Blockchain technology has many advantages that make it attractive for widespread use in many fields of activity. Blockchain is ideally suited for the field of finance and, in particular, for international payments.
The process of international transfers, which usually takes a lot of time, money, and involved parties will significantly reduce transaction time, costs, and also eliminate the need for a complex information structure.
The identity management services on the blockchain provide users with a wide range of tools for storing information such as passport data, birth and marriage certificates, driver’s licenses, identification cards, diplomas, usernames and passwords, and other personal data.
The blockchain will allow states to use a transparent electronic voting system, with the possibility of verification by the voter.
It will also help to forget about the problem of copyright infringement in such areas of creativity as art, music, cinema, and literature. Thanks to the blockchain, authors will be able to confirm and protect copyrights and intellectual property rights.
Thus, the key advantages of public blockchains are:
1. Decentralization
The blockchain does not have a single control center or storage location, and all network participants whose nodes are located around the world are directly involved in maintaining operability.
Accordingly, decisions regarding the operation of such a network are made most democratically, and the network itself is extremely stable.
Blockchain is extremely difficult to crack, it is not censored, and managing a single company or state is impossible.
2. Data security
Multiple duplications of data among its participants guarantee the safety and immutability of the information entered into the blockchain.
Moreover, due to the specifics of the blockchain device, this information cannot be replaced, edited, or deleted. And the use of consensus algorithms suggests that all transactions included in the blockchain are confirmed.
3. Transactional transparency
Every network member has access to the entire transaction history, right up to the very first transaction.
Therefore, to check whether a particular transaction has passed between two addresses, you just need to refer to their history stored in the blockchain.
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4. High transaction speed
Since blockchain networks are peer-to-peer, transactions occur directly between users, regardless of their location and without the participation of intermediaries.
Moreover, the network is always available to users, it does not have limited hours of operation and does not go offline for the holidays.
5. Lower transaction costs
Since blockchain networks are peer-to-peer, to conduct a transaction, you do not need to resort to the services of intermediaries.
So, thanks to the blockchain, users can simplify the verification of transactions, reduce the time for validating transactions, increase liquidity, and minimize fraud risks.
Moreover, users of the blockchain network pay commissions for confirming transactions, which, compared to traditional financial institutions, such as banks, are much lower.
Shortcomings of blockchain technology
This technology is imperfect and not without flaws, which today hinder the mass adaptation of the blockchain.
There are few flaws of blockchain development which we highlight below:
1. Blockchain size
In mid-June 2018, the size of the Bitcoin blockchain is 171 GB.
This means that to maintain the network, each full node must have enough memory to store all the blockchain data.
The more the transactions that take place on the network, the more it weighs and the faster it grows.
It is also worth keeping in mind that previously, each full node must download the entire transaction history, which can take a considerable amount of time.
The increase in the Ethereumblockchain, the second in terms of capitalization and popularity of the cryptocurrency network, also raises experts’ concerns.
This network exceeded the current size of the Bitcoin blockchain back in June 2017, when one of the network users noted that synchronizing a full validation node requires about 180 GB of memory and more than a week to download a transaction archive.
2. Lack of confidentiality
There are no names and surnames in the blockchain, but this does not mean that the network is completely anonymous. Each network user is assigned a wallet address, and all network participants see what transactions were made from him.
Once a user attaches this address to any site or service that can indicate his or her identity. For example, to a cryptocurrency exchange, any network member will be able to find out how much money a particular person has, what they spent, and to whom they sent.
In theory, this can jeopardize the security of a user with a large number of cryptocurrencies, not to mention companies for which this vulnerability of public blockchains is a serious problem since it can potentially reveal confidential information about customers, sales, counterparties, and more.
3. Energy consumption
This drawback is primarily inherent to blockchain networks that support the PoW consensus algorithm.
In them, consensus nodes, called miners, are responsible for adding new blocks to the blockchain by solving complex mathematical problems using powerful computer equipment, for which they receive a reward in the cryptocurrency of the network.
This process is intentionally made resource-intensive and complicated so that the number of blocks found by miners every day remains constant.
4. The problem of blockchain scalability
Today, the problem of blockchain scalability is perhaps the main and most discussed for the cryptocurrency market. First of all, this refers to the Bitcoin network, where the block size is limited and equal to 1MB.
Even though this measure helps protect the network from potential DDoS attacks, the limited block size significantly impedes the increase in throughput of the entire network, which is necessary for such a popular cryptocurrency as bitcoin.
So, in the Bitcoin network, throughput is about 7 transactions per second, while in the Visa payment system it is 24,000.
What are the benefits of Blockchain technology?
By concentrating on the positive effects of a blockchain of data, we can distinguish the main quintet of their advantages:
1. Improving the efficiency of economic, financial, and organizational processes.
This is achieved by reducing costs arising from the implementation of business plans.
The second factor in increasing efficiency is the reliability of information within the blockchain, which allows you to abandon duplicate operations.
2. Security and privacy.
Even open structures allow you to save personal data of participants in anonymous status. Only transaction information is available, but not its initiators or owners.
3. Transparency.
The standard blockchain is a data chain with public access to the registry. All information can be verified, but not available for modification.
4. Equality of participants.
The technology is based on a mathematical model, completely devoid of vicious human factors, greed, deceit, and corruption. This sets equal rights for users.
5. Decentralization.
The absence of a single governing body eliminates unnecessary intermediaries, eliminates monopolization.
Ricky Brown is an energetic content strategist and marketer at App Development Companies, the platform that helps you to find the best IT Partner for your app, web, and software requirements across the globe.