What Are the Advantages and Disadvantages of Blockchain?

Many Blockchain networks are designed as decentralized databases that operate as a distributed digital ledger. These Blockchain ledgers record and store data in blocks that organize them in a chronological order linked by cryptographic evidence. The creation of blockchain technology brings with it many advantages for various lines of business by offering increased security in a trustless environment. However, there are also some disadvantages created by its decentralized structure. For example, the efficiency of Blockchain networks is more limited and requires more storage capacity than traditional centralized databases.

 

ADVANTAGES

Distributed Technology

Because the blockchain data is kept in thousands of devices in the distributed node network, the system and data are very strong against technical failures and malicious attacks. Each network node can make and store a copy of the database. In this way, there is not a single point of failure, so the fact that a single node is offline does not affect the security or operation of the network. In contrast, most traditional databases rely on one or more servers, making them more vulnerable to technical failures and cyber attacks.

 

Stability

Confirmed blocks are almost impossible to recover, but once data is saved on the Blockchain, it is extremely difficult to change or remove it. This feature makes Blockchain a very suitable technology for storing financial records or other data that requires audit trails because every change made to the Blockchain is tracked and recorded in a distributed and public ledger that cannot be changed.

For example, a business can use Blockchain technology to prevent its employees from committing fraud. In this scenario, Blockchain can provide a secure and immutable record of all financial transactions made within the company. This makes it very difficult for an employee to conceal suspicious monetary transactions.

 

Non-Trust-Based System

In most traditional payment systems, transactions are based not only on the two parties involved, but also on an intermediary such as a bank, credit card company, or payment provider. This is not necessary when using blockchain technology because the distributed network of nodes validates transactions using a process called mining. For this reason, Blockchain is often referred to as a “non-trust” system. Thus, the Blockchain system eliminates the risk of relying on a single organization and also reduces overhead and transaction fees by not using intermediaries or third parties

 

Disadvantages

51% Attacks

The Proof of Work consensus algorithm that protects the Bitcoin Blockchain has proven its effectiveness over the years. However, there are several potential attacks on Blockchain networks, and the 51% attack is the most discussed. Such an attack can be carried out with a unit in control of more than 50% of the network hashing power, and can also result in the malicious exclusion or reordering of transactions.

 

While theoretically possible, there has never been a successful 51% attack on the Bitcoin blockchain before. As the network grows, so does security, and since the rewards for miners will be higher as long as they work honestly, it is highly unlikely that they will use large amounts of money and resources to attack Bitcoin. Other than that, a successful 51% attack can only change the most recent transactions, since blocks are linked by cryptographic proof (modifying older blocks requires inaccessible computational power). Also, the Bitcoin Blockchain is very resilient and can adapt quickly to any attack.

 

Changing Data

Another negative aspect of Blockchain systems is that once the data is added to the Blockchain, it is very difficult or almost impossible to change. While immutability is one of the biggest advantages of blockchain, it's not always good. Changing blockchain data or code is very challenging and often requires a hard fork, where a chain is abandoned and a new one is started.

 

Private Keys

Blockchain uses public key (or asymmetric) cryptography to allow its users to own cryptocurrencies (or any other Blockchain data). Each Blockchain account (or address) has two keys; a public key (shareable) and a private key (kept secret). Users need their private keys to access their assets, meaning they treat users like their own bank. If a user loses their private key, they have lost their money and there is nothing that can be done to fix it.

 

Inefficient

Blockchains, especially those using Proof of Work, are considered highly inefficient. Because mining is very competitive and there is only one winner every ten minutes, the work of all other miners will be wasted. It is known that the amount of resources used by the Bitcoin network has increased drastically in the last few years as miners constantly try to increase their computing power to increase their chances of finding a valid block hash. It is known that this network currently consumes more energy than many countries such as Denmark, Ireland and Nigeria.

 

Storage

Blockchain ledgers can become very large over time. The Bitcoin blockchain currently needs around 200GB of space. The growth in blockchain sizes exceeds the growth in fixed memory, and the network can risk losing nodes if the registry becomes too large for individuals to download and store.

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