A new report by the European Union is of the view that the first wave of blockchain technology adoption will come from permissioned platforms that are focused on specific areas or target a set of user bases.
In its paper published last week, the EU Blockchain Observatory Forum talked about the issue of blockchain tech and the various steps needed to be taken before it can achieve mass adoption. The paper was produced by ConsenSys AG and is called “Scalability, Interoperability, and Sustainability of Blockchains.”
The document mentioned that blockchains that are designed to meet the specific needs of users are much more flexible compared to public blockchains, most of which are for cryptocurrencies. Developers of private blockchains have a higher level of freedom in designing the performance and security of their networks, the report added. The EU body concluded that a few global blockchain networks have the potential to become “the backbone of a Web of Value” over the next few years.
Despite their optimism, the authors mentioned that three key areas remain a challenge for blockchain. Scalability is the primary problem, as most blockchains struggle to handle large volumes of transactions at high speed. The second problem is interoperability, with most of them lacking the ability to exchange data across other networks. The third problem mentioned was sustainability, with the authors questioning the long-term viability of most blockchain platforms currently in existence.
The report stated the following:
“It seems clear to us that a multiverse of independent blockchains that cannot interoperate would be severely limited. Users of blockchain platforms will find it beneficial to be able to exchange data and make transactions between chains too: a healthcare chain connecting to an insurance chain, a real-estate chain connecting to construction materials or manufacturing chain, and so on.”
The EU group pointed out that for blockchain networks to become successful, they would need to scale to meet the demands of their user base. The technology should also become less energy-consuming if it is to stand the chance of recording growth over the coming year, the EU body added.
While discussing the necessary steps required to achieve large-scale blockchain projects, the authors noted that development teams would need a clear vision of their goals, a proper use case for using blockchain technology, a strong governance structure, and the ability to interact and share efforts amongst relevant stakeholders.
Even though the European Union has been supportive of the new technology, the report stated that there is still much to be discovered and developed regarding blockchain. They, therefore, believe that the experimentation phase should be a light-touch one, as this would enable them to understand the technology further.
In the report, the authors wrote that “Both the US and China have expressed strong support for blockchain research, with the former even going so far as to include it as part of its USD 700 billion defense budget. We, therefore, recommend that the EU continue its strong support, targeting both basic research as well as supporting the implementation of infrastructure-related projects in particular, as well as research into non-technical topics such as governance of blockchain projects.”
The EU Commission formed the EU Blockchain Observatory Forum in 2018 with the hope of identifying important initiatives, monitoring developments, and promoting collective action in emerging technologies such as blockchain. The group is planning to issue a new blockchain report this year which will focus on issues and the technology’s privacy and confidentiality features.
Even though this report is not a clear regulatory effort from the EU, the group talking about the ways to improve blockchain technology and boost its adoption could signal an intent by the body to explore the options it has. If blockchains can solve the problems mentioned by the EU body, then the technology has the potential to replace traditional systems in a wide range of industries.