Top 10 Enterprise Blockchain Implementation Challenges

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As blockchain transitions from hype to reality, various issues are coming to light. Further, it is also becoming clear that the technology requires more detail in terms of enabling better understanding, hence better implementation. Notably, blockchain implementation challenges simply imply that there is more to work on before the technology can fulfil its promise.

Interestingly, getting to the bottom of the challenges requires a good understanding of the technology and what it entails. Further, blockchain is quite undefined as it is today. As such, one might not be clear on what will work for days to come. Notably, the issues that are still to be clear include blockchain implementation architecture which is yet to be standardized. In this light, the following implementation challenges are present.

Top Enterprise Blockchain Implementation Challenges Infographic

Top 10 Enterprise Blockchain Implementation Challenges

  1. Blockchain implementation cost

One if the major challenges facing the implementation of enterprise blockchain is the cost of the whole process. Notably, most of the existing blockchain platforms are quite inefficient in terms of speed of transactions and the energy consumption. For instance, while the bitcoin network transacts only 3 to 5 transactions per second, it gobbles up a lot of energy in the process.

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On the other hand, Ethereum can manage up to 15 transactions per second. Unfortunately, all these compare so poorly against VISA which can carry out 1,667 in one second. Interestingly, it is apparent that even the few transactions per second completed by bitcoin would require a lot of energy to complete in a year. For the 4 TPS, one would need to avail over 32 terawatt hours’ worth of electricity to power the platform annually.

Basically, enterprise blockchain platforms run on a similar framework as bitcoin and others. Notably, the bitcoin network was the first to come to light and it is the one that inspired all of the other blockchain-based technologies that are extant today.

Nevertheless, popular enterprise blockchain platforms have made great strides in terms of the transaction speeds. For instance, Hyperledger Fabric claims to enable speeds of up to 3,500 TPS which is just about twice the speed over VISA platform. However, Hyperledger Fabric does not run on proof-of-work platforms like bitcoin and hence is slow on power consumption.

This is not to say that the implementation process is cheap. First, one will need to hire the right people who are in short supply. Further, most of the software requirements are expensive. In short, one must be ready to pay for the convenience that comes with the new technology. This includes membership to the consortia that are pushing the enterprise blockchain projects where most of them are private.

  1. Scalability

Blockchain technology, and by extension the enterprise blockchain technology, is contending with the problem of the inability to serve many users. According to IDC, the global spending trend on blockchain solutions is increasing. Notably, the firm forecasts spending on blockchain globally to reach $11.7 billion by 2022. Basically, this is evidence that there is going to be increased demand for such solutions as enterprise blockchain.

With the increased demand for enterprise blockchain and the associated applications, companies that can successfully scale their enterprise blockchain platforms will reap big. Notably, for the technology to gain substantial adoption by the mainstream entities, the throughput should be sufficient. Already, there are a number of ongoing projects that are investigating ways through which the transaction speeds of enterprise platforms can remain high even with many users on board.

For enterprises that have a large number of customers, it is clear that scalability is necessary for them to consider the technology. For instance, for a bank that has 2 million customers to adopt R3’s Corda, the bank will have to determine that it can serve all the 2 million customers efficiently without serious network lag. Further, if by any chance all the customers try to access the platform at the same time, the bank must be sure that the network will not crash.

Unfortunately, most of the existing enterprise blockchain networks are untested to that extent. Notably, there is no evidence of an enterprise blockchain network like Corda or Hyperledger Fabric being used by large banks to determine the success rate. As such, few institutions, if any, are willing to take the chance for the fear that it could backfire on them. Therefore, it is imperative that the various enterprise blockchain projects undertake to assure the market that their platforms are sufficiently scalable by actually putting them in practice.

  1. Data privacy

One of the greatest selling points of enterprise blockchain is that it decentralizes operations such that users do not require the intermediation of middlemen. Further, it is clear that the platform allows for transparency as well as data integrity such that every participant on the platform is satisfied concerning transactions over the platform.

Nevertheless, it is also true that most enterprises would not appreciate the case where anyone can view their data which might be quite sensitive to their core business. Let us say Company A and Company B are competitors in the shipping industry. Further, let us assume that the companies are interested in joining TradeLens, a blockchain-based supply chain solution that targets the digitization of operations in the shipping industry.

