Blockchain Technology: Pros and Cons

 

What Is Block Chain Technology?

A blockchain is a type of public ledger that consists of a series (or chain) of blocks on which transaction details are recorded and stored on a public database after network participants authenticate and verify them. A public ledger can be viewed but cannot be controlled by a single person.

Blockchain technology is a structure that stores public transactional records, also known as blocks, in a network of databases linked by peer-to-peer nodes. This type of storage is also known as a 'digital ledger.'

Every transaction in this ledger is authorised by the owner's digital signature, which authenticates and prevents tampering with the transaction. As a result, the digital ledger's information is extremely secure.

In a nutshell, a digital ledger is similar to a Google spreadsheet shared across multiple computers on a network, where transactional records based on actual purchases are stored. The data is visible to anyone, but they cannot corrupt it.

Why Blockchain Is Important: Business Runs on Information?

Blockchain is ideal for delivering that information because it provides real-time, shared, and completely transparent data stored on an immutable ledger that network members with permission can access. A blockchain network, among other things, can track orders, payments, accounts, and production. Furthermore, because members have a unified view of the truth, you can see all aspects of a transaction from beginning to end, giving you greater confidence as well as new efficiencies and opportunities.

Elements of Block Chain Technology

• Distributed ledger technology: All network participants have access to the distributed ledger and its immutable record of transactions. With this shared ledger, transactions are recorded only once, eliminating the duplication of effort that is common in traditional business networks.

• Immutable records: No participant can change or tamper with a transaction once it has been recorded to the shared ledger. If a transaction record contains an error, a new transaction must be added to correct the error, and both transactions are then visible.

• Smart contracts:  To speed up transactions, a set of rules known as a smart contract is stored on the blockchain and executed automatically. A smart contract can define the terms for corporate bond transfers, travel insurance payments, and much more.

Pros of Blockchain

• Open: One of the primary advantages of blockchain technology is that it is accessible to everyone. This means that anyone can contribute to blockchain technology, and no one needs permission to join the distributed network.

• Verifiable: Blockchain technology is used to delegate information storage in order for everyone to confirm the accuracy of the data by utilising zero-knowledge proof, wherein one party demonstrates the validity of the data to some other party without uncovering anything about the data.

• Permanent: Records or information stored using blockchain technology are permanent because it is a decentralised network with a large number of trustworthy nodes. This means that there is no risk of data loss because duplicate copies are stored at each local node.

• Free from Censorship: Because blockchain technology is not governed by a single party, but rather by the concept of trustable nodes for validation and consensus procedures that approve transactions using smart contracts, it is considered censorship-free.

• Tighter Security: Blockchain uses hashing methods to store each transfer of funds on a block that is linked to each other to increase security. It uses the SHA 256 hashing technique to store transactions.

• Immutability: Because blockchain technology is decentralised, any change is reflected in all nodes, rendering it impossible to commit fraud; thus, transactions can be described as tamper-proof.

Disadvantages of Block Chain

• Scalability: In contrast to their centralised counterparts, blockchains have limited scalability. If you've used the Bitcoin network, you're probably aware that network congestion affects the speed with which transactions are completed. Simply put, the likelihood of slowing down increases as more people or nodes join the network. Bitcoin and VISA transaction speeds, for example, differ significantly. Transactions in Bitcoin are currently limited to 4.6 per second. VISA, on the other hand, has a transaction processing speed of 1,700 transactions per second. The solution is to conduct transactions outside of blockchain technology and use blockchain technology only for data storage and acquisition. Scaling approaches that are novel include the use of blockchain solutions with different architectural designs or permissioned networks.

• Storage: Blockchain databases are stored indefinitely on all network nodes, posing a storage problem. A personal computer's storage capacity is limited, and as the volume of transactions increases, so does the size of the database. Blockchain ledgers have the potential to grow in size enormously over time. Currently, the Bitcoin blockchain requires approximately 200 GB of storage space. Blockchains appear to be growing faster than hard drives, and if the ledger becomes too large for users to download and store, the network may lose nodes.

• Security: Blockchain platforms are more secure than other platforms. This does not, however, mean that it is completely risk-free. The blockchain network can be hacked in a number of ways like A 51% attack on network control is possible if one entity controls 51% of network nodes. They can then change the ledger and double-spend. It is possible on networks with controllable miners or nodes. As a result, 51% of attacks are more likely to occur on public networks than on private networks. Another disadvantage of blockchain is the possibility of double-spending. The blockchain network employs Proof-of-Stake, Proof-of-Work, and other techniques to prevent double-spending.During a DDoS attack, nodes are flooded with requests for the same thing, causing the network to slow or stop. Because of its cryptographic algorithm, blockchain is insecure. Quantum algorithms and computing can be used to crack cryptography. In contrast, blockchain solutions now employ cryptographic algorithms that are resistant to quantum computing.

Privacy

Despite being anonymous and encrypted, data is accessible to all network nodes on a public blockchain. As a result, this data is legally accessible to all network users. Transactional data is used to identify a person within a network in the same way that cookies and web trackers are used on websites. Regrettably, this shows that blockchain technology is not entirely secure.

The Bottom Line

Blockchain is finally making a name for itself, thanks in large part to bitcoin and cryptocurrency, with many practical applications for the technology already in place and being researched. As a buzzword on the lips of every investor in the country, blockchain has the potential to make business and government operations more accurate, efficient, secure, and cost-effective by eliminating middlemen.

Written by Jay Kumar Gupta