Challenges and its Solutions with Blockchain Technology Adoption in Enterprises

Full text

Dr. Ranju S. Kartha
1236
Turkish Online Journal of Qualitative Inquiry (TOJQI)
Volume 12, Issue 5, June 2021: 1236 – 1246
Research Article
Challenges and its Solutions with Blockchain Technology Adoption in Enterprises
Ranju S. Kartha
1
Abstract
Blockchain is going to be a very critical technology for future development of the world. This
technology is useful in storing immutable data ensuring that no one will alter data. Since it is
decentralized and traceable, no central authority can control it, making it less corruptible. The
enterprises are starting to use Blockchain to achieve operational efficiency by automating
business process or digitizing records, tracking and tracing physical and digital assets and
securing sharing of information. The number of threat vectors grows exponentially as
blockchain networks become more complex. While it significantly reduces traditional risk it
also creates new risks. This paper highlights the risks and challenges with blockchain
adoption, also proposes some of the solutions. Blockchain is an inter-organizational
technology, so how do this technology bring people from different organization together is
the biggest challenge. There are many other issues like interoperability, latency issues, smart
contract vulnerabilities, security concerns and throughput issues etc. But people are still
exploring and finding new ways of implementing blockchain technology in daily life due to
its versatility resulting in new and innovative applications. So blockchain technology is
revolutionary with the potential to improve or develop new systems in different industries
and areas.
Keywords: Blockchain Technology, Consensus Algorithm, Decentralized Application,
Distributed Ledgers, Immutability, Smart Contracts.
Introduction
Digital transformation is the prerequisite of the organization to remain competitive in the fast-
changing world. Blockchain changed the thinking of people and business, it is a revolutionary
technology that is going to remake the future. Big companies as well as business have felt the
importance of this new technology. So many of the biggest organizations and business owners
are focusing on blockchain. With blockchain, people from all around the world can exchange
information quickly, effectively, securely and efficiently. That is why businesses and banks
are trying to adopt this new technology to work effectively and improve their transactions.
This technology which fundamentally influences the way that our economy, governance
systems and business functions and changes our conceptual understanding of trade, ownership
and trust.
1
Dr., Mangalam College of Engineering, Ettumanoor, Kerala, Computer Science and Engineering Department,
ranju.kartha@mangalam.in
Received: , Accepted:

Challenges and its Solutions with Blockchain Technology Adoption in Enterprises
Blockchain is definitely needed as this is the age of smartphones and world wide web. The
rest of this paper is organized as follows: Section 2 describes the need of blockchain
technology in today’s world. Section 3 comprises the working of blockchain technology and
section 4 addresses risk and challenges with adoption of blockchain technology in various
enterprises. Section 5 proposes some of the solution to prevent risks in blockchain adoption
and Section 6 presents the conclusion and future scope.
Need of Blockchain Technology
In today’s world, advanced digital transactions take place every moment of each day- orders,
payments, account tracking and much more. With Often It is observed that the world is
standing up to modern challenges in the midst of COVID-19. The challenges include:
• Trust Deficit
• Fake Menace
• Anonymity
• Access to quality capital
• Supply chain agility and resiliency
• Need constant reconciliation
• No single version of truth
Trust
Trust is a desire, where a person will have an expectation that the person on other side will
work with integrity. Nowadays we are facing a huge amount of trust deficit- when we are
buying a product, we are not sure about how it is come. We are not sure about the source of
the news article we read, there are many fake menaces which is going on in and around us
and government is finding hard to detect. In the case of a company, it is coordinated with
supplier, bank, customer, auditor and insurer. Each entity maintains its own set of accounts
and it has separate transactions. But everything has to be subject to reconciliation, so there is
no single version of truth. Blockchain is an evolution of ledger technology. It is maintaining
a record of transactions in our lives. So, we can track the ownership of assets before/ during/
after any transaction in a secure and transparent way.
Fake Menace
Nowadays, because of the use of smart phones the world captures over 1 trillion
computerized images and recordings annually. There are countless applications are available
for any of us to download and use to edit manipulate and alter images and even videos.
Today’s world people depend on social media pictures and recordings more than
ever before and on the other side we don’t believe them. Due to the transparency,
traceability and decentralization nature of the Blockchain, it can be conceivable to check
the realness of the data or the source of information and build trust in news shown on
the Web. The Blockchain in news industry enables the content to be produced and distributed
over the internet in an immutable and secure way (Akash 2020).
Anonymity
It refers to data obtained from respondents who are totally unknown to those concerned with
the survey. Anonymity is essential as it offers protection to those who are most at risk of
experiencing retaliation for their action or beliefs such as those who support potentially
controversial organizations. Blockchain provides anonymity which means nobody knows

