Advantages and disadvantages of blockchain technology

Veera Budhi works as Chief Technology Officer (CTO) at Membrane Labs.

A blockchain is a network of decentralized and distributed data (ledger), which means that users share ownership and management of the network through data nodes. As a database, blockchain stores information in a digital format.

Blockchain technology stores data in blocks and links them together to form a chain. The blocks have a specific capacity and are closed when they are filled and connected to the previous block. All newly added information after the last block is compiled into a newly created block and added to the chain when it is filled.

Blockchain is known for its critical role in cryptocurrency systems such as Bitcoin. It maintains a decentralized and secure record of crypto transactions. Therefore, blockchain can guarantee the reliability and security of data records and generate the need for a third party.

Advantages of blockchain over non-blockchain database

• Immutability. Blockchain supports immutability, which means that it is impossible to delete or replace recorded data. Therefore, the blockchain prevents data tampering in the network.

Traditional data does not show immutability. The conventional database uses CRUD (create, read, update and delete) at the primary level to ensure proper application operation, and the CRUD model enables easy deletion and replacement of data. Such data may be vulnerable to manipulation by rogue administrators or third-party hacks.

• Transparency. Blockchain is decentralized, meaning that any network member can verify data recorded in the blockchain. Therefore, the public can trust the network.

On the other hand, a traditional database is centralized and does not support transparency. Users cannot verify information whenever they want, and the administration publishes a selected set of data. Nevertheless, individuals cannot verify the data.

• Censorship. Blockchain technology is free from censorship as it has no control over any single party. Therefore, no single authority (including authorities) can interrupt the operation of the network.

Meanwhile, traditional databases have central authorities that regulate the operation of the network, and the authority can exercise censorship. Banks can, for example, suspend users’ accounts.

• Traceability. Blockchain creates an irreversible audit trail, which allows easy tracking of changes on the network.

The traditional database is neither transparent nor immutable; therefore, no permanent path is guaranteed.

Disadvantages of blockchain

• Speed ​​and performance. Blockchain is significantly slower than the traditional database because the blockchain technology performs more operations. First, it performs signature verification, which involves cryptographically signing transactions. Blockchain also relies on a consensus mechanism to validate transactions. Some consensus mechanisms, such as proof of work, have low transaction throughput. Finally, there is redundancy, where the network requires each node to play a critical role in verifying and storing each transaction.

• High implementation cost. Blockchain is more expensive compared to a traditional database. In addition, companies need proper planning and execution to integrate blockchain into the process.

• Data modification. Blockchain technology does not allow easy modification of data once it is recorded, and it requires rewriting the codes in all the blocks, which is time-consuming and expensive. The disadvantage of this feature is that it is difficult to correct an error or make necessary adjustments.

One solution does not fit all requirements, and this is the same with blockchain technology. There is a lot of buzz in the industry about blockchain and Web3, and many organizations want to move from Web 2.0 to Web3, but this is not a simple “lift-and-shift” type of solution. Organizations should do their due diligence and conduct a deep dive analysis to see if blockchain technology fits their needs, and then plan their development or migration to Web3 accordingly.

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