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'Coopetition' the Biggest Obstacle to Blockchain Growth, Consulting Firm Says
Even though some markets have been quick to adopt blockchain technology to improve their systems, the innovation itself has a few restrictions that are hindering its growth. Consulting firm McKinsey highlighted in its recently released report several factors that contribute to this issue.
Industry type, asset categorization, technological growth, and regulatory measures are among the major hurdles that the consulting agency pointed out. This conclusion came after it analyzed 90 cases that use blockchain technology, Which-50 reported.
The analysis stated that the biggest obstacle to global adoption of the innovation is the coopetition paradox. The agency posits that competitors existing in the same ecosystem need to work together to eliminate barriers stunting the technology’s growth. But this is a complicated problem, and a true solution has yet to be discovered by companies operating in the crypto sphere.
“Overcoming this issue often requires a sponsor, such as a regulator or industry body, to take the lead. Furthermore, it is essential that the strategic incentives of the players are aligned, a task that can be particularly difficult in highly fragmented markets,” the report stated.
There’s also the matter of investors whose objective is to profit rather than devote long-term support to a particular blockchain project. And because the goal is driven by profit rather than the improvement of a product, developers release results that are incomplete, which ultimately leads to the collapse of a project.
McKinsey further argues that as long as regulators have yet to put up parameters that will govern this market, limitations to blockchain will continue to exist.
“Standards can be established with relative ease if there is a single dominant player or a government agency that can mandate the legal standing. For example, governments could make blockchain land registries legal records.”
The problem here is that blockchain is a difficult concept to grasp once you dive deeper into the details. As such, regulators are still mapping out the landscape of this technology, with many of them getting lost as existing rules in the real world contradict with the very nature of blockchain itself.
For instance, the new EU General Data Protection Regulation (GDPR) provides for the "right of erasure" for individuals who wish to delete their data from a company. However, digital ledger technology is a decentralized system and as such information is stored on multiple nodes that make up a certain network. It’s difficult to get rid of information when the technology that stores it boasts an advantage that it can keep an immutable record of data.