Many people are starting to turn to blockchain due to its ability to boost the reach of businesses and reduce their expenses. While the blockchain has been around for some time, it is still a relatively new technology and often misunderstood. For those unaware, the blockchain is the distributed ledger for which cryptocurrency (Bitcoin, Ethereum, etc.) transactions take place. Blockchain holds a lot of promise for businesses, but it is important for businesses to understand the various challenges that come with it.
Think about the dot-com boom when many companies wanted to establish a website. We see a similar pattern as many businesses are hopping on the blockchain bandwagon for the wrong reasons. It is even looked at as a free ticket to success. So, before deciding to hop on the blockchain train, consider the following ideas.
Which of Blockchain’s Technical Capabilities Suit You Best?
There are a variety of popular blockchains that your company can use to build your processes. For example, Ethereum allows for smart contract capability where companies can automate their ideas. If your business flow is transactional in nature, you can use cryptocurrency to denominate emissions of data between users in a network and design them to automatically execute, based on preset conditions similar to a borrower making a crypto-loan payment.
Due to some technical issues with Ethereum, Qtum is starting to gain some momentum with its superior reliability. It is built on the same blockchain as Bitcoin and includes smart contract utility making it a hot commodity for businesses and startups.
Blockchain’s Shortcomings
The blockchain is not a magic bullet. The technology is decentralized between participating nodes and requires a high volume of users. So, if you do not have a large community of stakeholders on each side of the transactional business flow, your idea involving blockchain will not work. One example of this is Basic Attention Token (BAT) which aims to revolutionize the digital advertising market through assisting people to monetize their data collected by the Brave browser. The only problem is that it can only be successful if you have a lot of users adopt the model. If you do not have people to replace their existing web browsers with the Brave browser to participate, the idea may fail to gain traction.
How Will Cryptocurrency Volatility Affect Your Platform?
The cryptocurrency market volatility can really put a damper on your operations, especially if your platform is dependent on the value of the token to operate. For example, a payments blockchain that does not include instant currency exchange functionality would be unable to properly protect users from swift upwards or downwards swings in value causing someone to lose money on the transaction. Also, if costs for processing are excessive, you will find that gaining widespread adoption might be challenging. In fact, platforms like Steam and Stripe stopped accepting bitcoin due to the challenging volatility and the processing environment.
