What are the disadvantages of blockchain

By Dileep Seinberg

Most blockchains are designed as decentralized databases that act as distributed digital ledgers. These blockchain ledgers store data in chronological blocks linked by cryptographic evidence. Blockchain has grown out of its infancy and businesses have now been able to use it in its mature form – beyond its obvious uses for financial institutions. Many industries have benefited from the development of blockchain technology, which increases security in trustless environments.

Every coin has two sides. For example, blockchains require more storage space and are less efficient than traditional centralized databases. Although blockchain technology has advanced remarkably since its inception, some challenges need solutions before blockchain’s widespread use for daily transactions.

Scalability:

Unlike their centralized counterparts, blockchains have limited scalability. If you have used the Bitcoin network, you are most likely aware that the speed at which transactions are completed depends on the network congestion. Simply put, the chances of slowing down are higher as more people or nodes join the network. For example, there is a significant difference between Bitcoin and VISA transaction speeds. Currently, Bitcoin transactions are limited to 4.6 per second. However, VISA is capable of 1700 transactions per second. The solution is to make transactions beyond the blockchain and only use blockchain technology to store and retrieve data. There are also new ways to handle scalability, such as using blockchain solutions with different architectural designs or permissioned networks.

Storage:

Blockchain databases are permanently stored on all network nodes, which poses a storage problem. The amount of data that can be stored on a personal computer is limited, and as the volume of transactions increases, so does the size of the database. Blockchain ledgers have the potential to become extremely large over time. Currently, the Bitcoin blockchain requires approximately 200 GB of storage space. The size of blockchains seems to grow faster than the size of hard drives, and the network may lose nodes if the ledger becomes too large for users to download and store.

Safety:

Blockchain offers greater security than other platforms. However, this does not mean that it is completely safe. There are several ways in which the blockchain network can be compromised, some of which are listed below:

1. In a 51% attack, network control is possible if an entity controls 51% of the network nodes. They can then make changes to the ledger and double use. It is possible on networks with controllable miners or nodes. 51% of attacks are therefore less likely to occur on private networks and more likely on public networks.

2. Another disadvantage of blockchain is double spending. The blockchain network uses Proof-of-Stake, Proof-of-Work and others to prevent double spending. Double spend is only possible on networks that are exposed to 51% attacks.

3. During a DDoS attack, the nodes are flooded with requests for the same, which slows down or stops the network.

4. Blockchain’s cryptographic algorithm makes it insecure. Quantum algorithms or computing can crack cryptography. However, blockchain solutions now use cryptographic algorithms that are resistant to quantum computing.

Privacy:

Despite being anonymous and encrypted, all network nodes have access to data on a public blockchain. All users of the network can thus legitimately access this data. Similar to how websites typically use cookies and web tracking, transaction data is used to identify an individual within a network. Unfortunately, this illustrates that blockchain technology is not entirely secure.

Power consumption

Due to mining, blockchain’s energy consumption is high. One of the factors causing this is that as soon as a new node is created, it connects to every other node and builds a distributed, continuously updated ledger. Each blockchain solution works differently. Permissive or private networks with fewer nodes do not have these problems. Since a universal agreement is not necessary, they use consensus-building techniques. However, the problem remains unsolved if you use Bitcoin, the most popular blockchain network. Simply put, permissioned networks use less energy than public networks.

Private keys:

The ability of individuals to act as their bank is critical to decentralizing blockchain technology. However, this raises another problem. Private keys are required to access resources or data stored in the blockchain. It is crucial to note the details of the private key obtained during the creation of the wallet. In addition, they must ensure that no one else has access to it. If a user loses the private key, they will no longer be able to access the wallet. Blockchain’s dependence on its users is a limitation. This is a disadvantage because not all users are technologically savvy, which increases the likelihood of errors.

Data immutability

One of the biggest drawbacks of blockchain technology is the immutability of data. It benefits financial and supply chain systems. Immutability can only exist if network nodes are fairly distributed. A blockchain network is vulnerable if one entity owns at least half of the nodes. Another concern is that data, once written, cannot be erased. If someone uses a blockchain-based digital platform, he cannot delete the record.

Cost and implementation

Implementing blockchain technology involves significant upfront costs. Although most blockchain solutions are open source, investing in them is relatively expensive. Hiring developers, leading a team that excels in various aspects of blockchain technology, paying for a blockchain solution and so on are all expenses. Also consider maintenance costs. Enterprise blockchain projects can cost well over a million dollars to implement. Therefore, companies that like the concept of interoperability Another disadvantage of blockchain technology is the lack of interoperability. There are different blockchain network types, each working differently and trying to solve the DLT problem in a particular way. It results in interoperability issues where these chains cannot communicate effectively. Interoperability remains an issue for both conventional and blockchain-based systems. New blockchain technologies offer superior solutions compared to previous blockchain technologies. For example, Ethereum addressed its inefficiencies by switching to a more efficient blockchain technology solution that allows automation through smart contracts. It also implemented Proof-of-Stake (PoS), which is slightly more efficient than Proof-of-Work (PoW). Despite its drawbacks, blockchain technology offers some distinct advantages and is undoubtedly here to stay. Blockchain lovers and developers will undoubtedly find a way around these obstacles in light of the technology’s enticing benefits. We are still far from widespread adoption, but businesses and governments will be actively experimenting with new applications of blockchain technology over the coming years.

The author is the founder and CEO of MuffinPay