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Advantages & Disadvantages of Blockchain Technology - Blockchain Technology

The document discusses the advantages and disadvantages of blockchain technology. The main advantage is disintermediation, which allows a distributed database without a central authority through consensus mechanisms. This reduces costs compared to centralized third parties. However, the main disadvantage is performance - blockchain transactions are slower than centralized databases due to signature verification, consensus processes, and redundant processing across nodes. Other advantages include increased security and transparency, while other disadvantages include scalability limitations and the complexity of coordination across decentralized networks.

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Kult Caffe
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705 views3 pages

Advantages & Disadvantages of Blockchain Technology - Blockchain Technology

The document discusses the advantages and disadvantages of blockchain technology. The main advantage is disintermediation, which allows a distributed database without a central authority through consensus mechanisms. This reduces costs compared to centralized third parties. However, the main disadvantage is performance - blockchain transactions are slower than centralized databases due to signature verification, consensus processes, and redundant processing across nodes. Other advantages include increased security and transparency, while other disadvantages include scalability limitations and the complexity of coordination across decentralized networks.

Uploaded by

Kult Caffe
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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11/1/2017 Advantages & Disadvantages of Blockchain Technology – Blockchain Technology

Blockchain Technology

November 21, 2016November 23, 2016

Advantages & Disadvantages of Blockchain Technology

The biggest advantage:

Disintermediation

The core value of a blockchain is that it enables a database to be directly shared without a central administrator. Rather than having some centralized
application logic, blockchain transactions have their own proof of validity and authorization to enforce the constraints. Hence, with the blockchain acting as a
consensus mechanism to ensure the nodes stay in sync, transactions can be verified and processed independently.

But why is disintermediation good for us? Because a database is still a tangible thing even though is just bits and bytes. If the contents of a database are
stored in the memory and disk of a particular computer system run by a third party even if it is a trusted organization like banks and governments, anyone
who somehow got access to that system can easily corrupt the data within.

Thus the third-party organizations especially those who control important databases need to hire many people and design many processes to prevent that
database being tampered with. Unavoidably, all this takes a great amount of time and money.

However, with blockchains, we can now replace these third-party organizations with a distributed database, locked down by clever cryptography. “Like so
much that has come before, they leverage the ever-increasing capacity of computer systems to provide a new way of replacing humans with code. And once
it’s been wri en and debugged, code tends to be an awful lot cheaper” (Gideon Greenspan).

Other advantages are :

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11/1/2017 Advantages & Disadvantages of Blockchain Technology – Blockchain Technology

The biggest disadvantage:

Performance

Because of the nature of blockchains, it will always be slower than centralized databases. When a transaction is being processed, a blockchain has to do all the
same things just like a regular database does, but it carries three additional burdens as well:

1. Signature verification. Every blockchain transaction must be digitally signed using a public-private cryptography scheme such as ECDSA
(h ps://en.wikipedia.org/wiki/Elliptic_Curve_Digital_Signature_Algorithm). This is necessary because transactions propagate between nodes in a peer-
to-peer fashion, so their source cannot otherwise be proven. The generation and verification of these signatures is computationally complex, and
constitutes the primary bo leneck in products like ours. By contrast, in centralized databases, once a connection has been established, there is no need to
individually verify every request that comes over it.

1. Consensus mechanisms. In a distributed database such as a blockchain, effort must be expended in ensuring that nodes in the network reach consensus.
Depending on the consensus mechanism used, this might involve significant back-and-forth communication and/or dealing with forks and their
consequent rollbacks. While it’s true that centralized databases must also contend with conflicting and aborted transactions, these are far less likely where
transactions are queued and processed in a single location.

1. Redundancy. This isn’t about the performance of an individual node, but the total amount of computation that a blockchain requires. Whereas
centralized databases process transactions once (or twice), in a blockchain they must be processed independently by every node in the network. So lots
more work is being done for the same end result.

Other disadvantages are:

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11/1/2017 Advantages & Disadvantages of Blockchain Technology – Blockchain Technology

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