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how many blockchain assets we have and who we traded with. In blockchain technology only
the person with private key can access all of the transfer information.
Access to Quality Capital
Most of the small businesses needs additional capital to start to grow to reach their potential
but there are some barriers. Blockchain provides significant benefits to businesses by
enabling easier, cheaper, and faster access to capital through programmable digital assets
and securities (ConsenSys 2020).
Supply chain Agility and resilience
Supply chain resilience is an approach that assists a country to make sure that it has
diversified its supply risk across many supplying nations rather than being dependent just one
or few. While globalization has provided unlimited opportunities, it has also increased
competition complexity and vulnerability. Blockchain technology could make supply chain
management simpler and more transparent. Using this technology companies can manage and
monitor risks within the supply chain ensure quality of delivered parts and track delivery
status. Companies can also use smart contracts to manage and pay for supply chains
autonomously. Smart contact could assist with shipping and logistics tracking valuable
products as they travel around the world. Using blockchain technology, companies have a
complete picture of their products at all stages of the global supply chain bringing
transparency to the production process while reducing the cost of manufactured goods.
Need Constant Reconciliation
Disruption in the finance industry has become the new normal, and migrating to a growth
mindset is the most effective way for accounting and finance professionals to prepare for
what’s ahead (Blackline 2017). Account reconciliation are an effective way to keep a digital
eye on everything from household budgets to the finances of publicly traded companies.
Most of the companies uses double entry accounting to perform an account reconciliation.
But double entry accounting system has many problems such as complexity, cost, accuracy
and time spent doing and verifying entries. A blockchain is a distributed, digital ledger which
represents a significant innovation by offering a disinter-mediated solution to record keeping
and growth of the digital economy. Since the blockchain is a shared ledger that processes
transactions in real time, it has the potential to improve accounting efforts by lowering
overall costs which are associated with reconciliation of ledgers, it makes reconciliation
untenable.
No Single Version of Truth
In computerized business management, single version of the truth, is a technical concept
describing the data warehousing ideal of having either a single centralized database, or at
least a distributed synchronized database, which stores all of an organization's data in a
consistent and non-redundant form (Wikipedia 2019). In today’s world with the growing
complexity of our technology, it getting harder to find and maintain the single version of
truth. It is one of the important requirements in digital transformation. Blockchain technology
provides a single version of the truth of an agreement, by validating all digital transactions
using consensus algorithm within the network (Sally 2019).
Blockchain Technology
Blockchain is a decentralized digital public ledger used to record transactions across many
computer systems implemented in such a way that any record cannot be altered or changed
without changing all the subsequent blocks. It is a new way of securing trust, transferring the

Challenges and its Solutions with Blockchain Technology Adoption in Enterprises
values and storing the data. Blockchain is a digital record of transactions and its name comes
from its structure, in which individual records called blocks, are connected together in a
single list called chain. It’s a new type of database, where information held on a blockchain
exists as a distributed shared ledger, so the records are truly public and easily verifiable.
In this technology, there is no one has control of ledger, no one can falsify anything on the
chain, there is no double spending is possible and finally anyone’s identity can be kept
completely secret. There no centralized version of information exists for the hacker to
corrupt. It is additionally less vulnerable since it uses consensus algorithms to validate each
transaction. Following are the four key features of this technology:
Distributed Ledgers
Blockchain is a decentralized distributed ledger, every transaction goes through the blocks
and which is distributed across a number of systems in a real time basis over a peer-to-peer
network. So, the ledgers are stored and maintained by all the participating nodes in the
network.
Immutability
Each block header has a field that references the previous block hash key, thus forming a
continuous chain of blocks. If anyone tries to tamper any block, then the whole blockchain
will get dissolved, so the blockchain is immutable.
Privacy
Blockchain uses cryptographic hash functions, public and private key cryptographic
techniques to ensure secure, authenticated and verifiable transactions.
Trust/Consensus
No one can alter the data without everyone finding out, it uses consensus algorithm to
validate data. The consensus mechanism is used to decide which block will be added to the
network. A transaction is valid only when, more than 50% of the nodes in the network should
agree the consensus about its validity (Bellini 2020).
Figure 1. How Blockchain works

