Blockchain Technology – 20 Main Pros and Cons
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What is it? How is it different to Cryptocurrency?
Blockchain technology is a marvel. It is a pinnacle of what the human mind is capable of to promise a better future. It can ease our lives by making our business transactions, official and government matters, logistic supply chain a lot more reliable.
This technology’s potential is limitless because we can achieve all the above goals in various implemented systems. Blockchain requires administrative, legislative, and government support for the country it is implemented in to pave the way for success.
Defining Blockchain Technology
In a nutshell, Blockchain is a new way of digital transactions that is incorruptible. You can program it to record not only finances but anything that can be deemed of value.
Blockchain is a type of database. It is prevalent because it solves one of the significant issues for most people, i.e. financial management, without spending double for an intermediary. Blockchain resolves this problem by creating blocks with different information.
Whenever a new block is added to the system, it is entirely transparent to all users, and it is impossible to alter, change, or corrupt these blocks.
The entire chain is secure from hackers. To compromise the security and intrude into the system, hackers would require tremendous processing power to compromise every block in the chain, making it virtually impossible. People who calculate new hash values for the blocks are termed as “miners.”
Difference Between Cryptocurrency and Blockchain
You will always get to hear about Blockchain when people talk about cryptocurrency and vice versa. Many people confuse them for the same thing. However, that is not the case. Cryptocurrency is based upon the decentralized system of Blockchain, but they are different.
Blockchain technology is also used in many other fields and areas, including logistic management systems, medical institutes, etc. By applying Blockchain, users can optimize workflows and system quality.
Two main algorithms govern the blockchain mining process.
Proof of Work
The Proof of Work algorithm ensures security. Mining refers to the process in which a node that wants to enter the chain has to solve a computational challenge imposed by the proof of work.
Proof of Stake
The proof of stake algorithm is based upon minting. The minting process is less computationally expensive than mining. Trusted establishments couple together while adding records in the Proof of Stake protocol and voting to whether accept or reject a new block request.
One of the most popular blockchain-based platforms is Ethereum. It has such flexibility that anyone can use it. It is known for maintaining a stringent protocol for security to prevent eavesdroppers and malicious attackers. The users generate scripts stored in the Blockchain known as Smart contracts alongside decentralized applications. Ethereum Virtual Machine powers this entire platform.
Structure of Blockchain
Blockchain technology comprises linear block that is added to the chain regularly. Any information can be present in each block; however, the timestamp, transaction, and the hash are three key components that are always included in any variation of this technology.
Every block has the hash value of the previous block that is generated automatically. The automation makes it impossible to alter the data inside of the hash value.
Each consequent block enhances the block’s verification before it, making the entire chain extraordinarily safe and reliable. Clearly, the more the blocks, the higher the security.
Another key feature is the timestamp with each block. It shows the time of block inception. The entire process is transparent. All users can view the transaction information at any point in time.
Pros of Blockchain Technology
Blockchain Technology Use Cases
Organizations can utilize blockchain technology in many industrial areas, in addition to the IT sector. Tech giants are providing and implementing the technology to improve the current workflows with optimization and capacity building. Some use cases of Blockchain technology include the following:
1. Government Management Systems
Government management is one of the most tedious and laborious jobs. With the influx of all the applications and sending them to respective departments, it becomes difficult to track and provide a decent follow-up. One proposed system promises to bring together legal and economic activities. Another is ID2020 that ensures identity proof for people who do not possess official documents.
2. Fair Electoral System
Election commissions can utilize blockchain technology for digital voting. Users can ensure that their vote is transparently and anonymously casted for the desired person or object. Estonia uses an electronic residency system to identify its citizens and business people.
3. Creative Ownership
Blockchain technology is used to create a platform that ensures artists and creative people get proper authorship for their creations. Digital editions can be ascribed a unique identity that can verify the authenticity of the claims.
4. Secure Medical Records
Hospitals can use blockchain technology to develop a transparent system that provides accurate medical records for each patient admitted into the institution.
5. Supply Chain Management
Blockchain technology can remove frauds from the supply chain process. Supply chain losses are quite detrimental to a company. We can ensure the location and specification of each product that is transported.
