Blockchain technology is a revolutionary innovation that promises to transform various industries and sectors, from finance and supply chains to healthcare and education. However, becoming a blockchain professional is not an easy task, as there are many technical challenges and limitations that need to be overcome. In this article, we will explore some of the most common and pressing issues that blockchain professionals face in their job positions, and how they can be addressed or avoided.
- Blockchain technology is a peer-to-peer distributed ledger system that can record transactions transparent, secure, and immutable.
- Blockchain professionals design, develop, implement, and maintain blockchain applications and solutions for various use cases and domains.
- Some of the technical challenges that blockchain professionals face include scalability, energy consumption, interoperability, security, regulation, and user adoption.
- These challenges can be mitigated by using different consensus algorithms, scaling solutions, interoperability protocols, encryption methods, compliance frameworks, and education strategies.
One of the biggest challenges facing blockchain technology is scalability. Currently, many blockchain networks struggle to handle the number of transactions they receive, leading to slow transaction times and high fees. This makes blockchain networks challenging to use in applications that require fast and cheap transaction processing.
Blockchain professionals must be aware of the different scalability solutions being developed and implemented to overcome this challenge. Some of these solutions include:
- Sharding: This is a technique that divides the blockchain network into smaller partitions or shards, each with its own set of nodes and transactions. This reduces the workload and bandwidth requirements for each node and increases the overall throughput of the network.
- Layer 2: This is a term that refers to various scaling systems that create off-chain channels or networks that allow for faster and cheaper transactions, without compromising security or decentralization. These transactions are then periodically settled on the main blockchain layer³. Examples of layer 2 solutions include Lightning Network, Plasma, and Raiden Network.
- Sidechains: These are separate blockchains connected to the main blockchain via a two-way peg or bridge. They allow transactions to be processed on a different chain with different rules and parameters, such as higher speed or lower fees. They also enable cross-chain communication and interoperability.
Another challenge that blockchain technology faces is energy consumption. The process of validating transactions on a blockchain network requires a lot of computing power, which in turn requires a lot of energy. This has led to concerns about carbon emissions and the environmental impact of blockchain technology¹.
Blockchain professionals must be aware of the different consensus algorithms used to secure and validate transactions on a blockchain network, and how they affect energy consumption. Some of these algorithms include:
- Proof-of-work (PoW): This is the most common and oldest consensus algorithm used by blockchains such as Bitcoin and Ethereum. It requires nodes to compete in solving complex mathematical puzzles in order to create new blocks and earn rewards. This process is very energy-intensive and wasteful¹.
- Proof-of-stake (PoS): This alternative consensus algorithm replaces the puzzle-solving process with a stake-based system. Nodes are required to lock up or stake some of their tokens in order to participate in creating new blocks and earning rewards. This process is more energy-efficient and less wasteful than PoW.
A third challenge that blockchain technology faces is interoperability. This refers to the ability of different blockchain networks to communicate and exchange data seamlessly and securely. Currently, most blockchains operate in silos, meaning they have their own protocols, standards, and data formats incompatible with others. This limits the potential of blockchain technology to create a unified and integrated ecosystem.
Blockchain professionals must be aware of the different interoperability protocols being developed and implemented to overcome this challenge. Some of these protocols include:
- Cosmos: This project aims to create an internet of blockchains, where different blockchains can connect and interoperate via hubs and zones. Hubs are central blockchains that act as routers for zones, which are independent blockchains that can have their own consensus and governance mechanisms. Cosmos uses Inter-Blockchain Communication (IBC) to enable cross-chain communication.
- Polkadot: This project aims to create a network of blockchains, where different blockchains can connect and interoperate via parachains and relay chains. Parachains are independent blockchains that can have their own features and functionalities, while relay chains are central blockchains that coordinate and secure the network. Polkadot uses Cross-Chain Message Passing (XCMP) to enable cross-chain communication.
- Wanchain: This is a project that aims to create a bridge between different blockchains, where different blockchains can exchange value and information with each other via cross-chain smart contracts. Wanchain uses a protocol called Storeman Node to enable cross-chain communication.
