Blockchain Risks for Existing Companies
Let’s take a look at some of the potential obstacles to the widespread adoption of blockchain technology and why it poses a threat to existing businesses.
In the short term, financial institutions are struggling with the disruption generated by cryptocurrencies. We all know that banks, for example, profit a lot from financial transactions. They have reasons to want to exercise control, they have little incentive for massive and revolutionary innovations.
A financial institution has also invested heavily in its technology infrastructure, so it will not be motivated by an investment that makes it obsolete. It’s not easy to convince the millions of stakeholders in the global financial ecosystem that they can drastically change what they do and, to make matters worse, make far less money. Therefore, finance companies must also be careful with the most intransigent regulations and laws, which pose risks to the innovation itself. However, the main threat is doing nothing.
Cross your fingers and wait for digital coins like bitcoin or blockchain technology to disappear, a fad that can be lethal. For this reason, finance organizations research and keep up-to-date on the blockchain. Entities such as Wells Fargo, Commonwealth Bank of Australia, Goldman Sachs, Bank of America and Mastercard have already been involved in active blockchain projects. They understood that it’s better to participate than stand by and risk becoming obsolete.
In the long run, finance organizations are more likely to evolve towards direct blockchain innovation. They will find a way to work it out for their prosperity rather than avoid it.
You can already see some interesting ideas and collaborations for the blockchain, like Ripple’s and the InterLedger protocol (ILP).
They are ready to contribute to existing payment systems and improve rather than destroy them. If we move away from the financial sector and look at blockchain risks in general, the key areas can be identified.
First are the risks of doing nothing or doing something in a world of rapid technological change and consumer expectations. Doing nothing about a technology, and particularly in this age of accelerating digital transformation, can make the business obsolete.
The emergence of the casual job sharing economy with startups like Uber and Airbnb has already revolutionized some important industries. Refusing to research, educate, and experiment can end up limiting an organization’s ability to compete in the future. However, doing something is also risky. For example, if a company commits available resources but limits itself to designing a prototype that ends up failing, it runs the risk of losing capital.
What might this mean for your current customers and partners? Could you be breaking the law regarding tax obligations if you use a cryptocurrency? You may not meet the notification requirements if you are a public company. What about insurance companies? Will blockchain transaction losses be covered for you?
Doing business through the blockchain also poses privacy risks. While the basic design includes cryptography, the chain itself is open to anyone. It’s a quality and a potential flaw. Although I highlighted blockchain security as a benefit, it is still vulnerable to fraud and hackers. The risks of standing still or moving are the same as with any innovation, but they are magnified with the blockchain by what you can do with it and how you do it. In the art of innovation. There is an inherent risk. It is the price that every company must pay to dedicate itself to its business.
In the 21st century, the agility in offering solutions and the way they are offered will be the quality that distinguishes those who succeed and those who fail.