Since we have discussed this technology’s basic working, let us now understand the advantages and disadvantages of this technology.
6. No External Intervention
Blockchain is a decentralized system free from any third-party intervention or external interference. There is no central authority to enforce policies over this system. The system can seamlessly work without an intermediary giving the executive decision authority to the members of this technology.
7. Enhanced Security
With each database, there is a risk of external hackers and intruders, making it vital to protect it. Falling into the wrong hands, the breach can wreak havoc on the organization. Securing the database with network security protocols is a tedious job, and there is always a margin for error and the heavy costs attributed to the process. Blockchain technology resolves this problem with the help of proof of validity and the ability to authorize constraints. Independently, users can verify the transactions.
Each record in the chain along with its data record is transparent to every member. It can neither be altered nor deleted. Resultantly, this technology has transpired to become one of the most secure, trustworthy, and unalterable system of transactions out there. The trust is based upon two people who do not even know each other with each transaction adding to the security. No one can do anything nonsensical due to transparency.
Each transaction attributed to the system is immutable. No one can delete or change it. Each transaction is copied to every other computer in the chain, making it indestructible. You can blindly trust blockchain technology to ensure backup and safety of your data.
10. Free From Hackers
It is impossible to hack Blockchain. The computing power required to do so is not yet available. To compromise a blockchain-based system, the hacker will have to intrude every chain in the design, making it virtually impossible to do so. The difficulty increases with the number of computers. Fewer computers make it more prone to hacking.
Blockchain technology ensures that no problems go unnoticed. It is designed to correct and solve problems if required. It is effortless to detect a fault due to the traceability of each node in the chain. Since the information is copied from one system tot he next, any error becomes enhanced.
12. Distributed Public Ledger
Multiple ledgers maintained by organizations become extremely difficult to manage and trace. Blockchain technology relies on a public decentralized ledger that removes the clutter and makes it easy to trace any issue on a single publicly available register.
13. Faster Speed
The standard banking channels consume a lot of time to process and initialize a transaction. Blockchain technology adds wheels to this process by reducing the time to mere seconds compared to the traditional three to seven days.
Cons of Blockchain Technology
There is no such thing as a free lunch. Everything comes with its disadvantages, including this absolute marvel. Let us discuss a few significant disadvantages of this technology.
Blockchain technology is not energy efficient. It consumes a lot of energy to maintain the dynamic decentralized ledger.
Whenever a new node tries to enter the system, it communicates with other nodes. This ensures transparency, but the miners have to solve complex problems that require substantial amounts of computing, ultimately leading to energy consumption. Each node is provided with fault tolerance and zero downtime to ensure reliability.
Each transaction has to be signed with a hash. The verification of this signature is a big challenge. Identity has to be verified by decrypting, which is one of the main reasons for power consumption.
No Legacy Support
Blockchain does not provide legacy support. Nodes running on old software are not able to accept new transactions in the chain. The chain is created with the same history as the chain running on old software. This is known as a fork.
Lack of Balance
Another major problem for blockchain technology is the lack of balance between the number of nodes and each user’s cost. Costs are higher for systems that are not powerful enough to meet the criteria leading to slow transaction speed. This system can be distributed to create a fair share of the load.
This is one of the significant disadvantages of this technology. The average cost of each transaction is somewhere between 75 and 160 dollars. The main cost factor is high energy consumption. The initial capital costs of Blockchain also take a significant cut on the pocket.
Blockchain can be hacked if the attacker uses a sophisticated algorithm based upon quantum computing such as ‘Short.’ It can break the RSA encryption. Blockchain technology must devise a system to solve this issue.
Blockchain technology has revolutionized the industry with its new decentralized system free from any interference. The implementation, however, has some caveats which require attention. However, in a nutshell, the technology is up-and-coming and a safe and secure way to take our transaction game into the future.
It is up to us, the humans, to ensure that this technology is not utilized for the wrong purposes. Moreover, like nuclear technology, it can either be used to ease the lives of the used or destruct it altogether.
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