The global Blockchain market is predicted to grow at an impressive CAGR of 42.8% and hit $19.9 billion in revenue by 2023, according to the latest report published by HTF Market Intelligence. A significant force driving the market expansion is the increasing investments from venture capitalists. This has led to an explosion in the Blockchain marketplace, as well as a wider variety of industries adopting the transformative power of Blockchain technology.
Blockchain’s growth drivers
As a technology originally developed for use in cryptocurrency transactions, Blockchain’s tremendous potential is beginning to be tapped by various sectors outside of Bitcoin.
At present, the Banking Financial Services and Insurance (BFSI) sector holds the largest slice of the Blockchain pie. The report estimates that about half of the total Blockchain patents applied are primarily for financial use — such as transactions, cross-border payments, maintaining customer identities, and more. In an article on Blockchain’s uses outside of Bitcoin on FXCM, it was stated that the main hook attracting the banking sector to Blockchain is its decentralized and immutable system. With this new technology, solutions to drastic problems like fraud, which costs organizations billions in losses every year, are being formed. Other areas that Blockchain’s immutability and security can also work to improve include central bank payment systems and money transfer processes.
However, the world of finance only scratches the surface of Blockchain’s capabilities. Among some of the fastest growing sectors utilizing Blockchain is retail and e-commerce. An article by Retail Dive outlines a projected $164 billion in “probable” business value by 2030, which is defined by cost savings and efficiencies brought about by Blockchain strategies. Major companies have already gotten a head-start in deploying Blockchain and Distributed Ledger Technology (DLT). American Express, for example, is in the process of test-driving Blockchain-driven loyalty rewards with Boxed, while Walmart is looking into Blockchain to bolster its food supply chain.
In addition to retail and commerce, the world of cloud infrastructure is also seeing its own Blockchain revolution. Over the past few years, the tech industry’s biggest players such as Microsoft, Oracle, Google, and HPE have all started to provide their own Blockchain-as-a-service (BaaS) offerings. This development has since breathed new life into old companies such as IBM, which is investing in enterprise systems backed by cloud infrastructure. It has aided in the company’s transition to cloud services and building custom Blockchains for customers.
With regard to the Internet of Things (IoT), Blockchain is once again providing solutions to longstanding issues surrounding security and efficiency. Professor of Management at the University of North Carolina Nir Kshetri claims that blockchain-enabled IoT deployment could improve overall system health and integrity by allowing devices to register and validate themselves against the network.
Threats to mass adoption
Despite Blockchain’s boom, however, various hurdles towards mainstream adoption of the technology still remain. Currently, there exists no regulations or set standards that detail how transactions must be recorded, which greatly contributes to the lag in adoption. Despite the promising potentials of Blockchain’s auditability and transparency, highly regulated industries must figure out new regulations for Blockchain, because its distributed ledger system may alter industry regulations — from financial reporting to auditing processes. The lines for information-sharing must also be made clearer in order to protect investors and customers.
Moreover, there are initial costs for adopting Blockchain, which makes it inaccessible for small and medium-sized businesses. Though it may promise long-term benefits, the costs to set it up are expensive, and organizations must be equipped with all the latest tech to acquire and maintain it. Existing equipment must also be retrofitted to be able to make the entire system work. On top of software and hardware costs, companies must also hire the right personnel who specialize in that kind of technology. Since it’s a relatively new field with not a lot of highly trained professionals yet, these workers often command large salaries.
Lastly, many question Blockchain for its environmental sustainability. In a paper published by the World Economic Forum, it was found the Bitcoin network’s energy consumption is comparable to that of nearly 700 average American homes combined — clocking in at more than 4.409 billion kilowatt-hours and a non-justifiable carbon footprint.
Until these issues are issues are addressed, the pace of adoption is likely to remain comparatively sluggish.