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Blockchain technology has been making waves in various industries, promising increased privacy, security and transparency. In particular, the market has grown rapidly, and there are indications that decentralized storage would have a sizable impact on people as small businesses “Uberize” the cloud. However, despite its potential, this technology is often misunderstood, plagued by a blockchain bias.
Here are seven reasons behind the blockchain bias:
- Lack of understanding: Many people are intimidated by blockchain technology because it is a relatively new concept. Despite the complex underlying tech, the basics of blockchain are simple: It is a linked list of transactions that are an immutable and transparent way to record payments and activities across a distributed ledger without reliance on third-party services or trusted entities. For distributed storage like Filecoin, Züs and Sia, the blockchain records and validates new storage allocation contracts between users and storage providers.
- Security concerns: People fear that blockchain technology has too many security weaknesses and can be easily exploited by malicious actors. In reality, blockchain technology is one of the most secure options available today, as data stored on the blockchain and off-chain are incredibly difficult to manipulate or tamper with in any way. The off-chain data in Filecoin, Arweave, Sia, Storj and Züs maintains a storage allocation root on the blockchain, which tracks changes made on the data layer.
- Business uptime: Ethereum smart contracts have suffered from high fees and congestion, which have now been solved by multiple chains and Layer 2 protocols with more capacity to process transactions. However, the tech for decentralized storage has been plagued with slow retrieval issues for certain protocols and some scaling issues, forcing innovative additional centralized layers to alleviate these issues. The centralized layers are Filebase, Skynet and Pinata that help with data movement.
- High implementation cost: The equipment and energy cost involved in operating a blockchain can be quite high due to the need for specialized hardware and software resources required to maintain it. However, recent blockchains are efficient and can use the same power as a general-purpose server in the cloud to operate a node on the chain. In the case of decentralized storage, it’s a mixed bag. While Filecoin and Arweave replicate data, for Sia, Storj and Züs, the data is distributed across servers with parity—which is more efficient and cost-effective than replication—and a more sustainable and eco-friendly architecture.
- Scalability issues: Due to its decentralized nature, scaling up a blockchain network can be difficult as more participants join, requiring additional resources like storage space or computing power. Fortunately, innovations like sharding are helping to address this issue and make scalability much easier for all types of projects. Some players use partitions to scale, allowing smart contract transactions to logarithmically increase in time taken to execute them—and making the systems scale to millions of users without a degradation in performance.
- Lack of regulatory framework: Although governments around the world have been taking steps toward regulating cryptocurrencies and other associated technologies, there remains no clear global framework for governing these systems, causing some confusion among potential adopters who don’t know what rules they must abide by. There has been some guidance based on SEC actions in a few categories, such as DeFi and Staking projects, but dStorage projects have had no guidance regarding the utility aspect of a token to buy and provide storage. While the SEC had indicated Ethereum as a utility, which would indicate that a storage token would be as well, there has not been a clear direction from regulators.
- Adoption challenges: Despite its many benefits, adoption of blockchain technology has been slow. Unfamiliarity with its concepts and applications, as well as an overall lack of awareness about how it can benefit businesses or individuals on a practical level, continues to inhibit development. As more people become aware of how transformative blockchain technology can be for certain industries, we should expect to see increased adoption over time.
While these biases are currently active, it’s only a matter of time before the market catches up to the clear advantages of emergent blockchain technology. Necessity is the mother of invention, and efficient means will always defeat adoption bias—whether the market recognizes it now or later. If businesses want to be ahead of the curve, dispensing with irrational biases and nay-sayers on blockchain is the way to go.
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