Notably, TradeLens is a case of implementation of blockchain in supply chain where firms in the shipping industry can easily access data relating to goods. Further, the solution runs of IBM’s Hyperledger Fabric where interactions are peer-to-peer. Also, all the participants can easily access any kind of data through the distributed ledger. In essence, this implies that Company A can view any kind of data relating to Company B.

If Company A and Company B are business rivals, Company B will lose any kind of leverage it might have once Company A views data that should have remained private. For instance, Company A will pre-empt any kind of surprise or strategic move Company B had in mind. This way, business for Company B will not be as good as the firm might have envisioned.

In this light, it is unlikely for the companies to join such a platform. Therefore, data privacy remains a sticking point that enterprise blockchain projects are looking to remedy if the technology is to go mainstream. Interestingly, this gets quite urgent considering that most of the potential adopters of the technology are in industries characterized by fierce competitions and deep secrecy.

  1. Insufficient internal blockchain knowledge

Blockchain as a technology is just taking off. Notably, most of the solutions that are coming up are novel and they are mostly technical to majority of people in the industry. Similarly, most organizations lack sufficient knowledge concerning blockchain technology internally. This is to say that the organizations do not have people who clearly understand the concept of blockchain and by extension, enterprise blockchain.

Notably, the organizations lack information concerning aspects like the choice of the best enterprise blockchain platform to adopt. Further, the firms are not cognizant of the appropriate blockchain implementation steps that should guarantee the best outcome as well as optimal utilization of the technology.

Interestingly, blockchain technology promises to solve many issues that were initially intractable. The technology promises to touch on almost all types of industry ranging from supply chain management to identity management. Therefore, organizations need to be clear on their blockchain needs so that they can choose the best enterprise blockchain platform.

For instance, let’s take the case of blockchain implementation in healthcare. Here, there are different needs that the technology can meet. Notably, the technology could be useful toward managing patient health records. In this case, an organization will need to choose between Microsoft Azure and another platform like Corda or any other. How does the organization ensure that the chosen platform meets their needs?

To successfully deliver that objective, the organization will need sufficient internal blockchain knowledge. Interestingly, they could try to fill any gaps by hiring external talent. However, there is a shortage in the skilled people who can successfully achieve the objective. Therefore, it becomes difficult for the firms to implement the blockchain-related project.

  1. Transitioning from legacy structure is proving difficult

Before blockchain entered the picture, most of the things it is targeting to change have been already operating fairly well. Notably, despite the few challenges that they encountered, the industries were delivering service or products to their customers. In particular, the industries were so used to the established legacy structures as well as the standards established in line with the structures.

Further, the people in the industries are quite familiar with the legacy structures to extend that any attempt at introducing fresh structures will destabilize the whole industry. For instance, it is clear that the financial industry is among the sectors facing a revolution sparked by blockchain. Here, the sector has established structures that guide service delivery.

Notably, people use VISA for cross-border transactions. For banks, they use SWIFT and other means for movement of cash in bulk. Such structures are so entrenched in the system that it will take a long time to introduce fresh mechanisms. Interestingly, this is exactly what blockchain is doing. This technology is fundamentally shifting the nature of operations in all ways conceivable.

The problem is that for organizations to successfully adopt the new technology, they will need to put in place new structures to handle the new way of doing business. For instance, they will have to choose a suitable enterprise blockchain platform or an appropriate blockchain platform like Ripple on which to conduct their business. At this point, another problem is likely to arise.

Like earlier discussed, legacy systems are deeply entrenched in the industry such that people could be reluctant to try out new systems. For instance, people in the financial industry could resist the adoption of blockchain technology because i) they know so little about it and ii) they feel it could herald massive job losses due to some positions falling redundant.

  1. Getting the right partner to facilitate implementation

Like earlier explained, blockchain is still an emerging technology and many people are yet to gain a clear insight of it. This is to say that even for those organizations that would want to implement it, there is no clear blockchain implementation roadmap. Notably, lack of clear standards mean that there is a lot of information which is more confusing than it is helpful.

Nonetheless, there are efforts at making this process easy for those that want to implement enterprise blockchain. Notably, the most important step to consider before making the plunge is to find the right technology partner to guide through the labyrinth. However, here comes another hurdle. Who is the best partner and how can one tell they have found the right partner?

