Pros and cons of blockchain technology

Pros and cons of blockchain technology

Since its appearance and boom in 2018, blockchain technology has become an indispensable extension of technological operations for many prominent businesses. And blockchain’s security features and impeccable transparency make it stand firmly on the digital ground. 

The traces of blockchain technologies are seen almost in every possible industry. Whether insurance, finance, gaming, or supply chain, you can find a thick blockchain print in their digital payment or automated tech services. That’s why with decentralized platforms becoming more and more mainstream every following day, it’s essential to be aware of the advantages and disadvantages of blockchain. 

In this article, we uncover the core pros and cons of blockchain technology and how all of these impact the quality of business operations. 

What is Blockchain Technology: Overview

Simply put, a blockchain is a decentralized platform using a peer-to-peer network to facilitate the process of recording financial transactions and storing information in a decentralized database. Anything of value can be stored and traded on blockchain network nodes reducing security risks and cutting costs for all parties involved.

Furthermore, most organizations using this technology also conduct a blockchain audit, which adds an extra layer of security and trustworthiness to its services.

As we know, business runs on information. So the faster and more accurately it’s received, the better. And for this purpose, a blockchain network is the perfect solution because it provides instant, shared, and fully transparent information stored on a distributed and immutable ledger that can be accessed by only a couple of permissioned network members.

This decentralized manner of operations makes it possible for all members to share a single view of the truth and access all details of a transaction end to end.

Here are the key elements of a blockchain:

#1 Block 

Blockchain consists of blocks. Every single block includes a cryptographic hash of the previous block, blockchain transactions data, and timestamp.

#2 Distributed Ledger Technology 

Each network participant has full access to the distributed ledgers and transactions immutable record. Through this shared ledger, all transactions are recorded just once, avoiding the duplication of effort that’s very common in traditional business networks. 

#3 Smart Contract

A smart contract is an indispensable blockchain component for speeding transactions through automatic execution. Smart contracts can easily define all terms and conditions and approve transactions automatically after they are met. 

Blockchain Technology: Pros and Cons

Knowing the main blockchain advantages and disadvantages can be the way out if you are in a dilemma about whether or not to adopt blockchain technology and integrate it into your business operations.

Blockchain Advantages:

  • Distributed Blockchain System: As blockchain data is generally stored in thousands of devices on a distributed network of nodes, the data and the system are highly resistant to malicious attacks. Each network node can replicate and then store a copy of the database eliminating even a single point of failure.
  • Greater Transparency: As blockchain works distributed, all network participants access the same documentation instead of individual copies. This distributed version can only be updated via consensus protocols, which means all parties should agree. Changing a single transaction record will require altering all previous records and colluding the entire network. Decentralization makes storing transaction records immune to corruption or takeovers as opposed to traditional finance industry units.
  • Accounting: Blockchain enables you to record and store data, eliminating human error and tampering. The transaction data is verified every time they pass from one blockchain node to the next. The process will leave a highly traceable and irreversible audit trail along with the guaranteed accuracy of your data records.
  • Faster Transactions: One of the main advantages you get is blockchain technology speed of a transaction increased. Due to transactions’ faster processing, blockchain takes the overall banking process to another level of functionality. For example, the Bitcoin network, which uses blockchain technology, allows users to transfer funds globally with affordable and secure options. 
  • Data Integrity: With the adoption of blockchain technology, users can rest assured as all transactions will be executed following the protocol commands with no third-party interference, like a financial institution. Due to security reasons, the platform was created so that any block or even a transaction added to a chain can’t be altered.
  • Secure Transactions: Every user who begins using blockchain is provided with an individual identifier connected to his account. This is a practical way to ensure that the owner himself makes the transactions. Moreover, block encryption makes it challenging for hackers to disturb the chain’s traditional setup.
  • Stability: It’s very unlikely for confirmed blocks to be reversed, which means that since data has been added to the blockchain, it becomes extremely difficult to change or remove. It makes blockchain a great way of storing financial records because every modification is permanently recorded on the distributed and public ledger.

Blockchain Disadvantages:

  • 51% Attacks: Although blockchain is considered a disruptive technology, it is not entirely secure. It is vulnerable to a few potential attacks, and the 51% attack is one of them. Such an attack can occur if one entity successfully gains control of over 50 percent of the network hashing power, allowing them to disrupt the network.
  • Private Keys: Blockchain networks use public key cryptography to allow users to control their crypto units. Each blockchain address has its private key. Users can access their funds through private keys, which enables them to act as a bank.
  • Storage: Because blockchain databases and all your data are kept on all the nodes of a network, it creates a storage issue. Today’s growth in blockchain size appears to overtake the growth in hard drives. As such, the network risks losing nodes if the blockchain ledger becomes too large for downloading or storing data. 
  • Legal Formality: Currently each part of the world, modern money is created and controlled by a centralized server. As such, the platform becomes a hurdle for the Bitcoin blockchain to be accepted by preexisting financial institutions.
  • Large Energy Consumption: The power consumption is relatively high in blockchain, which can become a great issue in the future. Moreover, creating nodes is time-consuming, as every time you add the next block in the chain, you need to compute nonce values several times.

FAQ Section 

What are some cons and pros of blockchain technology?

Blockchain has many features that can be divided into pros and cons categories. Some major advantages of using blockchain are its decentralized nature, integration process, speed of online transactions, and time-consuming process.
As for the disadvantages of blockchain technology, the main ones include legacy systems, energy consumption, storage problems, and cost. 

What are some examples of companies using blockchain?

Today blockchain is a part of many major fields and industries, including finance, banking, insurance, retail, healthcare, virtual currencies, etc. So the number and examples of companies and firms integrating the blockchain solution are limitless. 

How long does it take to create a blockchain?

It mainly depends on various factors, choosing between proof of stake and proof of history as the most important.
With POW, multiple algorithms need to be computed. As for POS, the next block creator is picked through a lottery system according to the size of their holdings.