Most blockchain systems are designed as a decentralized database that functions as a shared ledger. These blockchain registers record and store data in blocks that are organized in chronological order and linked through cryptographic evidence. The creation of blockchain technology brings many opportunities across industries, providing increased security and an unreliable environment. However, its decentralized nature also has some drawbacks. For example, compared to traditional centralized databases, blockchain has limited performance and requires increased storage capacity.
Advantages of blockchain technology
Because blockchain information is typically stored in thousands of devices, on a distributed network of nodes, the system and data are highly resistant to technical crashes and malicious attacks. Each node is able to play and store a copy of the database. If a node becomes damaged or remains offline, it does not affect the availability and security of the network.
Unlike blockchain, conventional databases typically rely on one or more servers and are more vulnerable to technical damage and cyberattacks.
Confirmed blocks are very unlikely to be re-edited, which means that once the data is logged into a block, it is extremely difficult to remove or modify them. This makes blockchain a great technology for storing financial records or any other data, as any change is recorded and can be tracked.
For example, a business may use blockchain technology to prevent fraudulent behavior by its employees. In this scenario, technology can provide a secure record of all financial transactions that take place within the company. This would make it very difficult for the employee to conceal suspicious transactions.
No need for a mediator
In most traditional payment systems, transactions depend not only on the two parties involved, but also on an intermediary – such as a bank, credit card company, or payment provider. When you use blockchain technology, this is no longer necessary, as a decentralized network of nodes verifies transactions through a process known as mining.
Therefore, the blockchain system eliminates the risk of being dependent on a single organization and also reduces the overall transaction costs and fees by eliminating intermediaries and other third parties.
The Proof of Work consensus algorithm that protects blockchain (in the case of Bitcoin) has proven very effective over the years. However, there are several potential attacks that can be made against blockchain and 51% of attacks are among the most discussed. Such an attack can happen if an organization manages to control more than 50% of the hashing power of the network, which would eventually allow them to manipulate the network by deliberately removing or changing transactions.
Change the data
Another disadvantage of blockchain systems is that once data is added to the blockchain it is very difficult to modify. Although stability is one of the benefits of blockchain, it is not always good.
Blockchain uses public key (or asymmetric) cryptography to give users ownership of their cryptocurrency units (or any other blockchain data). Each block address has a corresponding private key. While the address can be shared, the private key must be kept secret. To access their funds, users need their personal key, which means they act as their own bank. If a user loses his private key, the crypto assets in his wallet are lost and there is no way to recover.
Blockchain, especially those using Proof of Work, are highly inefficient. As their digging is highly competitive and there is only one “winner” every ten minutes, the work of every other node is depreciated. Node owners are constantly trying to increase their computing power to have a better chance of finding a valid block hash. This is one of the reasons that the resources used by the Bitcoin network have increased significantly over the last few years. It currently consumes more energy from countries such as Denmark, Ireland and Nigeria .
Blockchain data can grow a lot over time. Currently, the Bitcoin blockchain system requires around 200 GB of storage. The current growth in data size seems to be ahead of the growth of hard drives, and the network risks losing blocks if the database becomes too large for smaller users to download and store.