4 Major challenges of the blockchain industry

Blockchain technology is the future and it’s something we all admire. The potential blockchain technology holds when it comes to streamlining conventional validation processes that require scalability and transparency is just beyond our comprehension. Even with all this, the industry has to face some major adaptation impediments that are not usually discussed. In this article, we have discussed all the challenges that the blockchain industry is going through.

What are the challenges faced by the blockchain industry

Like every other new and futuristic technology, blockchain technology is also facing all kinds of challenges in its adaptation process, now we will discuss a few key challenges.

1. Lack of Workers

The blockchain technology boom has created a Tsunami in the job market. With tech giants like Google, Amazon, and Goldman Sachs hiring blockchain specialists in huge numbers, there’s a never before demand for blockchain talent which has shot up by 300%. With the number of DeFi and NFT projects in just the past year, both emerging startups and established tech giants have been going all out to hire the best talent across the world.

According to searches on top job sites, blockchain and Cryptocurrency jobs are at an all-time high with 6000 plus jobs on LinkedIn and more than 15000 jobs on Indeed and other job sites. This has resulted in companies increasing the salaries of their employees to retain them and attract new ones with salary packages as high as $1 Million dollars a year according to statistics published by Team Blind.

Reports also say that software engineers in the industry are getting packages as high as $900,000 with a pay structure reportedly including stock compensations and cash bonuses.

Tech giants like Google and Amazon have already started working with clients on blockchain technology, with Google’s new digital assets team the tech giant aims to work with clients using blockchain technology. On the other hand, Amazon has already started support for private blockchain technology with their blockchain service which supports decentralized ledger frameworks such as Ethereum and Hyperledger Fabric.

Because of this huge demand for workers and top-tier talent, the industry is facing a shortage of workers which has directly led to slowed development of projects. And experts think that this sluggish phase of development will continue for some time.

2. Scalability Issue

Over the years as the usage has increased, the blockchain technology has also evolved, from the first blockchain network was developed by Satoshi Nakamoto to underpin the Bitcoin network to the second decentralized network was the Ethereum network founded by Vitalik Buterin, a lot of things have developed and particularly the scalability.

Amongst the two most famous networks, Ethereum has an upper hand against Bitcoin as the network was primarily built to handle large numbers of transactions and also support decentralized applications. It is worth noting that 80% of the blockchain projects are based on the Ethereum network, but this overload has caused new scalability problems.

The scalability problem is so serious that the Ethereum network was running at an alarming 98% capacity, because of which the developers had to switch from proof-of-work (PoW) protocol to proof-of-stake (PoS) to lower the network usage. This scalability crisis has also resulted in slow speeds and high gas prices.

To counter this scalability problem, the developers of the Ethereum network are introducing the Ethereum 2.0 upgrade which is aimed at increasing the number of transactions per second by Sharding. Through Sharding Ethereum 2.0 will be able to increase processing rates from the current optimal speeds of approximately 30 transactions per second (TPS) to over 100,000 TPS by spreading data loads across the chain.

However, due to the slow speeds and high gas prices, a big number of projects are heading towards alternative networks such as Binance Smart Chain which has higher transactions and lower gas prices.

3. Security Issues

As with all new technologies, there comes a barrage of security issues, blockchain technology is no exception.

• Hacker Attacks: Decentralised Technology is more prone to hacking attacks compared to Centralized technology. Usually, on PoW Standard networks, hackers exploit a loophole in the system which will allow them to control a chain with 51% of processing power. Permissionless blockchain systems with low hash rates face attacks where hackers reverse transactions and invalidate new transactions and modify new blocks. Such attacks have happened on big firms like Bitcoin Cash ABC (BCHA), Bitcoin Cash (BCH), and Ethereum Classic.
• Loopholes in Coding: Just like every other technology, blockchain technology is also vulnerable to coding loopholes. These coding loopholes allow hackers to undermine specific points of failure which will allow them to transfer assets from wallets that are native to the system.
• Flash Loan Attacks: Flash Loan attacks usually target smart contract DeFi ecosystems as they offer non-collateral loans. Attackers exploit these loopholes to manipulate tokens and then withdraw profits to other networks. A recent flash loan attack was reported to have led the company to a loss of $200 million in cryptocurrency assets.

4. High Energy Consumptions

One of the main resources for blockchain technology is power consumption. Popular blockchain systems like Bitcoin and Ethereum run entirely on power as they are proof-of-work systems that depend on mining to validate blocks and transactions.

Mining is a heavy power consuming activity, it is said that annual Bitcoin mining power consumption is more compared to that of countries like Finland. On the other hand, the carbon footprint is also alarming and is estimated to be roughly 97 metric tons of carbon dioxide produced every year.

Meanwhile, countries like China have completely banned crypto mining as it causes heavy damage to the environment. This has led to a power crisis in neighboring countries like Kazakhstan, as the country has cheap electricity prices, and crypto miners from China and other countries migrate to Kazakhstan which is also a crypto mining hotspot.

This has led to an unexpected power crisis in Kazakhstan and authorities have directly blamed crypto miners for the situation.  the US government is also pushing crypto mining firms to switch to renewable energy sources. This also comes amidst the US government taking necessary steps to meet its climate change goals.

This has led to the Ethereum network planning an upgrade to the proof-of-stake protocol, which will be a part of the Ethereum 2.0 upgrade that aims to cut down energy consumption by 99.95% if fully implemented.

These challenges have significantly affected the progress and the speed of development of the blockchain technology, the industry’s demand for specialists, the security issues, and the heavy energy consumption play a very big role in the crisis. But experts believe that sustainable changes in blockchain technology can turn things around.

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