Most blockchains are designed as decentralised databases and function as the equivalent of a distributed digital ledger. These blockchain ledgers record and store data in the form of blocks, which are arranged chronologically and linked to each other by cryptographic proofs. The advent of blockchain technology has brought certain advantages to many industries and has provided greater security in an environment where trust is lacking. However, the decentralised nature of blockchain some times also brings certain disadvantages. For example, blockchains are limited in efficiency and require greater storage capacity than traditional centralised databases.
Blockchain advantages
1, Distributed
Because blockchain data is typically stored in thousands of devices on a distributed network of nodes, the system and data are highly resistant to technical failures and malicious attacks. Each of these network nodes can replicate and store copies of the data, so a single point of failure will have no impact: the availability and security of the network will not be affected by a single node going offline.
In contrast, many traditional databases rely on a single or a few servers and are therefore more vulnerable to technical failures and network attacks.
2, Stability
A confirmed block is essentially irreversible, meaning that once data is registered in a blockchain, it is difficult to delete or change. This makes blockchain an excellent technology for storing financial records or any other data that needs to be audited and tracked, as every change in the blockchain is tracked and permanently recorded by the distributed public ledger.
For example, companies can use blockchain technology to prevent employee fraud. In such a use case, the blockchain provides a secure and stable record of all financial transactions that take place within the company. This has the effect of making it difficult for employees to hide suspicious transactions.
3, De-trust mechanisms
In most traditional payment systems, there are not only two parties to a transaction, but also a third party intermediary (e.g. a bank, credit card company or payment method provider). However, with blockchain technology, the situation is completely different, as the distributed network of nodes only needs to verify and validate the transaction through a process of 'mining'.
A blockchain system will therefore eliminate the risk of trusting individual entities and reduce costs and transaction fees (by reducing intermediaries) throughout the process.
Blockchain Disadvantages
1,51% Attack
For many years, the proof-of-work consensus mechanism protecting the Bitcoin blockchain has been very effective. However, a number of potential attacks have gradually emerged that can affect the blockchain network, with the 51% attack being the most talked about. Such an attack occurs when an entity manages to control more than 50% of the network's hashing power, which would eventually allow an attacker to disrupt the network by deliberately deleting or modifying the order of transactions.
While such an attack is theoretically possible, there has in fact been no successful 51% attack on the Bitcoin blockchain network. And, as the network grows in size, so does security, while miners are less likely to spend large amounts of money and resources attacking Bitcoin, as they are already well rewarded from honest mining. Furthermore, because blocks are linked to each other by cryptographic proof (tampering with previous blocks would require enormous network arithmetic), a successful 51% attack would only be able to modify the most recent transactions for a short period of time. Moreover, the Bitcoin blockchain is also extremely adaptive, and this will allow it to react and adapt quickly to various attacks.
2, Data modification
Another drawback of the blockchain system is that once data is added to the blockchain, it is very difficult to modify it. While the stability of the blockchain is a major advantage, it can also be a disadvantage in some cases. Changing data or nodes in a blockchain is generally very difficult and usually requires a hard fork, i.e. using a new chain to take over the old one.
3, Private keys
Blockchain is the use of public (or asymmetric) cryptography to give users ownership of their cryptocurrency (or any other blockchain data). Each blockchain account (or address) has two corresponding keys: a public key (which can be shared) and a private key (which should be kept secret). Users need to use their private key to access funds, which means that the user acts as their own bank. If a user loses their private key, they effectively lose control of the funds (and the loss of the funds cannot be recovered).
4, Inefficiency
Blockchains, especially those that use proof-of-work, are often extremely inefficient. And, because mining is so competitive and there is only one winner every 10 minutes, the work and time of other miners is wasted in the meantime. Miners are constantly trying to increase their computing power so that they have a better chance of finding a valid hash block. And the resources used by the Bitcoin network have increased significantly in recent years, with it now consuming more energy than some countries use (such as Denmark, Ireland and Nigeria).
5, Storage
The blockchain ledger has also grown larger over time. Currently the Bitcoin blockchain alone already requires around 200GB of storage space. The growth in blockchain size also appears to be outstripping the growth in hard drive devices, and the network could lose nodes if the ledger becomes too large for individuals to download and store.
Despite its flaws, the blockchain presents some unique features that make it clear that it is here to stay. We still have a long way to go in gaining widespread adoption, and many industries are now getting used to the advantages and disadvantages of blockchain systems. In a few years' time, businesses and governments will probably be experimenting with more applications as a way of finding out where blockchain technology can show its greatest value.