Interestingly, this is one of the major challenges that arise when entities are looking to implement the technology. Getting the right partner will enable an organization to discover the best blockchain implementation roadmap. Presently, there are umbrella projects like Hyperledger, Enterprise Ethereum Alliance, and other enterprise blockchain platforms like Corda, Microsoft Azure and Hyperledger fabric. Particularly, these are private blockchain platforms that bring together likeminded organizations focused on blockchain.

Unfortunately, even if one decided to gather information for the creation of one’s own blockchain platform, it is quite a difficult and costly task. Let us say that an entity successfully comes up with a blockchain platform. The reality is that the blockchain cost of implementation is prohibitively high. As such, it is only prudent that one looks for a partner to help implement the technology.

Even with the many, and high profile partners available, sometimes it is quite costly to access their platforms. Further, the existing platforms are filling up quickly which means they could soon overcrowd. In such an environment, it would be difficult to get customized services given the huge demand.

  1. Security

It is clear that one of the greatest selling points of blockchain is its resilience against cyberattacks. Nevertheless, a recent cybersecurity report outlines various risks that the blockchain sector faces from bad actors. Notably, the pace of the implementation of the technology is seemingly exposing parts of the industry to hackers.

According to the report, there are numerous vulnerabilities inherent in the technology due to immature processes and defenses. For instance, chances of a person falling victim to phishing scams are quite high. Further, lack of clear standards of development imply that there is a lot malware that is lurking around within the industry. These, coupled with technology vulnerabilities as well as implementation exploits, pose a grave danger to unsuspecting users.

To escape the possibility of the security problems, users are continuously going for private blockchain networks. Notably, these are networks that are not open to the public and that they require authentication before access. Examples of such blockchain platforms include those on which various enterprise blockchain projects run.

However, the problem with private networks is that users do not have the same autonomy that users of public blockchain networks have. Here, there is a tendency by the “presiding” node to exert some restrictions on what participants can do. For instance, this affects the ability of users to tinker with the platform the way they would want to.

Nonetheless, the public blockchains are insecure such that anyone can run a node within the ecosystem. If a bad actor successfully attacks a platform such that they can initiate double spending of coins, the platform is likely to lose credibility. This implies that anyone with investments in the ecosystem will experience losses.

  1. Criminal activity

Enterprise blockchain implementation is facing a huge challenge that touches on the ‘cleanness’ of the technology. Notably, the technology assumed global popularity after two things happened. One, it brought to light bitcoin, which threatened to turn the financial industry on its head. Secondly, the technology seemed to abate high profile criminal activity like money laundering. Interestingly, bad actors used the technology to move huge tranches of cash stolen elsewhere.

Further, researchers at Cornell University Library established though a survey that many people distrust blockchain because of the infamous cryptocurrencies. Notably, the study established that criminals use the digital currencies to settle shady transactions over internet-based marketplaces. Also, the study observed that cybercriminals were utilizing crypto to ask for ransom in cases of Distributed Denial of Service (DDoS) attacks of computers.

As a result, blockchain took on an unlikable quality. For the potential adopters of the technology, it remains important to first allay fears of bad actors continuing to use the platform to conduct their criminal activities. In essence, there is some kind of fear among the new potential users who are not ready to get embroiled in a scheme which they do not like.

Given the distributed nature of the shared database, it is clear that each and every participant on the platform will keep a copy of all transactions completed. Therefore, if a bad actor used the platform to procure contraband, all the participants on the network will have a copy of the transaction details. It is the thought of such incidences that gets in the way of potential users of the technology.

  1. Lack of regulatory clarity

Given the various unfortunate incidences discussed above, some government entities are reluctant to allow the technology the freehand to grow. Further, regulators are finding it hard to define the legal environment for the technology given its complexity. For instance, a blockchain network consists of various nodes spread across the globe. Therefore, once a transaction happens on the platform, it is difficult for authorities to clear define the jurisdiction and therefore the correct legal obligations of the parties to the transaction.

In the midst of this legal conundrum, it is hard to imagine how upcoming legislations like the EU’s General Data Protection Regulation (GDPR) will work. In essence, the regulation gives digital rights to ownership of data stored on a blockchain platform. Interestingly, it is clear that users of blockchain platforms can operate anonymously. In such a case, knowledgeable observers wonder how effective the GDPR will be.