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In Figure. 1, user A wants to make a transaction with user B, whenever a new transaction
occurs, it creates a new block with new data which is broadcast to peer-peer network
consisting of computers, known as nodes. Using known algorithms, the nodes in the network
validates the transaction and the user’s status. A verified transaction might involve records,
cryptocurrency, contracts or other information. Once verified, the transaction is combined
with other transactions to create a new block of data for the ledger.
The new block is added to the existing blockchain which is permanent and unaltered. The
block thus created is identified using a unique code called hash. Each block has a block
header and block data. Block header contains hash of the current block, timestamped batches
of recent valid transactions and hash of the previous block. The block data having list of
validated and authenticated transactions, thus forming a contiguous chain of blocks called
blockchain. Blockchain network uses consensus mechanism which is agreed upon a signal
value of truth that gets added to the blockchain.
The pillars of the blockchain structure are the contents of the block loop connection,
validating the new block with the P2P consensus and verifying the communication with the
encrypted signature (Cheng 20217). Blockchains are consumers of advanced cryptographic
primitives including cryptographic hashing and digital signature. In blockchain technology
all transactions are chained together by their hash value, once committed to the chain all
records are immutable. It is impossible to alter a previous record without altering every
party’s chain. If one node compromised, it can no longer participate in the chain until it
regenerates, the true chain from the other participants.
With blockchain, every time an asset is used or consumed, the owner of the asset signs the
transfer with a private cryptographic key. In order to initiate the transaction, the owner
requires both the asset and the private key. After broadcasting, anyone in the network can use
owner’s public key to guarantee the digital signature coming from private cryptographic key
is authentic. Thus, blockchain will check the validity of the key and ownership of the asset.
Therefore, even if the asset is cloned, it cannot be used without the private key. Once the
transaction has been committed to the chain, the owner of the asset will have changed. This
means, each node that receives a second transaction requesting the transfer of ownership, it
will check that there was a previous transaction that already transferred the asset and will
reject that transaction. This will prevent double spending. So cryptographic system plays an
important role in the inner working of blockchain technology and public key encryption
scheme serves as the premise for blockchain transactions.
In blockchain system consensus mechanisms are used to ensure records are true and honest.
There are various consensus mechanisms, the difference is the way the consensus is reached.
Cryptocurrencies like bitcoin and Ethereum use a Proof- of-Work mechanism. Each
transaction in the network is validated by having people solving a complicated math puzzle
attached to it. This is done by powerful computers and are known as miners. A reward in the
form of a cryptocurrency is issued to the first minor who cracks the puzzle. The minor who
has first solved the hash puzzle is allowed to broadcast the block in the network. The block
also includes the solution to the puzzle, also called nonce in the block header. Other miners
on the network will receive the block and they validate this block before they append it to
their chain of blocks.
Blockchain technology is providing cybersecurity and protecting precious data against
attacks. Communication reliability and safety will also significantly improve with this

Challenges and its Solutions with Blockchain Technology Adoption in Enterprises
technology. Peer-to-peer ride sharing apps allow the owners to pay automatically and the
reduction in complicated bureaucracy is also one of the achievements of blockchain. With
blockchain, corruption can be easily be traced instead of traditional systems which are very
slow. With blockchain sensitive medical information about patient is stored in a decentralized
database that is accessible to the authorized doctors. So, treating health problems with
Blockchain will become easy and convenient. Hence, this technology ensures that each and
every deal is a real one.
Risks And Challenges in Blockchain Technology
Every technology has advantages but simultaneously also possess some limitations that need
to be considered while using that technology. In today’s world Healthcare systems, Banking,
Cyber Security, Real estate, Automotive industry, Bitcoin, Voting, Payment and Transactions
and Smart Cities etc. uses blockchain technology. This paper points out some of the real
barriers to greater adoption of blockchain technology.
Distributed Ledgers
Many industries especially big enterprises they need to follow particular regulatory
compliance and whenever we deal with blockchain, we will keep that in mind. Countries like
US take a lead on how regulation on cryptocurrencies should take place within the united
states framework. So, the enterprises need to adopt new smart regulatory hands-off approach
for implementing blockchain technologies in their financial services and other sectors (Yeoh
2018).
Scalability
Blockchain is a decentralized secured network, whenever a new transaction is created it
needs to propagate to the network, it reduces the transaction speed. Scalability is an important
issue in blockchain because of the limitation in the size of the block that can hold data and
block creation time. Even if the block creation time is reduced, it is quite difficult to solve
due to the security issues. There is a limit to block size due to the transmission overload of
the network, even if the size can be increased by a certain amount.
Integration with the legacy system
Blockchain is running on the latest technology due to which its too difficult to get it synced
with older systems as those systems or software need to be modified to incorporate the
changes due to which overhead cost is increased to meet the blockchain requirements. Thus,
it might take a lot of funds or human expertise and also it is a time-consuming process. To
solve this issue, the enterprises must find way to sync their existing system with blockchain
solutions.
Less Privacy
In blockchain the identities of users are anonymous, but still with the transaction patterns it is
feasible to connect the user’s identity with that address and can get information about the
user.
Potential security threats
Real time transaction is a biggest challenge in blockchain technology. Private blockchains are
generally smaller and easily disrupted by traditional DDoS. Assets can be compromised
when it is moved between blockchains, this causes interoperability risk. If the private keys
used to sign the transactions placed on blockchain are not managed properly, it will result in

