Threats to BlockChain: Part 3 Critical Mass of Network Participants

A network of participants is where many people or entities decide to join a collaborative initiative and agree to abide by the rules set either technically or by convention.  When a network becomes valuable and possibly self-sustaining through the number of entities participating it said to have reached a critical mass.

There are a certain number of participants that make this facility useful which depends on the context on the collaboration.  For example, there is a definite value to email which only has 2 people involved but social networks rely one person being connected to lots of people who, in turn, are connected to lots of people.

This way the content being published by individuals becomes more diverse and potentially valuable through aligning of interests of people in that network.

Why does this affect BC?

A BlockChain solution relies on a number of people using the system to gain the efficiencies on offer.  BlockChain promises fee-free payments between participants, for example.  If an online merchant is selling items on a website and is willing to accept payment in a BlockChain-enabled currency then they will save a considerable amount on payment management which payment processors currently charge.  In the UK this is usually around 2.5% of the total sale cost.

Example

However, if participants don’t join the BlockChain network then the participant needs to maintain two banking systems – the regular one and the BlockChain version.  This means the cost of operating on both.

 

How to solve it?

The solution to this problem is highly specific on the context of the network unfortunately. For our example of retail merchants luckily there are a handful of very popular ecommerce solutions (Magento, SiteCode, etc.) which integrate payment systems into their online processes.  BlockChain integration could be made at the application level which would minimise the technical complexity of the actual integration.  The payment provider that is selected to manage the online transaction processing could also be BlockChain-integrated which would also reduce cost through reduction of complexity and risk.

Leave a Reply

Your email address will not be published. Required fields are marked *