Advantages and Disadvantages of Blockchain
Blockchain can be defined as a distributed ledger technology for storing information in such a manner that makes it tamper-proof. It works on protocols designed to make an agreement among different parties who do not trust each other so that they can work together to achieve different purposes which benefit the whole group. Blockchain technology first got its recognition when Satoshi Nakamoto published a research paper in 2008. The title of the research paper was ” A peer-to-peer electronic cash system”.
This article focuses on discussing the advantages and disadvantages of Blockchain Technology.
Advantages of Blockchain Technology:
This section discusses the advantages of blockchain technology.
- 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.
- 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.
- Permanent: Records or information which is stored using blockchain technology is permanent means one needs not worry about losing the data because duplicate copies are stored at each local node as it is a decentralized network that has a number of trustworthy nodes.
- 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.
- Tighter Security: Blockchain uses hashing techniques to store each transaction on a block that is connected to each other so it has tighter security. It uses SHA 256 hashing technique for storing transactions.
- Immutability: Data cannot be tampered with in blockchain technology due to its decentralized 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.
- Transparency: It makes histories of transactions transparent everywhere all the nodes in the network have a copy of the transaction in the network. If any changes occur in the transaction it is visible to the other nodes.
- Efficiency: Blockchain removes any third-party intervention between transactions and removes the mistake making the system efficient and faster. Settlement is made easier and smooth.
- Cost Reduction: As blockchain needs no third man it reduces the cost for the businesses and gives trust to the other partner.
Disadvantages of Blockchain Technology:
This section discusses the disadvantages of blockchain technology.
- 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.
- 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 utilization.
- Energy Consuming: For verifying any transaction a lot of energy is used so it becomes a problem according to the survey it is considered that 0.3 percent of the world’s electricity had been used by 2018 in the verification of transactions done using blockchain technology.
- 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 speed up to be used for industrial purposes.
- Legal Formalities: In some countries, the use of blockchain technology applications is banned like cryptocurrency due to some environmental issues they are not promoting to use blockchain technology in the commercial sector.
- Storage: Blockchain databases are stored on all the nodes of the network creates an issue with the storage, increasing number of transactions will require more storage.
- Regulations: Blockchain faces challenges with some financial institution. Other aspects of technology will be required in order to adopt blockchain in wider aspect.