If people really did trust blockchain technology, they would use it. Eventually, should more people around the world trust blockchain technology, the mass-market adoption would become a reality.
The Rise of Blockchain Without a Regulatory Umbrella.
Certainly, blockchain systems are not as common in the world today as many imagine. Despite the numerous use cases for the technology, corporate executives, believe that trust could potentially delay its adoption, as research shows. As a result, business leaders and the general public, are also reluctant to utilize blockchain systems, including digital currencies. Owing to the fact that most are alarmed by the potential government regulations which may result in financial loss.
Above all blockchain systems, the bitcoin network is the most popular. The reason for bitcoin’s popularity is for allowing global financial transactions to occur without oversight from third-party players, specifically, the government. Furthermore, since the system is decentralized, no regulator could shut down the entire system from one single server. Thus, no single government or regulator can control the currency. As a result, people who had been distrustful of banking institutions became the first to adopt bitcoin.
The Problem with a Trustless System
On the contrary, many of the people who would utilize blockchain technology do want government oversight. In other words, without laws and regulations that help govern the use of this revolutionary technology, many people will remain untrustworthy of blockchain systems.
At the moment, the root problem with blockchain technologies is that, just like conventional technologies, trust is required. As much as bitcoin, cryptocurrencies and other blockchain systems have been introduced as trustless alternatives to conventional systems, sometimes trust within these networks can help save the network from attacks.
For instance, in 2016, a user exploited a design flaw in the DAO, a DApp on the Ethereum blockchain. As a result, the user went on to withdraw around $60 million worth in cryptocurrency. Fortunately, the community worked on a radical solution to create a duplicate of the entire blockchain, and eventually reverse the theft.
In addition, Initial Coin Offerings, the funding model preferred by blockchain startups, relies on trust. Since 2017, more than $20 billion has been raised, but a substantial percentage went to fraudulent campaigns. As it turns out, blockchain technology doesn’t exactly proclaim the end of the need for trust.
Regulations to Stamp-Out Fraud
The fall from grace of the ICO system became apparent as more people became aware of the abuse of the unregulated environment exploited by fraudsters. However, as regulatory agencies stepped in to subdue the practice, start-ups shifted to selling digital tokens under similar rules as stocks and other securities.
Eventually, government authorities will have to work on a framework that balances between regulations and the flexibility offered by blockchain systems. Since blockchain technology has several use cases, there is a great need for regulation that holds the users of the technology accountable.