What are the advantages and disadvantages of blockchain technology?

blockchain technology

Most blockchains are designed as a decentralized database that functions like a distributed digital ledger. These blockchains record and store data in blocks organized in chronological order and linked by cryptography. The development of blockchain technology has brought many benefits in a variety of industries, increasing security in trustless environments. However, its decentralized nature also has its drawbacks. For example, compared to traditional centralized databases, blockchains have limited efficiency and require greater storage capacity. Below one can find some advantages and disadvantages of this technology, that also impacts the Bitcoin price for example. 

Advantage: Distributed

Since blockchain data is often stored in thousands of devices on a distributed network, the system and data are highly resistant to technical failures and malicious attacks. Each network node is able to replicate and store a copy of the database and therefore there is no point of failure: a single network point going offline does not affect the availability or security of the network as a whole. In contrast, many conventional databases rely on one or a few servers and are more vulnerable to technical failures and cyber attacks. This can influence the Ripple price quite a bit. 

Disadvantage: Private keys

Blockchain uses public key or asymmetric cryptography to give users ownership of their cryptocurrency or other blockchain data. Every blockchain account or address has two corresponding keys: a public key which can be shared and a private key which must be kept secret. Users need their private key to access their funds, which means they act like their own bank. In fact, if a user loses his private key, the money is lost and there is nothing left to do with it. He or she may also lost their Cardano coins, which is a shame as the Cardano price continues to rise.

Advantage: Reliable system

In most traditional payment systems, transactions depend not only on the two parties involved, but also on an intermediary, such as a bank, credit card company or payment provider. When using blockchain technology, this is no longer necessary as the distributed network of nodes verifies the transactions through a process known as mining . For this reason, the blockchain is often referred to as a trustless system. Therefore, a blockchain system solves the risk of trust in an organization in one go and also lowers the total costs and transaction costs by eliminating the need for intermediaries and third parties.

Disadvantage: Inefficient

Blocks, especially when using Proof of Work, are very inefficient. Since mining is highly competitive and there is only one winner every ten minutes, every other miner’s work is wasted. As miners are constantly trying to increase their computing power so that they have a greater chance of finding a valid block hash, the resources used by the Bitcoin network have increased significantly in recent years and the network is currently consuming more energy than many countries, such as Denmark, Ireland, and Nigeria.

Advantage: Stability

Confirmed blocks are very unlikely to be retrieved, which means that once data is registered in the blockchain, it is extremely difficult to delete or change them. This makes the blockchain a great technology for storing financial data or other data that requires a paper trail as every change is tracked and permanently recorded on a distributed and public ledger. For example, a company could use blockchain technology to prevent fraudulent behavior by its employees. In this scenario, the blockchain can provide a secure and stable record of all financial transactions that take place within the company. This would make it much more difficult for an employee to hide suspicious transactions.

To Top

Pin It on Pinterest

Share This