Blockchain technology has bough revolution in the digital industry. Nowadays, most industries and companies are using them to create platforms and apps.
Contrary to popular beliefs, the idea behind this technology was first countered during the 19th century. However, it became popular after Satoshi Nakamoto introduced Bitcoin.
This distributed ledger technology is very efficient and effective, but there are many drawbacks as well. In this article, we are going to discuss blockchain and its advantages and disadvantages.
What is Blockchain Technology?
It is a digital ledger that has no physical existence. This ledger automatically keeps track of all the things happening on it. All the economic transactions can easily take place in it as there is no need for a central authority.
The users who use the peer-to-peer network helps in fulfilling and validating the transactions on this network. All the records are permanently saved on this network.
It is a decentralized ledger, which means there is no central financial authority handling it. Because of this reason, there is complete transparency. Anybody with an internet connection can access it.
Most people associate it with cryptocurrency as it is the foundation technology behind digital currencies. However, it can be used in other industries and companies as well. The Cloud storage industry, the finance industry, as well as the supply chain industry is highly dependent on this technology.
Advantages of Blockchain Technology:
This technology is pretty new as it was introduced just a decade ago. Even then, only a few companies had the courage to use it. However, there are many advantages to using this technology.
• No Government Interference:
The biggest advantage of using this technology is that there is no government interference. The cryptocurrencies built in this technology has no government control. They are independent. Most of the time government interferes with the currencies, thereby causing inflation. However, as it works on a decentralized network, there is no central authority governing it. Government or any other central authority has no scope of intervening with this technology.
• Trustworthy System:
It is a trustworthy system as there is no intermediary or middleman. All the things happening on this network is recorded in a distributed ledger. It is transparent and trustworthy. The transactions are constantly monitored on this network which makes it genuine and trustworthy.
• Increased Stability:
The biggest advantage of using this technology is stability. When you complete a transaction on this system, no changes can be made to it. The data is saved in the ledger and cannot be changed or manipulated. It offers a stable system to companies. It accurately records all the data and keeps it transparent. It offers you a single, stable network.
It is a highly secure network. Everyone who uses it gets a unique identity. It will be linked to the account and will be highly encrypted. It helps to keep all the transactions secure. Only the owner will be able to use the account and nobody else.
This technology is known for its transparency. All the things are recorded in a public ledger. The parties who are doing the transactions can see all the blocks. It increases trust between parties. All the blocks are linked to one another, so it is not easy to delete anything. All the activities are transparent and can be seen by all the parties.
• Faster Processing:
It is a cloud-based technology. Most of the cryptocurrencies are built on it. It helps you to easily transfer cryptocurrency from one person to another or from one platform to another. It takes very less time to transfer the money as the processing speed in quick. Compared to the fiat currency, it takes less time to transfer cryptocurrency.
• Low Cost:
This is another advantage of using this technology. As it is a public ledger where the users validate the transactions, the cost is very lower. You can easily transfer cryptocurrencies without any transaction fees as there is no middleman.
This technology helps you to maintain anonymity. When you complete a transaction, only the transaction details are stored in the ledger. The personal information about the parties remains hidden. It helps in anonymous transactions. If you want to keep your details private, you can use this system.
Disadvantages of Blockchain Technology:
Although this distributed ledger technology is quite popular, there are some drawbacks to using it. Here are some disadvantages of using this technology.
• Extreme Volatile:
Cryptocurrencies are developed and traded using this technology. However, it is extremely volatile. The price fluctuates very quickly. The fluctuations can be anywhere around 5% to 25%. Because of this reason, many people avoid using it.
• Energy Consumption:
It consumes a high amount of energy. The transactions take place at a super-fast speed which needs high computing power. The servers and networks consume more power. Apart from that, it updates everything in a public ledger which again increases energy consumption.
• Private Keys Problems:
In this network, the users are given something called private keys. It works as a source of identity as well as security. Every user needs to keep the private keys safe and secure. If you forget it or misplace it, you will not be able to complete the transaction. If someone gets a hold of the private keys, they can easily misuse all the funds.
• Security Issues:
As it is a digital platform, there are various online risks associated with it. Compared to other traditional systems and networks, this public ledger is prone to more security risks. There are instances of various hacking attacks. Once the hacker infiltrates the security barriers, they will take away all your money. This technology faces nearly 51% attacks.
• Maintenance Cost:
In order to use this technology, you need strong hardware. You need to invest in hardware as well as software to use it. Apart from that, you need to bear the maintenance cost as well. Its cost can be quite high as you need servers and networks.
These are the advantages and disadvantages of using blockchain technology. Despite the drawbacks, many new companies are using this technology to start their own business.