You’ve probably heard all the news by now. Facebook is launching a cryptocurrency with support from Visa, Mastercard, and Paypal. JPMorgan is testing out JPM Coin for transfers between institutional accounts. And, the price of one bitcoin is back over $10,000. No matter where you look, it’s clear that blockchain adoption is imminent.
Through disintermediation, blockchain technology is removing friction from every market containing transactions. It consolidates trust into an immutable ledger to enable the sovereignty of identity and data outside the control of any centralized authority.
Blockchain’s value isn’t just as a database. It fundamentally defines how data is stored at the protocol level to provide a trustworthy way to store transactional data with (nearly) complete immutability and auditability.
Unfortunately, the blockchain industry still contains plenty of obstacles that prevent the majority of the world from getting involved. Here, we examine the most impactful blockchain issues currently blocking adoption and some of the solutions that will make them a thing of the past.
The difficulty of scalability is perhaps the most glaring challenge to blockchain adoption. We’ve already seen the inability of popular blockchains like Bitcoin and Ethereum to handle a massive influx of new users.
At the height of the 2017 bull run, the median bitcoin transaction time spiked to over 20 minutes – double what we see today. And, the average transaction fees reached over $35 per transaction. We can only imagine what those stats will balloon to if left unchecked during the next wave of adoption.
On a positive note, several talented teams are working to improve the scalability of the most popular blockchain networks.
Already, layer two scaling solutions, such as Bitcoin’s Lightning Network and Ethereum Plasma implementations like Matic, are gaining traction. These mechanisms effectively move transactions off of the blockchain onto a payment channel between participants, or onto a side-chain. Once the payment channel is closed, the final state is recorded on the blockchain. Moving transactions ‘off-chain’ increases throughput, lowers transaction fees & reduces traffic on the main chain. These solutions essentially create a blockchain ‘virtualization’ layer.
At the protocol layer (AKA layer one), numerous teams are improving blockchain scalability through consensus optimizations. Some projects, such as Aion, are implementing hybrid consensus mechanisms. Other teams, like StoreCoin and Algorand, are focused on improvements to traditional Proof-of-Stake consensus mechanisms. You can also follow Ethereum’s layer one roadmap here.
On the other side of the blockchain, some teams are working on layer zero innovations. While layer two solutions act as the virtualization layer on top of a blockchain, layer zero mechanisms influence the underlying network’s infrastructure. Implementations at this layer improve scalability by reducing the communication latency between the nodes on the network. Doing so minimizes the blocktime and speeds up the consensus process. For instance, Ethereum currently adds a new block every ~14 seconds because it is constrained by how long it takes for each block to propagate to all 5000+ nodes on the network. What if layer zero solutions can reduce blocktime to ~7 seconds? Ethereum can double its network throughput!
Scalability solutions are complex and will likely take years to implement successfully. We’ll probably start seeing private, permissioned blockchain networks like Facebook’s Libra (‘intranet’) gain traction before public networks scale (‘internet’).
The complexities of key management are a stopping point in both business and consumer blockchain adoption. People outside of the blockchain industry are accustomed to accessing their bank account with a username/password and sending funds using names, email addresses, phone numbers, or other human-readable methods.
Additionally, transacting crypto assets allows for no mistakes. If you accidentally send crypto to the wrong address, you’re out of luck. There’s no way to revert transactions, and you can’t lean on FDIC insurance to recoup your lost or stolen funds. That level of personal responsibility makes most people nervous.
Blockchain software experiences should empower users to trust themselves as much, or better yet, more than they trust their bank. The average person isn’t comfortable storing numerous keyphrases and private keys securely. Practicing blockchain security strategies currently involves multiple complicated steps. Let’s shift that onus from the end-user to the companies providing blockchain products to them.
The harsh truth is that we won’t see massive crypto adoption until the experience is as seamless as an app like Venmo or PayPal. We need to give users the level of comfort they currently experience without sacrificing security.
Traditional finance is rife with development tools enabling apps to plug into the existing banking system. Plaid, Stripe, and other SaaS products have been the catalysts for an explosion in financial technology (FinTech) products. We’re not there yet with blockchain.
Blockchain is missing a robust middleware layer that connects apps to blockchains. Currently, hooking into a blockchain requires a substantial amount of code and sometimes forces you to use an entirely new programming language.
We’re beginning to see the growth of early middleware with projects like Chainlink, which connects real-world data and events to smart contracts through oracles.
But, that’s not enough. We need readily available APIs that give developers the ability to query various blockchains, create and manage wallets, and initiate transactions as their minimum set of functionality.
And, the blockchain industry is still missing useful software development kits (SDKs) that enable programmers who are blockchain novices to begin dApp and smart contract development quickly and without much background knowledge.
There’s no shortage of teams working on blockchain’s scalability problems. In fact, we’re confident that scalability won’t even be part of the conversation about blockchain issues five years from now.
But in addition to scaling, we must improve the experience for developers and users. The blockchain industry tends to take a technology-first approach which, unfortunately, isolates new participants and hinders adoption. We’ve identified that gap and have chosen to close it.
We’re improving the blockchain user experience through several innovations. Our solutions include contact lists to more easily send/receive crypto assets, SDKs and APIs for frictionless development, hardware integration for top-notch security, and a straightforward authentication process.
With Abstrakt, you can focus on your business’s differentiators without having to worry about the nuts and bolts of connecting to a blockchain. Check out our iOS SDK documentation to get started today. (Android SDK coming soon)!