof-of authority methods, which is energy-intensive as it advocates for the adoption of the distributed renewable source of energy.  Another challenge of blockchain technology is interoperability. Many players are entering into ever-expanding industries and thus creating a worry that with a lot of networks, having no standards to allow the players to interact is one of the challenges faced. Standardization is what has been termed interoperability. The lack of interoperability will give leeway for the blockchain coders as well as developers.

On the other hand, subject the Information Technology departments to a hard time as they will learn that some platforms might not communicate as they required translation help. According to the report, it is clear that some of the platforms, such as Github, for instance, have about 6500 active blockchain projects which totally utilize or are developed using different protocols, coding languages as well as through the use of different mechanisms of privacy measures. Developing one blockchain is impossible since one cannot provide a solution to the many specific industries with different use cases, privacy schemes, consensus mechanisms, and economic models. 

Differences in Requirements for Blockchain


Different blockchain have different requirements; for example, a supply chain blockchain requires higher decentralization and lesser TPS, while an IoT blockchain requires high TPS throughputs and lower fees. This results in challenges of blockchains communicating with each other since they are significantly isolated and disconnected. However, this problem can be solved through the use of some cross-chain technologies like NeoX to help interconnect the different blockchains. Sidechains like ICON have also been enabled to run parallel with the blockchains, which have a two-way peg that enables asset interchangeability between the two chains. When both chains use the same consensus protocol mechanism, the side chain can easily validate transactions in the main chain.

Another interoperability solution is the escrows methodology used by Ripple (XRP). The Company uses Interledger protocols that link the different ledgers and allows users to use third-party connectors to transmit currencies freely. This protocol takes in the cryptographic algorithm and can generate fund custody for the different ledger systems involved through third-party connectors or validators. Both parties, later on, confirm the cross ledger transactions after they have reached an agreement. Raiden and Bitcoins lightning network can also be used for cross-chain communication. These Ethereum networks use harsh locking technology that enables cross-chain payments. An off-chain payment network is established between the different blockchains to make up the lightning network to allow value transfer between them.

Raiden network helps Ethereum switch from the current model as the different transactions pass through the blockchain towards the model where users transfer tokens. This is through data exchanging in an off-chain without engaging the global consensus protocol while sustaining Ethereum network security. Some projects like WAN, AION, and ICON are also teaming up to allow blockchain communication. They have together formed BIA to lessen this problem of blockchain isolation. 

Public Blockchain Privacy

blockchain privacy
Source: Medium

Privacy is another challenge in the blockchain environment. Transactions and network ledgers in a public blockchain environment are open to everybody for transparency and easy tracking. Lack of privacy in such transactions is a great contributor to various issues like confidential corporate. Some protocols have been created to provide an alternative to Bitcoins anonymity, including Coin Join, Zero-knowledge proof, and Ring signature.

Enterprises require privacy in their transaction, but with blockchain, this is not considered resulting in many firms striving to find a solution to this problem. An example is EY, which in 2020 launched Baseline protocol together with Microsoft to help businesses operate using the Ethereum blockchain using the Zero proof, distributed identity, and off-chain storages to enhance the use of common standards in processing transactions. This aspect could enable the business not to store their personal and sensitive information on the blockchain by granting them full privacy of their processes. 

The ring signature is a privacy protocol used by Monero. When using this protocol, once a sender has initiated a transaction, the transaction is joined with other users’ transactions to form a ring. The transactions are then masked such that all transactions become indistinguishable from one another, making it harder for perpetrators to track a specific transaction. Monero further uses the Stealth Address technology to create a one-time address for each transaction in the ring. A zero-knowledge proof is a methodology used by Zcash to enable the processing of anonymous transactions. The technology can conceal information on transactions so that details of the sender, receiver, and amounts are not visible in the system except for users who have their own private keys in the smart contract. 

The Coin Join technology is used by Dash, whereby the protocol mixes multiple payments from many spenders and combines them into one transaction. The mixing of transactions makes it hard for one to trace a specific single transaction. Large-scale adoption and success of blockchain technology in the world require addressing the current challenges that the platform is facing. This includes issues of energy consumption, interoperability, and privacy in its environment. Energy consumption can be reduced by avoiding proof of work validation and adopting proof of stake and proof of authority since they are less energy-intensive.

Challenges of Interoperability can be solved using a cross-chain to enhance the connection between different blockchains. Privacy can, on the other end, be solved through the use of Coin Join, Zero-knowledge proof, and Ring signature, which makes transactions untraceable in the system except for users who have the opening key. These barriers can thus be easier overcome by implementing new technological advances to increase the adoption and growth of the world’s Blockchain technology.

Featured image: Cryptofans

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