Blockchain technology has enormous potential but has yet to secure its place as a bona fide technology of the future. For this to happen, the Web3 sector must resolve some pressing issues that hinder the technology, preventing it from realizing its full potential. It’s encouraging then, that blockchain developers are constantly finding new ways to improve technology and its utility.
In this article, we’re taking a closer look at some of the biggest challenges that the industry faces today, as well as what’s been done to address them.
Blockchain technology still has some way to go until it reaches maturity. Among the biggest problems that the technology is currently facing is scalability. Simply put, blockchain networks need to be able to process transactions on a much greater scale to achieve mainstream adoption. If this is not resolved, blockchain is likely to remain a niche technology with some powerful, but limited applications.
Fortunately, Web3 devs are well aware of the issue and have been actively working on several promising solutions. For example, the world’s largest blockchain, Bitcoin, has the Lightning Network, which allows for direct channels to be opened between users. This means that two users can use such a channel to exchange Bitcoin without having to record each transaction on the blockchain.
Meanwhile, we also have a number of interesting scalability solutions for Ethereum, the second-largest blockchain. We call those Layer 2 solutions because they are built on Ethereum’s base layer with the help of smart contracts. The most prominent type of Layer 2 solutions, known as rollups, process transactions on L2 networks and then send them in a highly compressed form to the main net Ethereum. This method results in a much higher transaction throughput and much lower fees for users.
Having made huge progress in the past couple of years, rollup technology continues to evolve and improve. For example, an upcoming Ethereum upgrade is set to introduce ‘blobs’, which will add cheap temporary on-chain storage for rollup transaction data.
Another notable challenge that the Web3 sector needs to overcome is the fact that blockchain technology is a complex beast that is not very well understood by the average user. On top of that, the technology’s complexity is often hindering Web3 devs in their efforts to create more convenient designs and user-friendly products. Because of this, Web3 apps and services can often be intimidating to newcomers. Needless to say, this significantly diminishes blockchain’s mainstream appeal.
Here we have good news, as well, with major developments promising to improve the usability of Web3 apps and services considerably. For example, Ethereum, which is the leading platform for decentralized applications, is taking decisive steps to get rid of the rigid rules currently underpinning Ethereum accounts. The solution currently being explored is called account abstraction and it aims to make it possible to write custom logic for accounts. This would improve security, usability, the quality of crypto wallet UI and much more.
Lack of killer apps
Solving the scalability and usability problems would go a long way towards overcoming the third major challenge the Web3 sector is currently facing – the relative lack of real-world applications. Blockchain technology has been instrumental in creating the whole sector of decentralized finance (DeFi). Still, for it to become a true technology of the future it has to make an impact beyond the world of alternative investments. There are many areas where the unique properties of blockchain technology can be utilized to great effect and as the technology matures, more use cases will surely emerge. The key thing here is not to focus on a couple of established use cases, but to explore a variety of possible applications and identify areas where blockchain could also shine.
A technology of the future
Despite the challenges outlined above, blockchain technology still has a very compelling case for the future. For starters, it synergizes well with other emerging technologies such as artificial intelligence and fintech. It’s already proving very useful in certain areas and is used daily by an extremely passionate community of tech-savvy people. The Proof of Concept for blockchain technology has already succeeded and the journey to feature-completeness is already underway.
Find more information about blockchain and web3 in our blog.
Learn more about Lime Academy – Blockchain education for developers.