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Blockchain Adoption Barriers in Startups and Enterprises

blockchain adoption

Blockchain is a fashionable topic to discuss. Not surprising as the Fourth Industrial Revolution is here, and blockchain adoption is a part of it. According to the World Economic Forum’s 2018 report, 10% of global GDP will be registered on blockchain-based systems by 2025. Impressive, isn’t it?

An increasing number of startups and some large enterprises are testing the waters of blockchain. Banks and shipping companies are among them. Some governments work on blockchain integration as well.

Yet, the innovative distributed ledger technology that promises to bring transparency and traceability into any business processes has already encountered many barriers on its way to adoption.

Deloitte 2016 blockchain survey predicted a faster pace at which the innovative technology would infiltrate various industry sectors than we see in 2019.

The reason is that blockchain adoption is not only the decision of technology; it is also a business decision. There are many obstacles each company, no matter how large or small, has to overcome.

Why is Blockchain Adoption Problematic for Businesses?

  1. First, there is no confidence in the technology. It is still an innovation, and it’s normal. Building trust in the network represents a challenge for blockchain.
  2. High costs and complexity of blockchain.
  3. A lack of understanding comes next as many executives have a vague understanding of blockchain and the changes it will bring. Many still connect it only with cryptocurrencies management.
  4. A general lack of standards is also a problem. Blockchain-specific vocabulary is insufficient; its terminology is both scarce and new.
  5. A lack of general regulation is a problem. The survey of C-level corporate executives conducted by RANE showed that 23% of its respondents had a concern over the lack of clear blockchain regulation. The good news is that some governments have already come to terms with the idea of blockchain implementation; others are considering it. Yet, there is still a long way to go.
  6. Vague data regulation is one more issue. For instance, the General Data Protection Regulation (GDPR) does not align well with blockchain’s immutable ledger.

Though most of these problems are universal and not business-specific, there is a difference in the way large enterprise companies and startups approach and solve them.

Startup Challenges

Startup companies have more advantages in implementing any new technology, blockchain included, as they are not burdened with legacy problems and have more freedom.

Yet, regardless of better awareness and less constraint, blockchain startups are not that easy to launch. While emerging companies rarely face the problems of large enterprises (a lack of use cases for the technology, trouble justifying the ROI), they also have to overcome universal barriers.

So, 48% of respondents of the PricewaterhouseCoopers Global Blockchain Survey 2018 mentioned regulatory issues as the greatest obstacle on the way to blockchain adoption.

Also, among other major barriers are:

  1. a lack of trust among users;
  2. a lack of standardization;
  3. absent or poor collaboration between blockchain-related companies;
  4. an inability to bring the network together;
  5. an inability to scale; and
  6. intellectual property and audit/compliance concerns.

According to David Tolioupov, CEO of Zensoft, “Startup companies can move at a faster pace as they can see the true potential of an innovative technology right now. They devise use cases for blockchain solutions development instead of trying to find ones. Thus, they can utilize the technology most efficiently.”

Enterprise Companies Concerns About Blockchain Adoption

According to Deloitte’s 2018 Global Blockchain Survey, startups, or emerging disruptors in Deloitte’s terms, have less trouble implementing blockchain, while enterprise organizations face many issues.

They are usually constrained by the following barriers to blockchain adoption:

  1. Implementation. Large companies have trouble replacing or adapting existing legacy systems. Many of them do not understand the point of new technology implementation in the absence of a proper use case to justify it. This idea was supported by 74% of the Deloitte research respondents who actually “see a “compelling business case” for the use of blockchain technology” but don’t see how it can fit into their existing system.
  2. Regulatory and legal concerns. These refer to the choice of a regulator, data privacy issues, intellectual property, and enforceability of contracts.
  3. Potential security threats.
  4. Lack of skills and understanding.While blockchain is still in the transition stage, finding qualified specialists is a real challenge at the moment. However, according to the LinkedIn 2018 Emerging Jobs Report, the past year saw a 33x increase in blockchain developer jobs. So, more and more DLT-capable professionals are entering the job market.
  5. Uncertain ROI. This is a normal concern for any investor.
  6. Lack of trust. At this stage, many companies are skeptical about blockchain, regardless of all the hype.
  7. Blockchain is not a current business priority.

More Blockchain Adoption Issues

Another essential problem with enterprises comes from a poor understanding of blockchain nature and potential and how radically it can affect the business. It is a change that will bring many implications, and it is a challenge many large businesses are unwilling to accept so far.

Yet, staying passive while watching others try and succeed (or fail) is the worst strategy in the time of transformation. This does not imply that all legacy organizations have to give up their habitual ways of doing business for the sake of an innovative solution.

Surely no.

Fortunately, a growing number of enterprises see the point in at least trying to fit blockchain into their existing systems.

What’s Changed in 2019?

Blockchain hasn’t become a less popular topic for discussion; quite the reverse. While the overall attitude to this technology is still cautious, it has definitely matured, and businesses become more willing to acknowledge it.

This insight comes from a more recent Deloitte’s 2019 Global Blockchain Survey: 83 percent see compelling use cases for blockchain, up from 74 percent, and respondents’ overall attitudes toward blockchain have strengthened meaningfully.” It demonstrates that companies start finding blockchain more and more appealing. Judging by the answers of the 2019 survey respondents, the trust in blockchain integration is growing.

The commercial adoption of blockchain by enterprises won’t be immediate. It is rather a prospect of the future as the list of reservations to overcome is still broad. The good news is, however, that while barriers haven’t gone anywhere, they are becoming more uniform. We can, thus, expect faster blockchain adoption on a mass scale.

Co-Founder at Hostt
Peter Daisyme is the co-founder of Palo Alto, California-based Hostt, specializing in helping businesses with hosting their website for free, for life. Previously he was the co-founder of Pixloo, a company that helped people sell their homes online, that was acquired in 2012.

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