After the blockchains made a rapid introduction to our lives, this new technology became controversial in many areas. While some are in favor of using this innovative technology, others have negative thoughts about the outcomes. There are hundreds of different blockchains available today. Although these blockchains have separate features, they share certain characteristics. In this article, we will list the advantages and disadvantages of blockchain technology.
Advantages of Blockchains Decentralization
Decentralization is one of the most important features of a blockchain. While the system is managed by a single server in a centralized system, each computer in the decentralized system acts as a node. Each node has the same importance and function. In this way, power is not concentrated in a single person or organization. Decentralization allows blockchain users to have full authority over their personal accounts. For example, social media sites such as Twitter, Facebook, and Instagram are managed by a server. Messaging here, account information is kept on these servers. For this reason, your accounts may be closed by these platforms, or the content you publish may be limited. However, in a decentralized system, the use of your account is entirely up to you, it is not possible to produce the content you want and close your account against your will.
- Having a Transparent Structure: Every transaction performed on a blockchain is publicly visible. Therefore, it is not possible to manipulate the information contained herein. All users can enter the block explorer of the relevant blockchain and see the transactions made on this blockchain.
- Inability to Change Information: Similar to the above item, it is not possible to change the information contained here, as the information is public and saved on all computers in the network. Because the computers on the network are thousands in various corners of the world. In order to change the process done here, it is necessary to find these computers one by one and change the information there. This is nearly impossible. However, in a central system, only the main server can be hijacked and information can be deleted.
- Disabling Third Parties: When you want to make a transaction such as money transfer in a blockchain, you do it in a peer-to-peer (P2P) way, not through an intermediary, as in classical systems. This brings with it many advantages. First of all, since intermediary institutions such as banks are deactivated, transactions are carried out quickly and cheaply. For example, when you want to send money to a person abroad, this may take days and you can handle your transaction in a very expensive way because of the high commissions taken by the banks. However, you can transfer money within minutes through blockchain technology and do this in regard to cheaply. In addition, because of the P2P structure, the information you share with different users on the blockchain is encrypted with cryptography technology. By this means, any information you send to another user is only between these two users. This increases the security of information. In this way, your private correspondence takes place only with the other person and you, and it is not possible for anyone else to access these contents.
Disadvantages of Blockchains
- Security Issue: Although blockchains stand out with their reliability, there are also security vulnerabilities in some cases. In particular, there are some undesirable experiences in the past regarding this situation. In blockchains using the Proof of Work (PoW) consensus mechanism, a 51% consensus in the network is required for a transaction to be approved. Here, malicious people who own 51% of the nodes in a network can manipulate transactions in their own interests. However, the 51% attack becomes more difficult as the blockchain ecosystem grows and the security of blockchains increases. Also, the 51% attack is not profitable for miners. Because in this case, the value of the reward they will receive will decrease. For this reason, it is not very likely that 51% of attacks will occur, but it is useful to report that such a possibility exists.
- Loss of Assets in Case of Loss of Private Keys: You have full authority on a blockchain, but this can have some negative effects as well. There are two types of keys in blockchains called public key and private key. While the public key is your public password, we can liken it to a username. The private key is the password that belongs only to you, and the ownership of your account is equivalent to having this password. If you lose your private key, you cannot access your account in any way. If you lose the private key, you will also lose access to all your crypto assets, if any. However, if you forget your password in a central system, you can answer certain security questions and renew your password or access your current password. For this reason, we recommend that you keep your private key very safe and inaccessible to anyone.
- High Energy Consumption: One of the biggest disadvantages of blockchains, especially using the PoW consensus mechanism, is high energy consumption. The mathematical problem that will decide which computer will perform the mining becomes more difficult as the number of miners increases. As this problem becomes more difficult, the amount of energy that computers will spend to solve this problem increases. Because of various research, it has been seen that the amount of energy spent on Bitcoin mining is more than in some countries. In addition, the difficulty of mining reduces its profitability of mining.
When we take an overview of blockchain technologies, we can see the pros and cons of these technologies together. The disadvantages mentioned here are not valid for all blockchains. For example, high energy consumption is only available for blockchains using the PoW consensus mechanism. In a blockchain that uses the Proof of Stake (PoS) consensus mechanism, decentralization is somewhat compromised. At this point, the important thing is that the blockchain to be used is thoroughly researched and chosen in this way. In this way, existing disadvantages can be minimized.