Blockchain is a distributed ledger technology (DLT) or like a book of records but it is not managed by a single person or entity, blockchain is decentralized, and this record book can be maintained and keep by anyone interested. But like other technologies what are the blockchain technology advantages and disadvantages?
In today’s technology blockchain is a revolutionary new concept so there is more and more interest in this technology.
Blockchain is the latest and most promising technology in the modern economy. Blockchain technologies can help solve many problems in the industry such as trust, security, transparency, and data processing reliability. This technology shows good and very positive results in theory but what can be said about its application?
The main advantages of blockchain technology are decentralized and distributed networks, transparency, and dependable chains, a technology that cannot be changed and destroyed. However, the main disadvantages of this technology are high energy dependence, a difficult integration process, and high implementation costs.
Blockchain Technology Advantages and Disadvantages
Blockchains are mostly designed as decentralized databases that work as a distributed digital ledgers. These digital ledgers record and store data in blocks these records are arranged in chronological order and are linked to cryptographic evidence.
The creation of blockchain technology has created multiple benefits in many industries, providing greater security in an unreliable environment. But, its nature of decentralization also has some drawbacks.
For example, compared to traditional central databases, blockchain technology has limited efficiency and requires more storage space.
Advantages of Blockchain Technology
Reliable Distribution System
Intermediaries in traditional transaction processes, such as banks, credit cards, or other services charge additional charges in the form of transaction fees. Here the biggest advantage of Blockchain technology is that all transactions are published. Total costs have also been significantly reduced.
Distributed network nodes of blockchain technology confirm each step of the transaction and replace the needs of intermediaries. The mining process is a process where miners continuously verify transactions of all kinds for 24 hours.
As such, blockchain technology never fails to track transactional properties and is almost invulnerable to fraud. Intermediary elimination will reduce the risk of depending on a single institution and also reduce costs.
No Government Interference
Blockchain technology can more effectively manage large systems controlled by today’s government. It can always create, store, and maintain information for each transaction.
Neither the government nor any financial institution has control over virtual currencies based on blockchain technology. Often Government intervention has led to a decrease in the value of currencies, and the recent Zimbabwean dollar is a great example of this.
Regardless of the country and currency, one of the main problems governments have, when they interfere too much with their currency, print out too many currency notes in a short period of time, and end up experiencing inflation or hyperinflation.
Because blockchain is an online decentralized digital ledger or book, it is impossible for governments to interfere and take action against cryptocurrencies.
One of the most important advantages of blockchain technology is its durability. Now companies depend on a system that has higher retention in their services. Once data is stored in a blockchain ledger, it is difficult to delete or change it. Such a stable system can make the process easier than ever.
Data stored on the blockchain is visible and accessible to those with authorized access. Accuracy and paperless systems provide greater transparency in the transaction process. Because you can perform audits of Bitcoin transactions, it is easy to keep track of previous records.
For different members there is no need to create multiple books, a single book or ledger is still distributed to all members with the least activities of fraud.
Immediate Payments at Reduced Costs
Blockchain transactions are fast but usually cheaper. Single record-keeping of this technology replace traditional heavy paper transaction step processes. No third-party intervention is required in the transactions and the transactions process is completed with trust and on time.
There is no complex documentation process and transactions are performed with minimal errors. Digital currencies help to streamline processes faster and more economically.
Improved Financial Security and Efficiency
As mentioned above, the process of blockchain is faster and more reliable than traditional processes. No third-party intervention is blockchain’s main advantage which leads to good financial productivity. Such a system allows users to take advantage of a transaction process that saves money and time.
People are dependent on the blockchain because it is not dependent on a single organization throughout the transaction process. When a transaction is received, the system provides data to multiple open networks instead of a single server, as in traditional business systems.
This will prevent hackers from committing cyber crimes because transactions are shared openly.
Disadvantages of Blockchain Technology
Blockchain technology is truly a blessing for the new world. But besides the advantages, this technology has some disadvantages also. Let us take a look at the disadvantages of blockchain technology.
Issues in Private Keys
Blockchain addresses are consisting of individual unique private keys. This means that anyone with a license to use it has a private key to perform the operation. Encryption handles the final history of the public key string. This public key address is distributed to individuals to whom they have access via a private key, as described above.
If you lose the private key, the process will fail. There is nothing you can do to save money or other transactions. These private keys are like the administration of our bank. Due to problems with private keys, blockchain technology is a big failure.
Cryptocurrencies based on blockchain technology are highly volatile. One great example is, of course, the variable price of bitcoin, which changes daily.
One of the reasons for this fluctuation is that distributed blockchain technology and virtual currency which are new brands in the market.
This means that governments, companies, and other groups that accept or do not accept cryptocurrencies will inevitably be affected by fluctuations. This is a large drop, and such a move distracts people who are considering investing in bitcoins or other cryptocurrencies.
So knowing the blockchain technology advantages and disadvantages is necessary for a user to decide whether to invest in cryptocurrency or not
Many people claim that bitcoin is the best type of cryptocurrency and also blockchain technology. However, it is said that only about seven transactions per second can occur on the blockchain network. As we have discussed, the system is distributed and the identification of transactions under each node is very important.
When looking at scaling levels, the transaction number per nod is limited. Users sometimes need to spend a few hours to complete their transactions.
It is said that it is not practical to increase the number of active users according to the speed of the blockchain transaction. Traditional banking procedures are faster and more scalable compared to blockchain.
Blockchain technology provides maximum security over all other business models. However, it is not completely safe and according to the study, Blockchain technology faces 51 percent attacks.
Sometimes 51 percent of attacks are so lethal that intruders can easily control the system. These networks also affect dual use.
The security threat is exacerbated by the anonymity of the bitcoin system. Anonymity is valued, but it is difficult to identify the perpetrators of illegal transactions. Low transparency is a long-standing weakness of blockchain technology.
Change Information is Difficult
With blockchain technology, it is difficult to add or edit data once it is saved. These are considered to be the main disadvantages and advantages of blockchain technology. Due to the disadvantages, the data transcription code needs to be modified and involved in an extensive process.
Sometimes excessive stability can adversely affect the system. The main disadvantages of blockchain technology are unchanged files/records and demanding editing processes.
So these were the blockchain technology advantages and disadvantages which we discuss above. Some believe that blockchain will help create a cryptocurrency that will be a potential competitor to the precious metal, while others believe it is not more than a bubble and will soon explode and nothing else.
Blockchain technology has advantages and disadvantages, such as a double-sided coin. So far, many mainstream sectors benefit from such a powerful and reliable technology. But some are interested in the weaknesses of blockchain technology and are thinking about its application. After all, it’s all up to you to use this technology or not?