Blockchain Advantages and Disadvantages
Most blockchains are designed as a decentralized database that functions as a distributed digital ledger. These blockchain ledgers record and store data in blocks, which are organized in a chronological sequence and are linked through cryptographic proofs. The creation of blockchain technology brought up many advantages in a variety of industries, providing increased security in trustless environments. However, its decentralized nature also brings some disadvantages. For instance, when compared to traditional centralized databases, blockchains present limited efficiency and require increased storage capacity.
Since blockchain data is often stored in thousands of devices on a distributed network of nodes, the system and the data are highly resistant to technical failures and malicious attacks. Each network node is able to replicate and store a copy of the database and, because of this, there is no single point of failure: a single node going offline does not affect the availability or security of the network.
In contrast, many conventional databases rely on a single or a few servers and are more vulnerable to technical failures and cyber-attacks.
Confirmed blocks are very unlikely to be reversed, meaning that once data has been registered into the blockchain, it is extremely difficult to remove or change it. This makes blockchain a great technology for storing financial records or any other data where an audit trail is required because every change is tracked and permanently recorded on a distributed and public ledger.
For example, a business could use blockchain technology to prevent fraudulent behavior from its employees. In this scenario, the blockchain could provide a secure and stable record of all financial transactions that take place within the company. This would make it much harder for an employee to hide suspicious transactions.
Therefore, a blockchain system negates the risk of trusting a single organization and also reduces the overall costs and transaction fees by cutting out intermediaries and third parties.
Despite being theoretically possible, there was never a successful 51% attack on the Bitcoin blockchain. As the network grows larger the security increases and it is quite unlikely that miners will invest large amounts of money and resources to attack Bitcoin as they are better rewarded for acting honestly. Other than that, a successful 51% attack would only be able to modify the most recent transactions for a short period of time because blocks are linked through cryptographic proofs (changing older blocks would require intangible levels of computing power). Also, the Bitcoin blockchain is very resilient and would quickly adapt as a response to an attack.
Blockchain ledgers can grow very large over time. The Bitcoin blockchain currently requires around 200 GB of storage. The current growth in blockchain size appears to be outstripping the growth in hard drives and the network risks losing nodes if the ledger becomes too large for individuals to download and store.
Despite the downsides, blockchain technology presents some unique advantages, and it is definitely here to stay. We still have a long road to mainstream adoption, but many industries are getting to grips with the advantages and disadvantages of blockchain systems. The next few years will likely see businesses and governments experimenting with new applications to find out where blockchain technology adds the most value.