B U S I N E S S
Blockchain technology has great potential, but it also shows limitations and risks for enterprise applications.
Blockchain technology is an integral part of the digitization
The technology of decentralized data storage can change the economy sustainably and has great potential. Distributed ledger technology, in particular, is causing a sensation in key industries.
In addition to industry, there are interesting applications along the entire supply chain. But also the financial sector, insurers, and the medical sector are interested in the diverse applications. The business world will change radically with digital transformation. It is extremely important to know the blockchain and its advantages as well as the risks. Entrepreneurs should avoid the following mistakes in blockchain projects.
The analyst firm Gartner has worked out mistakes in dealing with blockchain technology. This enables entrepreneurs to understand the technological possibilities of the blockchain and at the same time recognize the current limitations.
Development not yet mature
Even though blockchain technology is currently frequently mentioned in connection with smart contracts or digitization, the maturity of development is still in its infancy. The technology is not yet ready for use in comprehensive or cross-industry projects. Smaller projects, on the other hand, can already be realized today with blockchain technology. However, numerous start-ups are ready to concretize future business models and to use decentralized administration for numerous industries.
Applications only for small projects
The decentralized leather technology DLT is currently limited to data acquisition. The branched backup of data records is an interesting field of application for blockchain technology for many companies. But according to Gartner, the maturity level for practice-oriented applications can only be expected in the next few years. For example, decentralized databases for music rights are possible, as is the case with Ujo, which works with Ethereum. Or a serious competition for money transfers abroad with Western Union, as with the Berlin company Bitwala.
The blockchain is not a data storage device
The transactions secured once on it are stored incorruptibly. It is therefore not possible to update the data. The basic prerequisites for consensus among the self-sufficient participants are immutability and high resistance to manipulation.
Blockchain technology only used selectively
Concrete solutions, especially for medium-sized businesses, are still in their infancy in Germany. Data protection also wants to have its say here and will probably continue to block the high process speed that the economy desperately longs for. Although interesting pilot projects can currently be seen, we are still a long way from the widespread of blockchain technology. The lack of application cases, legal uncertainties and the lack of blockchain experts are hampering the rapid expansion of blockchain technology with its great application potential for SMEs.
Lack of interoperability sets limits
A majority of the software-controlled interfaces are in an early development phase. Missing connections of DLTs prevent the cooperation of different systems, companies, organizations or techniques. Experts see initial success with Blockchain-as-a-Service technology, or BaaS for short, which can use a growing infrastructure as required. However, the pace of rapid development of new tools, standards, public DLTs, and implementation options is problematic. In addition to Microsoft Azure, IBM, and Amazon, other service providers offer platforms on which companies can circumvent the current hurdles in the form of organizational risks of blockchain technology.
The blockchain technology updates its data records chronologically and seals the transfer activities of its network participants cryptographically. While traditional databases are located on one server, intermediaries are trusted and the amount of data is distributed across many servers. This also means governance of its own, which could become a problem, especially with public blockchains. As entrepreneurs, blockchain consortia secure the right to have a say, but they are only worthwhile for larger companies. Private blockchains, on the other hand, have their own governance and are quick to make decisions.
IT infrastructure in companies often outdated
The urgently needed expansion of the IT infrastructure in companies has been saved for a long time. However, faster processes and better quality, as well as cross-company analyses of data, require the necessary building blocks. Most of the existing software and hardware components are not compatible with blockchain technology and necessary software update can quickly lead to a split in the network. Part of the blockchain rejects this update and becomes independent of the actual network. The risk of defragmentation is currently still dampening the decision-making power of entrepreneurs with regard to large investments.
Conclusion: How entrepreneurs avoid typical blockchain errors
Entrepreneurs need to know the enormous potential, but also the risk and current limitations in the development of applications. The range of blockchain standards is large and there is still a lack of uniform interfaces and programming languages. Legal security for digital securities is just as much a future task as creating one’s own infrastructure. Complex blockchain projects need time and at the same time, there is a lack of trained specialists. The digital transformation will bring further application possibilities and especially the middle class must be ready for their challenges.