Advantages and Disadvantages Of Blockchain Technology

Blockchain technology is quite popular these days for its impeccable security features and transparency. The payment and finance industry are witnessing no less than a revolution since the boom of blockchain technology in 2018. While other industries follow suit, there is no denying the fact that online/digital payments are the latest game-changers in all business industries. With technology becoming more and more mainstream each day, we must be aware of advantages and disadvantages of blockchain. Let’s start.

Advantages of Blockchain

1. Data Integrity: Blockchain technologies are designed in such a way that any block or even a transaction that adds to the chain cannot be edited, which ultimately provides a very high range of security.

2. Free from Censorship: Blockchain technology is considered free from censorship as it does not have control of any single party rather it has the concept of trustworthy nodes for validation and consensus protocols that approve transactions by using smart contracts.

3. Verifiable: Blockchain technology is used to store information in a decentralized manner so everyone can verify the correctness of the information by using zero-knowledge proof through which one party proves the correctness of data to another party without revealing anything about data.

4. Distributed: Since blockchain data is often stored in thousands of devices on a distributed network of nodes, the system and the data are highly resistant to technical failures and malicious attacks. Each network node is able to replicate and store a copy of the database and, because of this, there is no single point of failure.

5. Traceability: The format of Blockchain is designed such that it creates an irreversible audit trail, making it easy and accessible to trace any addition to the chain.

6. Immutability: Data cannot be tampered with in blockchain technology due to its decentralised structure so any change will be reflected in all the nodes so one cannot do fraud here, hence it can be claimed that transactions are tamper-proof.

7. Open: One of the major advantages of blockchain technology is that it is accessible to all means anyone can become a participant in the contribution to blockchain technology, one does not require any permission from anybody to join the distributed network.

8. Stability: Once data has been registered into the blockchain, it is extremely difficult to remove or change it. This makes blockchain a great technology for storing financial records or any other data where an audit trail is required because every change is tracked and permanently recorded on a distributed and public ledger.

9. Security: Blockchain technology is highly secure as each member of the Blockchain network is provided with a unique identity that is linked to their account. Also the block encryption in the chain makes it tougher for any hacker to disturb the traditional setup of the chain

10. Faster processing: Before the invention of the blockchain, the traditional banking organisation took a lot of time in processing and initiating the transaction but after the blockchain technology speed of the transaction increased to a very high extent. Before this, the overall banking process took around three days to settle but after the introduction of Blockchain, the time reduced to nearly minutes or even seconds.

11. No third party interference – No government or financial institution has control of the cryptocurrencies that operate on blockchain technology. This means no government can meddle with the value of the currency.

12. Secure transactions – The blockchain responsible for keeping record of all the transactions cannot be edited or manipulated. Both ends of a transaction and the public can view the transaction data at any given time. This makes online transactions more secure.

13. Instant transactions – Blockchain technology transactions are completed in a few minutes. Take for example a bank transaction made to a person with a different bank account. It takes two days minimum to complete the transactions. At this time, the person doing virtual transactions with crypto can complete a series of transactions.

Disadvantages of Blockchain

1. Power Use: The consumption of power in the Blockchain is comparatively high due to mining activities. Keeping a real-time ledger is one of the reasons for this consumption because every time it creates a new node, it communicates with each and every other node at the same time.

2. Cost: Each crypto transaction also demands high energy. There are very fewer chances that this issue can be resolved by the advancement in technology. The other factor is that the storage problem might be covered by energy issues that cannot be resolved.

3. Immaturity: Blockchain is only a couple-year-old technology so people do not have much confidence in it, they are not ready to invest in it yet several applications of blockchain are doing great in different industries but still it needs to win the confidence of even more people to be recognized for its complete utilisation.

4. Time-Consuming: To add the next block in the chain miners need to compute nonce values many times so this is a time-consuming process and needs to be sped up to be used for industrial purposes.

5. Legal Formality: In each and every part of the world modern money has been created and controlled by the central government. It becomes a hurdle for Bitcoin to get accepted by the preexisting financial institutions.

6. 51% Attacks: The Proof of Work consensus algorithm that protects the cryptocurrencies like Bitcoin in blockchain has proven to be very efficient over the years. However, there are a few potential attacks that can be performed against blockchain networks and 51% attacks are among the most common ones. Such an attack may happen if one entity manages to control more than 50% of the network hashing power, which would eventually allow them to disrupt the network by intentionally excluding or modifying the ordering of transactions.

7. Elimination of Errors: The application must be updated on each node of the peer-to-peer network or forked if any part of the nodes doesn’t accept the amendments.

8. Network Robustness for Dedicated Purposes: All applications have a business logic behind them. The logic defines how new applications must work in terms of business requirements. By nature, blockchain employs a strict logic that doesn’t allow redesign without the loss of benefits leading to the need for logical business changes to be acceptable to the blockchain solution.

9. Difficulty of Development: Applying very complex protocols to achieve consensus and allow for scaling from the beginning is very important. One cannot hastily implement an idea hoping to later add new features and expand the application without redeployment of the network or forking.

10. Inefficient: Blockchains, especially those using Proof of Work, are highly inefficient. Since mining is highly competitive and there is just one winner every ten minutes, the work of every other miner is wasted.

11. Storage: Blockchain ledgers can grow very large over time. The Bitcoin blockchain currently requires around 200 GB of storage. The current growth in blockchain size appears to be outstripping the growth in hard drives and the network risks losing nodes if the ledger becomes too large for individuals to download and store.

12. Scalability: It is one of the biggest drawbacks of blockchain technology as it cannot be scaled due to the fixed size of the block for storing information. The block size is 1 MB due to which it can hold only a couple of transactions on a single block.

Conclusion

Here we learnt about the basics of blockchain technology, how it is gaining popularity lately which makes it vital for us to understand the various advantages that this technology has to offer and also, the limitations that it currently faces.