Blockchain kills small businesses and burdens them with costs

Disadvantages of Blockchain Technology for Small Businesses and Enterprises

Every coin has two sides, so now let’s look in detail at the top 5 drawbacks of blockchain technology you may meet while implementing it for your business needs.

1. Uncertain Regulations

The lack of regulations and unclear terms of use of this technology is the first disadvantage that should be considered by its potential investors. In some cases, it may lead to mistrust among users.

Let’s take, for example, the problem of ICO scams: any individuals or organizations can raise funds through the sale of tokens, but in fact, they may not have any real value. Plus, vague regulations concerning the use of blockchain make it difficult for governmental institutions to adopt this technology, as they can’t invest in a new form of financial data storage without clear agreements in this field.

Though, for many other organizations and companies this drawback is not so crucial, as the advantages of using blockchain technology are much higher for them.

2. Power Consumption

Speaking about the disadvantages of blockchain, power consumption is definitely on the list. In order to create such a complex distributed system of data blocks, and then enable their proper work, companies need to support a really huge number of nodes that constantly process various data and communicate. Of course, these operations demand significant energy consumption rates, which is quite costly.

The good news here is that blockchain technology never stops moving forward. Recently created protocols help to reduce consumption and cut down on maintenance costs, so organizations can stay more eco-friendly and cost-effective.

3. Scalability Issues

Blockchain technology is incapable of handling transactions on a mass scale, and this can be a drawback for enterprise organizations. As far as every transaction needs to be validated by the majority of the nodes to be approved and become a part of the chain, few transactions can be processed per second. This may also lead to network congestion, as well as high transaction costs.

4. Development Costs

Let’s be honest, the services of blockchain development can not be cheap, at least at this adoption stage anyway. In addition, the new technology adoption involves the legacy apps replacement and integration of the new system parts, which also costs a lot, and can be one of the cons of implementing blockchain. However, the exact costs depend on what type of solution you need. If you invest in it today, tomorrow you will be ahead of the competitors.

5. Social Resistance

It is obvious that the new technology can seriously upset the status quo. Blockchain isn’t merely about fast transactions and cryptocurrencies. Such a level of transparency and equal access implies integrity. For example, it can lead to a new format of elections on an institutional scale. Some governments are not ready for that, even without discussing the potential pros and cons of blockchain technology for them.

We can apply the same idea to an organization - your employees or divisions can be scared by the transparency level. The only thing to say here is that progress has an unstoppable nature and social conventions will have to evolve.