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severe security attacks. Traditional measures like load balance, redundancy and anti-DDoS
measures can solve the above issues.
51% Attack
Government and enterprises need to control their data access for their security purpose, it is a
great concern while they adopting blockchain technology. Since the blockchain is
transparent, it is difficult to implement with sensitive data. Blockchain is the network of
people. Blockchain work under the assumption that honest nodes control the network. A
miner’s performance is based on the amount of computational power they have and this is
usually referred to as hash rate or hashing power. Miners usually grouped together in mining
pool so they can combine their mining power and become more efficient. If attacker nodes
collectively control more computational power than the good ones in the network is so-called
51% attack. The attacker would be able to prevent new transactions from gaining
confirmations to slow down or even completely prevent transactions between users. He
would be also able to perform double spending. For preventing the above attack,
organizations must ensure that there is no single miner or a group of miners or mining pools
that are capable of controlling more than 50% of the network’s mining hash rate. Random
mining group selection technique can reduce the mining power of each miners and defend
against 51% attack (Yang 2019).
Selfish Mining or block withholding
Miner attacker can produce their own blockchain privately by leveraging miner’s power. A
selfish miner achieves this by not announcing block to the network and receiving reward
when they have discovered a block. So, the blockchain grow much faster and much longer as
soon as attackers can present their blockchain to the public consensus mechanism. Using this
block withholding strategy, the attacker can gain profit with 25% of total computational
power.
Complexity
Since blockchain includes lots of mathematical complex calculations it is difficult to
understand by beginners. If the blockchain makes the consensus mechanisms more complex,
it may introduce new level of risks. Data integrity is directly linked to the security of the
consensus mechanisms. So, enterprises need custom consensus mechanisms that requires
thorough thinking to avoid the complexity in blockchain.
Initial costs for setup
For setting up blockchain in an organization in first time is very expensive as it is installed
for specific enterprise and therefore the initial cost is very high. After setting up, only few
resources are available, so the organization should need some experts to fulfill demand. So,
they are paying high to hire the resources which are qualified.
Consumption of Energy
Miners spend a very large amount of mining power to solve the computations using proof-of-
work algorithm to validate each and every transaction in the blockchain. This process is
highly energy consuming.
Lack of in-house capabilities
Lots of enterprise deciding not to do anything with blockchain because of lack of in-house
capabilities including skills and understanding. They believe that local expertise is not enough
to implement blockchain system in their enterprise. User awareness program, traditional end-

