Blockchain technology has the potential to change the world and disrupt numerous industries with its positive features like increased security, transparency, traceability, and decentralization.
Cryptocurrencies are one great example of the possible use-cases of blockchain technology. They allow us to send and receive inexpensive transactions anywhere in the world in 24/7/365, ignoring the bank holidays, slow processing times, and costly fees of the traditional financial world.
But the blockchain’s use-cases do not stop at cryptocurrencies. Among others, the tech is actively explored for identity, voting, banking, fundraising, food safety, and even for energy market solutions.
Blockchain’s Limitations Hinder Its Adoption
However, blockchains are facing a significant problem that hinders the tech’s adoption rate. And this is scalability. While traditional financial services – such as Visa, MasterCard, and PayPal – are capable of processing thousands of transactions per second (Tx/s), most cryptocurrencies struggle to scale their blockchains over 20-30 Tx/s. Due to these limitations, blockchain in its current state is not fit for enterprise use as many companies fear that the network they join will easily become congested, resulting in unreasonably expensive transactions and transaction processing times taking days.
Bitcoin is a great example of this with its block size limit of 1-2 MB. During one of the largest bull runs in the cryptocurrency’s history in January 2018, the average confirmation time in the Bitcoin network took nearly eight days with the average cost of a transaction being as much as $143. In the business world, no one can allow to offer customers a payment method that keeps them waiting for over a week. Furthermore – unless someone is sending tens of thousands of dollars, – paying $100+ for transaction fees is not beneficial for anyone (apart from the miners).