Advantages and Disadvantages of Blockchain

Most blockchains are designed as a decentralized database that functions as a distributed digital ledger. These blockchain ledgers record and store data in the form of blocks, which are organized chronologically and linked through cryptographic proofs. The birth of blockchain technology has brought many advantages to various industries and can provide higher security in a trustless environment. However, its decentralized nature also brings some disadvantages. For example, compared to traditional centralized databases, blockchain has limited efficiency and requires increased storage capacity.


advantage


distributed

Since blockchain data is typically stored in thousands of devices on a distributed network of nodes, the system and data are highly resistant to technical failures and malicious attacks. Each network node can replicate and store a copy of the database, so there is no single point of failure, that is, a single node going offline will not affect the availability or security of the network.

In contrast, many traditional databases rely on one or more servers and are more vulnerable to technical failures and cyber attacks.

stability

Confirmed blocks are unlikely to be revoked, which means that once data is registered in the blockchain, it is difficult to delete or change. This makes blockchain an excellent technology for storing financial records or any other data that requires an audit trail, as every change is tracked and permanently recorded on a distributed and public ledger.

For example, businesses can use blockchain technology to prevent fraudulent behavior by employees. In this case, blockchain can provide a secure and stable record of all financial transactions that occur within the company. This will make it more difficult for employees to hide suspicious transactions.

Trustless system

In most traditional payment systems, transactions rely not only on the two parties involved in the transaction, but also on intermediaries such as banks, credit card companies, or payment providers. If blockchain technology is used, intermediaries are no longer needed because a distributed network of nodes verifies transactions through a process called mining. For this reason, blockchain is often referred to as a "trustless" system.

Therefore, the blockchain system eliminates the risk of trusting a single organization and also reduces overall costs and transaction fees by cutting out intermediaries and third parties.


shortcoming


51% Attack

The proof-of-work consensus algorithm that secures the Bitcoin blockchain has proven to be very effective over the years. However, the blockchain network can be subject to certain potential attacks, with the 51% attack being one of the most discussed. This attack can occur if a single entity manages to control more than 50% of the hashing power, ultimately allowing a malicious attacker to disrupt the network by intentionally excluding or modifying the order of transactions.

While theoretically possible, there has never been a successful 51% attack on the Bitcoin blockchain. As the network grows in size, security increases, and miners are less likely to invest large amounts of money and resources in attacking Bitcoin, as the rewards for acting honestly are higher. In addition, a successful 51% attack can only modify recent transactions for a short period of time, as blocks are linked via cryptographic proofs (changing older blocks would require unimaginably large amounts of computing power). Furthermore, the Bitcoin blockchain is highly resilient and can quickly adapt to attacks.

Data modification

Another disadvantage of blockchain systems is that once data is added to the blockchain, it is difficult to modify it. Although stability is one of the advantages of blockchain, stability is not always good. Changing blockchain data or code is usually very demanding and generally requires a hard fork, which is to abandon one chain and adopt another.

Private Key

Blockchains give users ownership of their cryptocurrency units (or any other blockchain data) through public key (or asymmetric key) cryptography. Every blockchain address has a corresponding private key. While addresses can be shared, private keys are kept secret. Users need private keys to access their funds, meaning they act as their own bank. If a user loses their private key, the money is effectively lost and there is nothing they can do about it.

Inefficiency

Blockchains, especially those using proof-of-work, are very inefficient. Since mining is highly competitive and there is only one winner every ten minutes, the efforts of all other miners are in vain. As miners continue to try to increase their computing power, they have a greater chance of finding a valid block hash. The resources used by the Bitcoin network have increased significantly in the past few years, and it currently consumes more energy than many countries, such as Denmark, Ireland and Nigeria consume even more.

storage

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


Summarize

Despite its shortcomings, blockchain technology also has some unique advantages that mean it is here to stay. We still have a long way to go in terms of mainstream adoption, but many industries are beginning to take the advantages and disadvantages of blockchain systems seriously. In the coming years, businesses and governments are likely to experiment with new applications and explore where blockchain technology can add the most value.