Blockchain is one of the hottest technology fields of the last decade, together with machine learning and big data. According to the Deloitte 2020 Global Blockchain Survey, businesses worldwide find blockchain an integral part of organizational innovation.

Properly implemented, a blockchain solution can make parts of your business transparent or enable different actors to cooperate quickly and trustlessly.

But today, we won’t examine blockchain’s strengths. Instead, we will look at why it’s not the perfect choice for all your software projects.

Blockchain is more expensive

From our experience, infrastructure and maintenance costs for a blockchain solution are typically 10-15 times higher compared to an ordinary server with a database running on AWS or a custom AWS/GCP/Azure solution.

Even when using economically efficient Azure solutions, it can cost up to ten times more when compared to a centralized DB with similar functionality running on AWS.

Therefore, it’s necessary to seriously weigh the costs of running your solution vs. the need for transparency and distribution that blockchain offers.

Blockchain scales worse

Performance and scalability are the two major bottlenecks for any blockchain project.

From our experience working for large enterprise companies such as Bayer AG, Delta, PwC, and others, blockchain solutions that work fine for hundreds and thousands of users degrade in performance quite quickly when they need to serve more than ten thousand users.

Scaling blockchain, on the other hand, usually requires a complete rework of the core. Sometimes, there might even be no viable solution. So, despite some ambitious claims by blockchain companies, scaling is still an immature topic in the blockchain world.

Blockchain is about transparency, not privacy

Privacy is an issue. It is challenging to maintain privacy on the blockchain. In contrast to regular solutions, existing blockchain solutions are often all about transparency rather than privacy.

Solutions that provide the required level of privacy typically have to compromise on performance through zero-knowledge proofs or other kinds of encryption, which is costly.

Another problem with privacy is that most of the time, blockchain is permissionless or has very primitive permissions levels. Therefore, solutions for permissions are built on top of it as an additional middle layer, which, of course, adds performance overhead, degrades scalability, adds implementation and execution costs, etc.

Conclusion

There are three significant challenges that blockchain projects face: performance, scalability, and privacy. While there are multiple benefits for using blockchain, such as transparency and the ability to operate trustlessly, they need to be weighed against the downsides.

We want to share our knowledge with you about potential problems not to talk you away from blockchain, but to make sure the choice is clear and the right one for your project. If you still aren’t sure and would like to have a 30-minute consultation with an expert in the field, you’re welcome to contact us.