Challenges of blockchain

27 February 2020 in Blockchain , Solutions

 

There are still many challenges that come with the use of blockchain. Like other new technologies, the development and maturing take some time. Note: most (more or less) mature blockchain platforms, such as Ethereum and Hyperledger, have only been around for four years. Compare it with, and learn from the development or maturation of the internet, where everyone had a website but did not know what else to do with it. Downloading a movie would, at that time, cost an entire night. Ultimately, the internet has become a primary, perceived as necessary, facility, and downloading a movie takes a few seconds. 

 

But with new technologies come new rules that we have to apply.

 

With blockchain technology, we, therefore, see the following five challenges that arise when you go from a central to a decentralized model.

 

Blockchain Challenges

1. Privacy



Because a blockchain is a decentralized database model where all stakeholders can view the data, it is “not done” to put data on the blockchain.  The GDPR is based on an underlying assumption that in relation to each personal data point there is at least one natural or legal person – the data controller – whom data subjects can address to enforce their rights under EU data protection law. Putting actual data on the blockchain would therefore not be sustainable. As a solution, only hashes and pointers are used to refer to certain data. It is advisable to do this on a so-called permissioned blockchain because even hashes can be seen as personal data. This, of course, will lead to a new discussion about how decentralized a permissioned blockchain is.

New technology, as stated before, needs the time to grow. The open infrastructure that characterizes a blockchain will change along the way. This transition, will probably go in steps and not in one go. Blockchain applications such as Self Sovereign Identity and Zero-Knowledge Proofs are now being developed and ensure that there is no personal data on the blockchain, but only in the user’s wallet.



2. Governance



Governance is a concept that is not easy to grasp as there are many players involved in this process. Momentarily there is no standard framework for understanding blockchain governance, but when we step off from a centrally controlled model to a decentralized, controlled model, the governance model will change. 

How will different parties determine how certain rules are executed? Governance will evolve over time and in blockchain governance, we have identified various stages requiring different actions and decision-making processes. Organizational structures must adapt to this, and models must be developed to make joint decisions. These governance models do not yet exist and are, therefore, entirely new. It will take some time to develop and give legal form and content to these types of models.



3. Performance



Compared to traditional transactional systems, most blockchain solutions are not very fast. This means that some of these systems cannot handle thousands of transactions per second. This has an apparent reason. Every transaction in a blockchain, in comparison with a traditional system, is validated with regard to the agreements made. All transactions must be synchronized across all databases.

This is a component of the blockchain methodology that is also developing rapidly. Think of it as the film, which you had to download over the internet a few years ago, but now only takes a few seconds. 



4. Identity



With public blockchain systems such as bitcoin, identity is a significant challenge. This allows one to do transactions anonymously which increases the chance of doing transactions facilitating illegal means. At Ledger Leopard, we use the blockchain technology for supply chain optimization. Blockchain technology is used to reduce the administration cost and a more transparent way of sharing data across different chains. 

The digital identity is, of course, also a challenge, which applies to the entire digital world. 

To answer questions such as ‘How do I know for sure which physical person is behind a certain twitter or Facebook account?’: Blockchain technologies such as Self Sovereign Identity and Zero-Knowledge proofs are currently being developed, which seem to have much potential as a solution to the digital identity issue.



5. Public or Permissioned 



There is an ongoing discussion about the choice between a so-called public blockchain and permissioned blockchain. Where the public version is available to everyone and, according to blockchain purists, is the ultimate goal, the permissioned variant is designed for authentic, authorized users within a closed environment. A public blockchain network such as Bitcoin is a permission-less network, which means anyone can join the network. It’s important to note that permissioned does not mean private. Some of the public networks like Sovrin are public but permissioned networks. But the use of a permissioned blockchain is not experienced as a ‘real’ blockchain solution (yet). The choice between one of these blockchains will go in steps. For organizations that have just made the transition to the cloud, with the sweat still on its forehead, it will be hard to explain that their data must be available all over the world (in a public blockchain) without them having to worry about their security.

In the coming years, we are likely to see a transition wherefrom our view, a permissioned infrastructure will first have an impact on the digital world and especially digital identities.

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