A fourth challenge that blockchain technology faces is security. While blockchain technology is inherently secure and immutable due to its distributed and cryptographic nature, it is not immune to attacks and vulnerabilities. Some of the common security threats that blockchain networks face include:
- 51% attacks: These are attacks where a malicious entity gains control of more than 50% of the network's computing power, and can then manipulate or reverse transactions, double-spend tokens, or prevent new blocks from being created. These attacks are more likely to occur on smaller or less popular blockchains with low hash rates or network participation.
- Sybil attacks: These are attacks where a malicious entity creates multiple fake identities or nodes on the network, and can then influence the network's consensus or voting process, disrupt the network's functionality, or spread false information. These attacks are more likely to occur on blockchains with low entry barriers or weak identity verification mechanisms.
- Smart contract bugs: These are errors or flaws in the code of smart contracts, which are self-executing agreements that run on blockchain networks. These bugs can lead to unintended consequences, such as loss of funds, theft of data, or breach of contract. These bugs are more likely to occur on blockchains that support complex or poorly written smart contracts.
Blockchain professionals need to be aware of the different security measures and best practices that can be used to prevent or mitigate these threats. Some of these measures include:
- Auditing: This is the process of reviewing and testing the code of smart contracts or blockchain applications, to identify and fix any bugs, vulnerabilities, or inefficiencies before deployment. Auditing can be done by internal or external experts, using various tools and methods.
- Encryption: This is converting data into an unreadable format, using a secret key or algorithm, to protect it from unauthorized access or modification. Encryption can be used to secure data on the blockchain and data in transit or at rest.
- Multisignature: This is a feature that requires multiple parties or keys to authorize a transaction or action on the blockchain, instead of just one. Multisignature can enhance the blockchain's security and accountability of funds, assets, or contracts.
A fifth challenge that blockchain technology faces is regulation. Blockchain technology operates in a largely unregulated or unclear legal environment, as no universal or consistent rules or standards govern its use and development. Countries and jurisdictions have different laws and regulations regarding blockchain technology, varying from supportive and enabling to restrictive and prohibitive. This creates uncertainty and complexity for blockchain professionals who must comply with various legal requirements and obligations.
Blockchain professionals must be aware of the different regulatory frameworks and initiatives being developed and implemented to address this challenge. Some of these frameworks include:
- The European Blockchain Services Infrastructure (EBSI): This is a project that aims to create a pan-European blockchain platform that will provide secure and interoperable digital services across various sectors and domains, such as identity, education, health, and energy. The EBSI will also establish common standards and governance models for blockchain technology in Europe.
- The Blockchain Regulatory Certainty Act (BRCA): This is a bill that was introduced in the US Congress in 2019, which seeks to provide clarity and certainty for blockchain service providers who do not take custody of consumer funds or assets. The BRCA would exempt these providers from certain state licensing and registration requirements, and create a federal framework for their regulation.
- The Global Blockchain Business Council (GBBC): This is an organization that aims to promote the adoption and advancement of blockchain technology around the world, by engaging with policymakers, regulators, business leaders, and stakeholders. The GBBC provides education, advocacy, and collaboration opportunities for its members and partners.
A final challenge that blockchain technology faces is user adoption. Blockchain technology is still relatively new and unfamiliar to many who may not understand its benefits, features, or use cases. Moreover, many blockchain applications and solutions are still in development or testing stages, and may not be user-friendly, accessible, or reliable. This creates barriers and challenges for user adoption and retention.
Blockchain professionals need to be aware of the different strategies and methods that can be used to increase user adoption and satisfaction. Some of these strategies include:
- Education: This provides information and guidance to potential and existing users, to help them understand and appreciate blockchain technology and its applications. Education can be done through various channels and formats, such as blogs, podcasts, webinars, courses, workshops, or events.
- Incentives: This is the process of providing rewards or benefits to potential and existing users, to motivate them to use or continue using blockchain technology and its applications. Incentives, such as tokens, discounts, bonuses, referrals, gamification, or recognition, can be monetary or non-monetary.
- User Experience: This is the process of designing and developing blockchain applications and solutions that are easy to use, intuitive, attractive, and functional. User experience can be enhanced using various tools and techniques, such as user research, feedback, testing, prototyping, or analytics.
Blockchain technology is a powerful and promising innovation that can transform various industries and sectors. However, becoming a blockchain professional is not a simple or straightforward task, as many technical challenges and limitations need to be overcome. By being aware of these challenges and possible solutions, blockchain professionals can better prepare themselves for their job positions and career paths.