Many people have such questions. What is an Advantage of Using Blockchain Technology Brainly What makes blockchain fun (benefits) and what doesn’t (disadvantages) is hard to imagine.
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Consequently, we will explain the advantages and disadvantages of blockchain in an easy-to-understand manner this time.
Advantages and disadvantages of blockchain technology
The blockchain used in Bitcoin has seven main advantages:
- Impossible to manipulate
- Low operation and management costs
- Overall system stability
- Cost of system construction and operation decreases
- Participation is open to everyone, and information is highly transparent
- Mining for money
- smart contracts automate payments and contracts (smart contracts)
The blockchain used in Bitcoin has six main disadvantages:
- Fewer transactions per hour
- Scalability issues
- Laws and regulations undeveloped in this area
- 51% attack risk
- Malicious users may sneak in
- Increasing data volumes
I will explain each of them.
Advantages of using blockchain technology
Impossible to manipulate
In the following section, I will explain why the blockchain used in Bitcoin is complex to tamper with, as well as how it works.
In the blockchain, the chain of data has a “hash value,” which is a unique string.
Any tampering with the block information will produce a different hash value, and all nodes around the world will be notified immediately. That makes sense to me.
The hash value of the previous Block is more critical than the hash value of the current Block. After tampering changes a block’s hash value, subsequent blocks must also be modified to match the new hash value.
Changing strings is not as simple as “changing strings,” but requires repeated advanced calculations. If you are able to do that, you will have to keep working on the next Block.
It is a monumental task, as you can imagine. These properties of blockchain ensure Bitcoin’s security.
A blockchain can theoretically be attacked if miners who check and verify records and connect blocks collude and control more than half of the computing power.
Low operation and management costs
Another advantage is the low cost of management and operation. Several nodes store and manage blockchain data, as explained previously.
It would be extremely costly to manage this centrally. When you factor in subsequent maintenance and management costs, the server alone requires a large amount of capacity.
A distributed system, however, would not require such costs if nodes around the world manage data. Users of Bitcoin, investors who trade crypto assets for profit, and miners who create blocks and extend the chain are all involved in storing and managing information by providing machine power little by little.
Distributed management offers this advantage. As a result, Bitcoin can reduce remittance fees.
Due to Bitcoin’s low transaction fees, it is especially beneficial for overseas remittances.
Overall system stability
Due to blockchain’s decentralized and managed nature, the system as a whole is highly stable.
When a centralized system fails, the entire transaction will stop if the central system stops. Subsystems usually are provided as a safety measure, but cost considerations limit their use.
When distributed management is used, even if a problem occurs somewhere, the entire system is not affected. Blocks will be created one after another even if one miner has machine trouble and is unable to generate them.
Transaction reliability is greatly affected by the stability of the entire system. Therefore, blockchain, which is supported by nodes all over the world, is highly stable.
Bitcoin has never experienced a system outage since it began trading in 2009.
The cost of system construction and operation decreases
As a result of its tamper-resistant properties, blockchain has a lower total cost per transaction.
The cost of building and maintaining servers and networks was enormous with traditional centralized systems. Blockchain, however, distributes and manages data without having a server, so system construction and operation costs can be reduced.
In order to build a blockchain-based system, however, the blockchain’s characteristics must match your system’s requirements. It won’t be easy to gain the full benefits of blockchain if it is not necessary to use it.
Participation is open to everyone, and information is highly transparent
There are two types of blockchains: public chains and private chains.
An unspecified or large number of users is a characteristic of a public chain.
Throughout a transaction, all information (such as what happened, when, and what was said) is public.
It is possible, however, to limit the amount of information that can be made public in private chains (with a specific or small number of users).
A private chain, on the other hand, requires an administrator. Public chains with reinstated administrators are called private chains. Consortium chains are chains with multiple administrators.
Mining for money
In a public chain (with unspecified or many users), participants bear the cost of validating and agreeing on valid data. Depending on the consensus algorithm, this requires considerable computational resources.
In this case, mining is taking place. Successful miners will receive newly issued virtual currency. Our reward system allows us to attract more participants and maintain an administrator-free environment.
The ability to generate a profit that exceeds the cost of mining is not easy.
Public chains become more reliable as they accumulate more participants and operate longer. Virtual currencies are becoming more stable, but mining them becomes more difficult.
