Benefits of blockchain
In most cases, blockchains are designed as decentralized databases that function as distributed digital ledgers. A blockchain records and stores its data in blocks. Every time an operation occurs, a block is added to the blockchain after verification in chronological order. Blocks are linked with each other through cryptographic proofs. All updates to the entire network are shared among the participants. Each block is time-stamped and cannot be deleted. This indicates authentication and verification of the data. The advent of blockchain technology brought many benefits in many different industries, providing greater security in trustless systems. However, its decentralized nature also brings some downsides. Let’s dig deeper into this article to find out.
Advantages of blockchain
Blockchain offers better security
Blockchain is far more secure than any other record-keeping system. Every transaction is encrypted and linked to the previous block. In a blockchain, a network of computers coming together to verify a block. If valid, this block is then added to a ledger, which forms a ‘chain’. For this reason, it is impossible to alter a blockchain once formed. The immutable nature of blockchain makes it safe from duplication and hacking. Its decentralization offers a unique quality of ‘trustless’. Parties do not need trust to transact safely.
Blockchain increases efficiency
The decentralization of blockchain removes the need for middlemen in many processes for fields (payments, real estate, etc). Unlike traditional financial systems. Blockchain enables p2p cross-border transfers to facilitate faster transactions. This increases the efficiency of property management processes with a unified system of ownership records and smart contracts.
Blockchain improves traceability
Every time a transaction of goods is recorded on a blockchain, an audit trait is present to trace where the goods came from. It not only helps improve security and prevents fraud in exchange-related business operations, but it also helps verify the authenticity of the traded assets. For example, medicine companies can use blockchain to manage the supply chain from manufacturer to distributor, or in the art industry to provide irrefutable proof of ownership.
Blockchain offers greater transparency
Blockchain transaction ledger for public addresses is open to view. In incorporate and financial systems, blockchain adds an unprecedented layer of accountability, keeping each sector of the business accountable for acting with integrity towards corporate growth, communities, and customers.
Disadvantages of blockchain
The Proof of Work consensus algorithm that protects the Bitcoin blockchain has proven to be very effective over the years. However, there are a few potential attacks that can be executed against blockchain networks, and 51% of attacks are among the most discussed attacks. Such an attack can happen if an entity manages to control more than 50% of the network’s hash power, they would disrupt the network by intentionally excluding or modifying the order of transactions.
However, as the network grows, security will increase and it is very unlikely that miners will invest large amounts of money and resources to attack because blockchain rewards are better if miners act honestly. Additionally, a successful 51% attack can only modify the most recent transactions for a short period of time because blocks are linked via cryptographic proofs (changing older blocks will require invisible computational power). Additionally, today’s blockchains are very flexible and will quickly adapt as a response to an attack.
Another downside is that once data has been added to the blockchain, it is virtually impossible to modify it. While stability is one of blockchain’s advantages, it’s not always good. Changing blockchain data or code is often very strict and requires a hard fork. Once there, a chain will be discarded and a new chain is accepted.
It’s a fact that the Blockchain ledger grows huge over time. For example, the Bitcoin blockchain currently requires around 200 GB of storage. The growth of blockchain size appears to be outpacing the growth in hard drives. In addition, the network risks losing nodes if the ledger becomes too large for individuals to download and store.
Despite the downsides, blockchain technology presents a number of unique benefits, and it will definitely be here for the long term. We still have a long way to go to mainstream adoption, but many industries are embracing the advantages of the blockchain system. In the next few years, we will likely see businesses and governments experimenting with new applications to find out where blockchain technology offers the most value.
A recent example is TomoChain. They have officially cooperated with Vietnam’s Ministry of Education and Training to architect & utilize the NQA system for millions of Diplomas on their Blockchain, handling an entire nation’s demand for education.