Challenges and its Solutions with Blockchain Technology Adoption in Enterprises
point security measures, security update and anti-virus solutions are essential to solve this
issue.
The adoption of blockchain with other technologies in an organization, there is a need of
redesigning business and application workflow as well as adoption by all users.
Solutions and Discussions
Despite the challenges it has wide ranging possibilities and potential to enhance the quality-
of-service delivery, while improving confidentiality and integrity of data. While adopting
blockchain technology organizations mainly focusing on:
Private blockchain
It is actually deployed internally in the organization; it cannot be accessible by everybody
whoever having internet access. Private blockchains are smaller and centralized networks and
their membership is limited and closely operated and controlled by one entity. It can be able
to mine the blocks in one minute or we can set fixed time duration. By comparing with the
public blockchain, it is secure and scalable.
Permissioned blockchain
In this case it can control who has access or who can do changes in the blockchain. Each
node in blockchain need permission to read the information on the blockchain, that limit the
participants that can made transaction on the blockchain. Permissioned blockchain are large
distributed network however they may or may not be based on open-source code. They
operate under the leadership of a known entity that determines the role that individuals can
play within the network.
Integration with multiple chain
Lots of enterprises currently leveraging multiple clouds and build integration and working
together in one ecosystem.
Consortium blockchain
In this, the power does not reside with a single authority, it operated under the leadership of a
group. There are two types of nodes in the network, validator nodes and member nodes. Here
the control over the network is given only to a few predetermined nodes called validator
nodes and only these nodes can take part in consensus mechanisms. The read access is public
or restricted to a set of participants, this entirely depends upon the blockchain. So, it is s
partially decentralized network, which is faster and provides higher scalability and
transaction privacy.
Decentralized Application (Dapp)
It is an open-source application that operates autonomously on a decentralized public
blockchain. It cannot be controlled any single entity, and it generates and uses tokens by
following a standard cryptographic algorithm.
Consensus Algorithms
Enterprises uses blockchain with various consensus algorithms to protect themselves against
51% attack, such as Proof of Work, Proof of Stake and Delegated Poof of Stake. These
algorithms make it very impractical for an attacker to successfully conduct a 51% attack.
Blockchain uses a specific set of rules for generating new blocks, one of the rules to create a

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new block must be proportional to the total computing power of the proof of work
mechanism.
This means that we actually own to have the computing power required to create a new
block, which makes it very difficult and costly for an attacker to do. Since mining is so
intense, the miners have a very strong incentive to keep mining honest rather than attempting
a 51% attack or sybil attack.
Figure 2. Layers of blockchain architecture
Figure 2 shows the layered architecture of blockchain- Application Layer, Blockchain layer
and Internet Layer. The TCP/IP protocol is a set of rules that the end points in the
telecommunication connection be used, when they communicate.
Figure 3. Blockchain Layer
This paper proposes four layers inside the blockchain layer, that is shown in Figure 3.
Consensus layer - decides on the methods of consensus and network participation where the
network rules are applied to regulate the participants. Mining layer - will perform the mining
operation, Propagation layer - manages the distribution of blocks and Semantic layer -
decides how the newly created block related to the previous block in the network. Consensus
layer decides on the methods of consensus and network participation where the network rule
are applied to regulate the participants. There is a client application DApp that will invoke the
smart contract and it will execute all nodes in the network. Client application can get all the

Challenges and its Solutions with Blockchain Technology Adoption in Enterprises
transactions in the blockchain. It can also integrate other applications to trigger blockchain
activity directly, for instance we can connect to IoT device to blockchain. Blockchain based
solutions often bring together in many enterprises, which requires the development of
common standards for data storage, processing and protection. This paper proposes some of
the security measures to solve the risks and challenges in the blockchain technology.
• Every enterprise must have some expertise, they should have deep knowledge in
blockchain technology.
• Define the organization goals, that should be synced with security goals of blockchain
technology.
• Choose the type of the blockchain according to their need in their enterprise.
• Next is to find the risk and challenges in blockchain technology in their organization by
performing risk assessment mechanisms.
• Define the security governance and control to prevent the risks in blockchain adoption
in various application.
• The enterprises have to choose the security vendors to implement proper security
measures. If an organization chooses the right architecture at the beginning, then the
blockchain can foster privacy.
• After the implementation of security measures, the proper audit should be done
regularly and monitor all the transactions properly.
• The software behind a blockchain has to be written perfectly, a coding error could
make the blockchain vulnerable to attacks.
Conclusions
Blockchain is definitely a breakthrough in the digital financial world and it is going to be the
stronger technology for future generations. So blockchain technology is revolutionary with
the potential to improve or develop new systems in different industries and areas. This
technology has already made great changes in the financial as well as the other fields in the
world. In the future it is expected to grow more and surely its future is bright. Due to its
immutability, traceability and transparency, blockchain can helps in reducing cost,
inefficiencies and security threats. It creates new risks, while it significantly reduces some of
the traditional risk. This new technology may involve unforeseen risks, so professionals must
anticipate risk like never before and gear up for the same. The blockchain technology
integrating with other existing systems is the key part of enterprise applications. It’s a
comparatively young technology and that undergoes rapid improvement and a few of the
most important problems are still remain today.
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