Pros and Cons of Blockchain Technology - PerfectionGeeks
The internet has opened up new avenues for collaboration between individuals and businesses. This can be seen in the growth of online communities that allow users to create, self-govern, and thrive on their terms.
Blockchain technology is a new way to make it work. It allows people to share information and collaborate on the same platform.
Blockchain has many benefits, but what are the key factors that make it so important? It is managed by multiple participants, known as Distributed Ledger Technology (DLT).
Blockchain technology is disruptive in many ways, but it's still a better option than traditional database systems. It is not controlled by any single entity, so there are no chances of it being abused or suppressed. You might be considering Blockchain as a business owner. However, you remain unsure.
Let me help you get out of this bind by highlighting the pros and cons of Blockchain. Let's dive in and find out some of the amazing Blockchain benefits as well as some drawbacks.
10 Major Benefits of Blockchain Technology
Let's take a look at the top 10 blockchain benefits today, and see why individuals and businesses are so eager to adopt it.
Blockchain's greatest strength is its ability to enable decentralized trust. Because no one party can manipulate transactions or view their personal information, it allows people around the world to collaborate.
Blockchain-based apps are not always secure. That depends on how skilled developers are at creating secure codes. However, it does mean that there are more security options than conventional applications. Blockchain can help you feel more secure about your identity and data.
Only share what you need; a Blockchain application development company can't see your data without permission. It is also easier to feel confident in getting paid for the services you provide. Blockchain makes payment instantaneous. There's no need for checks or money orders to clear for days.
Operation Very Low Cost
Blockchain's greatest strength is its low cost of operation. Blockchain does not require servers to be maintained as it lacks a central authority. This drastically reduces overhead costs.
Decentralized payments and bank fees are eliminated. Transactions are peer to peer and do not require a third party. No third party can enforce or monitor contracts. Any documents, agreements, or transactions can be embedded into a blockchain.
Lastly, blockchains provide an additional layer of security against identity theft, as they are encrypted.
No One Point of Failure
Blockchain technology is a single point of failure. Hackers could easily gain access to your database or server and wipe out your entire network.
This means that you can lose all your data if files are stored on a single network. Blockchain technology is distributed so hackers cannot hack into one network and affect all connected accounts.
Blockchain is more secure than regular networks, as private keys can be longer. A typical password can be 8 characters (including numbers) but can be up to 100 characters with blockchain. It is almost impossible for hackers to crack them using brute force methods like guessing passwords.
Increased Security & Confidentiality
Blockchain technology is more secure than central systems because it can be distributed over a large network of computers.
According to the Economist, it's difficult to alter records once they are there. Every attempt to alter a record will be detected immediately, as copies and digital signatures can automatically be compared.
Your data will therefore be safe from hackers. Because transactions cannot be traced back to an individual user, blockchain networks offer an additional layer of security. Blockchain users have the option to choose whether or not their names and email addresses are included in transactions. If a person does not want to share transaction history information, they can remain anonymous.
You can use blockchain-based services with no worries about identity thieves or advertisers monitoring your activities.
Faster Transactions
A blockchain business strategy can process transactions much faster than traditional banks. Businesses that use blockchain to replace banks can save significant amounts on fees.
Many companies have conducted research that has shown that blockchain technology could help save businesses up to $20 billion annually in bank fees by 2022.
The decentralized nature of blockchain means that it doesn't need expensive third-party verification and massive data centers. This reduces costs. It doesn't require the same number of employees.
Reduces Fraud
The incredible attributes of blockchain technology make it an ideal tool for financial institutions to reduce the risk of forgery. A digital ledger keeps track of every transaction so it is impossible for anyone to double-spend the currency.
Each block stores financial information. If there are any modifications to an existing block, the other nodes reject them.
Once your bank has confirmed that your money was transferred they cannot go back and claim they didn't receive it. You would also be able to see fraudulent activity that occurred when another node modified transactions.
Before I move on to the next point, let me give some crucial advice to companies that want to implement Blockchain in their organizations. What does that mean? It is important to hire an experienced Blockchain development company in India, as the technology is still new.
Transparent & Universal Recording System
Any transaction that occurs in a blockchain is stored in a public ledger which can be viewed by anyone. This allows anyone to see the number of coins stored at a specific wallet address but not who it belongs to.