The difficulty level is adjusted so that the total amount of virtual currency does not fluctuate significantly in a short period despite the fact that the total amount of virtual currency increases through mining.
The more stable the public chain, the harder it is to mine. Similarly, public chains with low stability also have low mining difficulty.
Smart contracts automate payments and contracts (smart contracts)
It refers to a system that automatically executes contracts and is often compared to a vending machine in a general sense.
A smart contract is also used to automate contract processing on the blockchain.
By eliminating a third party, transactions can be settled faster (in some cases).
In more precise terms, blockchain refers to “processing that is performed automatically on the blockchain,” and this processing is not limited to contracts.
Disadvantage of blockchain technology
Fewer transactions per hour
There are few transactions per hour, which is the first disadvantage. A Bitcoin block takes about 10 minutes to generate. The process of approving a transaction and transferring money will take 10 minutes if person A sends 1 BTC to person B.
Bitcoin can also handle around seven transactions per second due to the small storage capacity of each Block.
The solution to these problems is to create side chains off the main chain or to use off-chain methods that repeat transactions outside the chain and record only the final results. Efforts are being made to speed up transactions.
Scalability issues
A second disadvantage is that it has scalability issues. In the case of Bitcoin, the scalability problem refers to long remittance times, rejected remittance requests, and increased transaction fees as the volume of transactions increases. There are several problems associated with this, such as rising prices.
The volume of Bitcoin transactions was small at the time of its introduction. Among engineers, it was traded as a hobby or a demonstration test. Transaction volumes rapidly increased, and scalability became a problem as Bitcoin became more popular and people started paying attention to its potential.
Laws and regulations undeveloped in this area
Thirdly, there are no laws or regulations related to the issue.
Bitcoin and other crypto assets are still relatively new technologies. Many experiments have been made using blockchain, and a wide variety of services are being developed around the globe using this technology. Therefore, legislation cannot keep up with developments, and undeveloped situations are likely to arise.
51% attack risk
A malicious individual or group can take over 51% of the processing power of all participants in a public chain. Workers (miners) generate and approve blocks in a public chain.The blockchain can be used to perform arbitrary operations if you have more processing power than that.
This is called a 51% attack.
It is important to note that the more participants and the longer a public chain operates, the more reliable and stable it becomes as a virtual currency. Due to the difficulty of 51% of attacks and the slight advantage they offer to the attacker, these attacks only occur occasionally in well-developed public chains.
As a result, an attack is more costly than it is beneficial.
Public chains, however, considered to be immature, are easy targets for 51% of attacks. In May 2018, Monacoin suffered a 51% attack (Block withholding Attack).
Malicious users may sneak in
Transactions between untrusted parties can be enabled by blockchains (public chains).
Malicious users can sneak into the system since it is open and does not require an administrator.
In spite of this, it has a mechanism that makes it difficult for malicious users to penetrate it. It is tamper-resistant (though it sacrifices some level of convenience) and enables transactions between an unspecified number of individuals through public key cryptography, digital certificates, block generation, and approval algorithms.
It may be attacked, however, if a large number of users have malicious intent.
There are 51% attacks, Sybil attacks, Eclipse attacks, Block withholding attacks, etc.
Increasing data volumes
Using blockchain technology, each machine verifies data, which makes it challenging to handle the data as it grows.
Our mechanism for dealing with this is as follows.
- Archive Node: Stores all blockchain data
- Pruning node: Storing only the necessary parts of the blockchain data but copying the entire blockchain
- Light node: Only contains block header information
Although archive nodes provide independent verification of all data, they have the disadvantage of having to hold that amount of data (about several TB) and maintain continuous network connectivity.
Verifying recent data is possible with just the pruning node.
Data can be reduced to about 1/1000 using light nodes, and missing information can be queried and processed as necessary.
The blockchain data is not maintained on every machine in the network, which makes it easier to manage.
Summary
There are many advantages to blockchain technology, but there are also many disadvantages. It is necessary to carefully consider whether blockchain is really appropriate for your system since it can be regarded as neither appropriate nor suitable.
Blockchains can be classified as public or private, or as consortium type, which lies in between. A blockchain is generally referred to as a public chain in most contexts. Public chains such as Bitcoin and Ethereum are representative.
Public chains are used to conduct trusted transactions between a large numbers of unspecified participants. To prove transactions, we use a consensus algorithm.
Businesses need to keep an eye on them to stay on top of the latest trends and apply blockchains to firms.
