Consultancy company McKinsey has released a report on the current and future state of cryptocurrency and blockchain technology, claiming that the recent hype may have damaged the real world proposition the technology offers and that industry-level scalability is still years away. The report is more cautious than negative in tone however, suggesting that if blockchain technology can scale and streamline over time, as well as offer genuine solutions to real-world problems, then some projects may meet their own lofty expectations.
Blockchain is an “Infant Technology”
The doubts that McKinsey raise are doubts that those within the industry, and investors who are not still trapped in the hype phase of cryptocurrencies, are also aware of. Reminding readers that blockchain is still an “infant technology”, something that more ardent critics are quick to forget, they state that blockchain is struggling to emerge from the ‘pioneering’ stage of the four-stage technology life-cycle which takes in pioneering, growth, maturity and decline.
McKinsey state that one of the reasons blockchain’s difficulties in escaping from this first stage is the emergence of competing technologies. These other technologies offer a different solution to the same problem, but can often be faster and cheaper because they rely on centralized systems in opposition to blockchain’s decentralized nature. In order to overcome this hurdle, blockchain projects need to emphasize the advantages of decentralized systems more to businesses and their customers so as to offset the potential downsides. The fact is that, currently, most businesses either don’t know about the benefits of decentralized systems or don’t care enough about the advantages to use them. Any new technology takes years to find its place in the world, slowly bringing users with it, and blockchain will likely be no different.
A second key concern McKinsey has for blockchain is that of security. They cite quantum computing, which has long been considered a potential weak point for Bitcoin’s SHA 256 mining technology, and the potential for a 51% attack on smaller networks, both of which are valid concerns. However, the prospect of someone sitting down to a quantum computer and hacking Bitcoin is many years away yet, given that it has taken computing giant IBM until this year to launch world’s first fully-integrated quantum computer, and it came with no price tag. Within this timeframe we can also expect blockchain technology to move on significantly enough to prevent 51% attacks, while a move to alternative consensus mechanisms such as Proof-of-Stake is already taking place.
Talkin ‘Bout a (Blockchain) Revolution
McKinsey summarizes that widespread adoption of blockchain technology relies on robust and appropriate scaling, a general understanding of the benefits of decentralization and, perhaps most importantly of all, that blockchain be the easiest solution to a problem. Given its relative youth and complexity compared to, say, cloud-based solutions, it has some ground to make up before we can consider the blockchain revolution to have really got going.