Further, the fact that the GDPR proposes some form of data protection is more confusing. Apparently, data stored on the distributed ledger is available to all participants to view, but not to alter. Also, not all the data belonging to a certain transaction is available for viewing by the users. This is due to a blockchain network property called data minimization. Therefore, this is evidence that data on a blockchain network is already protected.

Nevertheless, the point is that the blockchain community is not yet clear on what the law says about the emerging technology. As such, this is a point of concern that has many potential users of enterprise blockchain second guessing their decisions.

  1. Interoperability of enterprise blockchain platforms

Like earlier noted, there are numerous enterprise blockchain platforms in existence today. Interestingly, each project endeavors to provide certain solutions to the users. For instance, IBM’s Hyperledger Fabric is excellent in managing supply chains while R3’s Corda is best for financial industry solutions. Apparently, there is some kind of disconnect among these platforms which makes inter-platform navigation a nightmare.

Enterprise blockchain interoperability is a pertinent issue to which developers must find a solution if mass adoption is to happen. Notably, one should be able to join Hyperledger fabric but be able to utilize services on Corda or Microsoft Azure without any serious compatibility problems.

Interestingly, two of the most popular enterprise blockchain platforms, that is Enterprise Ethereum Alliance and Hyperledger, met last year with an eye on the problem. Notably, the projects intended to work together such that they could try and solve the problem of interoperability. Part of the agreement entailed setting up of certain standards which would guide the implementation of enterprise blockchain solutions.

Despite the enthusiasm behind the meeting, there is a lot to desire in terms of interoperability. Interestingly, interoperability is a property of software that determines if it has any chances of mass adoption. In particular, there are myriads of software out there where each has users. Therefore, there must be a way through which users of the different software can interact and conduct meaningful business. In this light, there is need for more work in terms of enterprise blockchain interoperability to drive mass adoption.

Summary

Blockchain implementation cost – finding the most suitable blockchain application is not easy as a majority of them are not fully developed. Further, the most convenient platforms come at a huge cost in terms of implementation and even energy costs.

Scalability – most of the potential users of enterprise blockchain platforms are multinational firms like banks whose clientele is in the order of tens of millions. Given that most blockchain solutions available are still under development, it is difficult to scale them to efficiently serve the huge number of customers without hitches.

Data privacy – it is clear that a blockchain network is based on a distributed ledger where all participants have access to data on the platform. As such, there is lack of data privacy and that firms will not be able to maintain their leverage against their competitors. Subsequently, many potential users shy away from the technology for fear of losing their competitive advantage.

Insufficient blockchain literacy – information regarding the use and implementation of blockchain is scattered and access the most useful piece of information is sometimes difficult. Further, organizations lack proper internal knowledge regarding use of blockchain. Therefore, it becomes difficult to develop a strong business strategy centered on the technology.

Transitioning difficulty – organization have grown used to extant structures and their staff are also specifically trained to utilize them. Given that enterprise blockchain implementation requires completely new structures, transitioning from legacy structures becomes difficult.

Lack of partners – blockchain is quite novel and understanding its basic principles requires assistance by those that are already knowledgeable. However, getting the right partner is problematic given that the few available are completely stretched with demand. Therefore, one is not likely to get the right kind of solutions.

Security – given the immaturity of the technology, there are glaring vulnerabilities that expose users to cybercrime. Until issues like scamming are fixed, potential users will continue to exercise caution and mass adoption will not happen soon.

Criminal activity – blockchain has a credibility problem arising from the fact that many criminals use it to facilitate dirty endeavors. Notably, some organizations do not want to partake in a platform where they co-exist with criminals and they opt not to implement the technology.

Unclear regulatory environment – many governments are still unclear on how they view blockchain from a legal standpoint. This results from the complexity of the technology. Therefore, potential users fear future legal problems and elect not to engage in the ecosystem.

Interoperability challenges – one constant hurdle to enterprise blockchain implementation is the incapability of users on one platform to sufficiently interact with users on other platforms. This lack of interoperability is holding back many potential users.


About Author

Swati Goyal has an extensive work experience of more than 6 years, in the field of Finance in diverse roles ranging from accounts, financial research to and Cryptocurreny. She follows the Finance market and enjoys writing on it, Swati's hobby is reading, watching movies and television shows.

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