Blockchain technology has enormous potential, but it isn’t without its challenges to overcome.
The uprising blockchain technology has a lot of problems, and this can cause a huge problem in the financial industries.
Blockchain technology continuously registers business transactions. It enhances the secrecy of transactions and creates a proper recording of all transactions. Implementing a Blockchain system, however, comes with some disadvantages. The challenges have limited its popularity and few firms can use it for transaction recording and management.
Cost of Initiation, Implementation, and Maintenance
The initial cost of implementing a blockchain system is very high. It requires large input regarding the software and hardware necessary for its initial launching. Small investment and banking companies may not meet such costs considering their financial status. Therefore, making and recording transactions using this system becomes a burden for such companies from the beginning. Maintenance cost is also high. Finance companies that consider such a system as liability may not take into consideration its high maintenance cost, as it decreases the overall returns for the business.
Modifications of Data
It also poses a problem with the modification of data. The banking and finance sector make regular modifications to the data they store, especially data involving a transaction. The Blockchain system, posing difficulties in such modifications, becomes more of a liability than an asset for the business. Therefore, most of these finance companies result in declining its use for transaction recording. The procedure of data entry is also long. Considering that the transactions in the finance sector may be numerous every day, such a long procedure may delay the recording of any such transaction, thus, rendering the system inefficient.
The blockchain system requires a high level of literacy, more so, computer literacy. As such, illiterate employees cannot make a proper recording in the system. It, therefore, forces the company that employs it to hire literate employees. Hiring such employees is an expensive task for the business. Therefore, many firms choose top retail to their current labor force rather than adopt the system and later must change major sections of their labor force. The alternative is to educate the current employees. This is also an expensive undertaking, and therefore some companies may prefer not to adopt it.
Duration of Blockchain
There is no certainty that the transactions recorded in the system will last for a long time. The operations of the system are cryptic, therefore, there is no certainty of how long the transactions may last in the system. Most financial transactions require information about the past transactions and their future impact. If the duration of such records is uncertain, it makes the system ineffective in the financial sector. The computing language of this system is complicated and difficult for ordinary people. The computing language, too, poses as a major blockchain problem today.
There are many blockchain regulations. Such regulations are challenges to any business. Most businesses prefer to operate and use systems that have few regulations to save time during the setup period. Therefore, the long procedures and regulations during the implementation of the blockchain system is a major discouragement to these businesses.
Dependability on Computers and Power
Blockchain implementation requires the use of computers. As such, problems affecting the computers such as processing power and viruses highly affect the system. Computers also require power. The dependence on power makes the systems unreliable in case of power cuts or power shortages. Most businesses require systems that can handle such power cuts. Using the blockchain system would require the business to have a manual backup system.