An individual or group could have a wallet. Users can remain anonymous if they wish to transfer their Bitcoins to a different address (e.g., to a Bitcoin wallet that isn't associated with their real identity).
Even without anonymity features, blockchain tech offers more transparency than traditional payment methods such as credit cards or checks. You don't even need a bank intermediary (or permission) to see who you have paid or received the money.
Better Accessibility
Anyone can join a blockchain network if they have an internet connection and a computer. It is not controlled by any one entity, so it's open to everyone.
Anybody can modify (add information) or create new blocks (to store data), to a blockchain if they can do so. Even techno-illiterate people can have access to blockchains. Blockchains are much more accessible than traditional financial institutions such as banks and financial services because of their openness.
You should be cautious when dealing with cryptocurrency providers. You should research all options before you make any major financial decisions.
Prevents Double Spending
Network nodes verify Bitcoin transactions using cryptography. These transactions are then recorded in a distributed ledger known as a blockchain. This provides security by preventing anyone from having direct access to your funds. Bitcoin prevents double-spending (i.e. no one can spend money they don't own span>
This is why bitcoin is sometimes called fungible. Its value remains the same regardless of its physical form changing. Bitcoins, in other words, are not dependent on the financial standing of an organization for their value. Instead, they are derived solely from mathematics.
Although it may seem absurd to consider a single bitcoin identical to another bitcoin, it is true. Every bitcoin has all of its transactions history within the particular blockchain framework
You own your bitcoin forever, and no one can take it away. There is only one way to find the answer, and that's by buying bitcoins.
Seamless Integration into Existing Systems
Blockchain allows businesses to seamlessly integrate their financial systems with external networks. This can be done in two ways: Blockchain as a service (BaaS), and blockchain application platforms.
BaaS provides organizations that use cloud services with a secure connection for blockchain networks. Blockchain application platforms enable anyone to use blockchain technology, even those who do not have cloud services. Integration is easier than with other methods of accessing blockchain technology.
Blockchain as a service allows businesses to connect directly to blockchain networks. This gives them instant access to all the decentralized ledgers that exist. You don't have to choose one or the other blockchain, and you can control your data more effectively than any other method.
In addition, BaaS can be set up faster and more easily than other services. This makes it ideal for companies that need to have blockchains quickly, such as supply chain management apps.
5 Major Cons to Blockchain Technology
Scalability
Blockchain can currently only process a limited number of transactions per second. It would take eight days to complete all transactions if a platform such as Bitcoin could process Visa's maximum volume of 4,000 transactions per second. Although there are many solutions to scaling blockchains, none of them have been implemented in a meaningful way.
Security
Blockchain is a distributed ledger that can be accessed by the public. Although there are some provisions for adding privacy and encryption layers to blockchains they are not yet commonplace. Anyone can see everything you do on a Blockchain. Some users may prefer greater privacy, but this is a drawback.
Your data can also be linked to your digital identity (i.e. public keys), which could expose aspects of your private life you don't want online. People trust third-party solutions, such as exchanges, over direct blockchain transactions. This allows them to relinquish control over their assets.
Cost
The biggest problem with blockchain technology is its huge energy consumption. To get a payout, miners must solve complex math problems. This means they require powerful rigs that consume tons and lots of electricity.
Some blockchains can be very expensive to operate, especially for small businesses and individuals. You can't change your mind later. If you want your blockchain online you must pay upfront.
Competitiveness
There is a lot of hype around blockchain because so many industries are trying to use it. This can lead to unnecessary competition among businesses. It can also be detrimental to those who are trying to implement it professionally. To keep up with their competition, companies will need to invest heavily.
Speed
Another disadvantage to blockchain technology's speed is its inability to scale. Blockchains are faster than centralized databases. They require miners, which are people who have high-end computers and software that solves computational puzzles to exchange for crypto tokens.
Blockchain transactions are slower than traditional payment methods such as cash and credit cards. If you are interested in using blockchain technology daily, this can be discouraging.
Final Thoughts
Blockchain technology is an innovative way to store and transfer data. Although it does have its flaws, most can be fixed with proper planning and execution. Blockchain technology is the most suitable for businesses that want to use its distributed ledger capabilities. The technology isn't as simple as it appears. Therefore, I recommend that you hire Blockchain developers who have the right skills and experience. Your business could be at risk.
