While the blockchain advertises itself as the new world order for a suite of benefits it claims to offer, I see Blockchain technology platform as untried and untested one, to lay my trust on it. In particular, I think it is a misfit for highly scalable, critical and regulatory domains like finance, insurance and healthcare for the following reasons:
- Scalability : Blockchain networks can face scalability challenges. The processing speed and capacity of many blockchain networks are limited, which may not be suitable for high-frequency or high-volume transactions common in fintech or insuretech or healthtech applications.
How does blockchain manage the ever-growing size of transactions even if it is a private deployment?
It's promise of scalability in Ethereum 1.0 was tested to be about 15 TPS at best which isn't sufficient for today's condition and this poor performance is largely due to the decentralized nature of ledgering in general and the community blames it on the Mining (aka Proof of Work) consensus mechanisms.
- Cost : Implementing and maintaining blockchain networks can be quite expensive, assuming that the tech companies operating in the regulated domains like finance and healthcare will opt for private blockchain. At a time when the world is still learning to get the Cloud Cost Estimate right, how are technology leaders evaluating the TCO of Blockchain platform is a puzzle, for it has its own denominations of money and unclear set of things that make up the cost computation. Assuming that a company were to leverage private blockchain deployed on cloud, how the cost estimate were to be made on top of cloud cost is only more head-scratching exercise.
Lastly, a simple case in point as to why I see blockchain as a cost multiplier. Given that blockchain data is ever-growing and that the participating node in the cluster holds an entire copy of the blockchain, the storage cost is in the multiples of the number of participating nodes. Do the similar math for IO, compute, etc. Don't you see the cost ballooning over the traditional system?
- Uncertainty in Legality and Regulations : The regulatory landscape surrounding blockchain is at best mute so far. With the ushering in of new and evolving regulations in Fintech in India like the Digital Lending Guidelines (DLG), Co-Lending Guidelines (CLG), etc, fintech companies may face uncertain or restrictive regulations, making compliance complex and expensive to maintain. I have posted a more detailed post on Blockchain's legality in general, yesterday.
- Privacy Concerns : Blockchain is not inherently designed for privacy. Any user having an account can see everything in the Blockchain ecosystem. Privacy implies centralization needs that is contrary to the decentralized nature of Blockchain platform.
- Maturity and Complexity : Blockchain technology is relatively new with much hype. There are a number of Blockchain ecosystem that has evolved and more is evolving. The use-cases where it is put to use in itself is still not a hands-down approach but more an adventure whose benefits are to be seen in the years to come. Blockchain doesn't look like a replacement to the traditional systems that we are used to.