Blockchain Advantages and Disadvantages
Blockchain potential seems to be almost limitless, and an increasing number of businesses are investigating novel blockchain use cases. Many people feel that blockchain technology has the potential to alter trade and the economy. Here are some of the benefits and drawbacks of blockchain technology.
The Benefits of Blockchain
The benefits of implementing blockchain include increased user privacy, transactional security, cheaper costs, and other benefits.
A public blockchain employs open-source code that is available to everyone with the requisite hardware. The technology of the blocks themselves, which are permanently connected together on a chain, allows for increased visibility for all parties involved, which may assist in peer-to-peer verification and fraud prevention.
Users often pay a charge in conventional transactions such as using credit cards to make payments. Eliminating third-party verification equals cheaper transaction costs. The implementation of smart contracts has the potential to minimize both time and real fees.
The use of thousands of computers on the blockchain network to authenticate and approve transactions almost eliminates the possibility of human mistakes. This results in more accurate data capture.
Aids in the prevention of hacking
Because all data is protected via peer-to-peer verification rather than a single authority, decentralization makes it more difficult to alter with any individual block of data. This self-policing, so to speak, helps to the blockchain’s security.
Blockchain has the ability to offer a financial alternative for individuals who are unbanked (a major issue in many developing countries) as well as a means of securing personal information for inhabitants of countries with unstable governments.
The barriers to blockchain development and acceptance are not just technological — particularly for firms attempting to modify their current processes — but also, in many circumstances, regulatory.
Concerns about sustainability
Because blockchain depends on enormous networks of super-powerful computers for nearly any activity (for example, bitcoin mining), the technology often consumes significant quantities of energy, which many say is hazardous to the environment. Crypto mining, in particular, that depends on a “proof of work” mechanism is highly wasteful, using amounts of energy equivalent to those used by certain nations.
Mining expenses (without hardware) may be as high as $7,000 per coin, assuming power costs $0.03$0.05 per kilowatt-hour. Miners who are paid with coins for their work may recover those expenditures, but it is a consideration for many others.
Although blockchain may accelerate transactions, it may not be as quick as older systems (such as credit cards), which can handle thousands of transactions per second.
The security and anonymity that are trademarks of blockchain technology, in effect, cut both ways, since both legitimate and illicit activities may benefit from these advantages. Indeed, blockchain has a history of being utilized in criminal networks such as the Silk Road, which is considered part of the dark web.
Regulation is changing.
Blockchain technology and its many uses, particularly cryptocurrencies, are in a state of flux as governments and corporations work to develop new laws and rules, as well as best practices. This is changing, however, as financial institutions and other organizations begin to accept cryptocurrencies as a valid method of payment and investigate new applications for blockchain technology.