Top Disadvantages of Blockchain Technology

Nowadays, many Blockchains are structured as decentralised databases that perform as distributed digital ledgers. The data is kept in chronological blocks and connected by encrypted proofs in these Blockchain ledgers. Beyond its apparent uses for financial institutions, Blockchain has surpassed its infancy and may now be used by enterprises in its mature form. The emergence of Blockchain Technology which improves security in untrusted environments, has benefited a plethora of sectors.

However, each coin has two sides. Blockchains, for instance, are less efficient than conventional centralised databases and need more storage space. Even though Blockchain Technology has come a long way since its beginnings, several issues still need to be resolved before it can be widely used for everyday transactions.

Do you want to know more about the disadvantages of Blockchain? If yes, you’ve come to the right place! This blog will take you through the top 10 disadvantages of Blockchain Technology. 

Table of Contents

1) Blockchain Technology – A quick recap

2) The Top Blockchain Disadvantages

3) The Top Blockchain Advantages

3) Conclusion

Blockchain Technology – A quick recap   

Blockchain is a distributed ledger technology which can be used to store data in a way that prevents any malicious activity. It operates as per protocols created to help parties that do not trust one another to get to an understanding, so they can cooperate or collaborate to accomplish various goals that are advantageous to the entire group. 
 

The Top Blockchain Disadvantages
 

1) Blockchain is not a Distributed Computing System 

Nodes are necessary for the correct operation of the Blockchain network. The Blockchain's quality is dependent on the nodes' quality. For instance, the robust Blockchain used by Bitcoin encourages nodes to join the network. The same cannot be said for a Blockchain network where nodes are not incentivised. 

This indicates that it is not a distributed computing system in which the network is independent of the contribution and involvement of the nodes. In contrast, a distributed computing system strives to ensure that the transactions are verified in accordance with the rules and that the transactional history is available for each transaction. While each of these operations is comparable to those of a Blockchain, there is no cohesion, cooperation, or synchronisation among any of them.

Blockchain is undoubtedly a distributed network, but it lacks the characteristics that make distributed computing systems valuable to businesses. 

2) High implementation costs 

Blockchain Technology implementation entails a significant upfront expense. Even though Hyperledger and most Blockchain solutions are open sources, they still demand substantial investment from the company that wants to pursue them. 

Hiring developers, supervising a team that excels at various facets of Blockchain Technology, paying for a Blockchain solution, and other fees are all involved. 

In addition, you must consider the solution's ongoing maintenance costs. The costs for commercial Blockchain projects can also exceed a million.

Therefore, companies that enjoy the concept of Blockchain but need more resources or funds to implement it may have to wait a long before joining the fad. 

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3) Power use is too high 

Blockchain energy consumption is high because of mining. This is because each new node links to every other node as soon as it is established and creates a distributed, continuously updated ledger. Every Blockchain solution operates uniquely. These problems do not exist in private or permissioned blockchain networks with fewer nodes. They employ consensus-building strategies since a global consensus is not necessary. However, if you use Bitcoin Blockchain, the most well-known Blockchain network, the problem is still unresolved. Permissioned networks consume less energy than public networks. 

4) Data is immutable 

Data immutability is one of the critical disadvantages of Blockchain. Financial and blockchain supply chain systems benefit from it. Only a network with evenly dispersed nodes may support immutability. A blockchain network is susceptible if one organisation controls at least half of the nodes. Data cannot be removed once written, which is another concern. A Blockchain-based digital platform cannot be deleted after it has been used. 

5) Blockchains are sometimes inefficient 

There are numerous Blockchain technologies available at the moment. The most well-known ones, such as Bitcoin, have many inefficiencies in the overall system. One of the main disadvantages of Blockchain is this. 

Firstly, it is discovered that the ledger can easily exceed hundreds of gigabytes when you start doing bitcoin mining on the system. It had inefficient data storage, which could cause storage issues for numerous nodes that desire to join the network. 

Since nodes must replicate the data anytime it is altered, there must be a better way to handle this. Moreover, as transactions and nodes increase, so does the size of the Blockchain. The entire network slows down if it keeps expanding. This is not ideal for commercial blockchains, where the network must be quick and safe simultaneously. 

With the aid of other Blockchain solutions, inefficiencies are being reduced gradually. Using lightning networks, Bitcoin is attempting to address these inefficiencies. 

6) Not completely secure 

Compared to previous systems, Blockchain offers higher security. This doesn’t necessarily mean that it is risk-free. The Blockchain network can be corrupted in several ways, some of which are outlined below: 

a) If one entity controls 51% of the network nodes, a 51% attack could result in network control. The ledger can then be altered, and double spending is thus possible. On networks with programmable nodes or miners, it is feasible. Therefore, 51% of attacks are more likely to occur on public networks than on private ones. 

b) Double spending is another problem with Blockchain Technology. Double spending is avoided by the Blockchain network using Proof-of-Stake, Proof-of-Work, and other techniques. Only networks susceptible to a 51% assault are capable of double-spending. 

c) The network slows down or stops during a DDoS (Distributed Denial of Service) attack because the nodes are overrun with requests for the same thing. 

d) Blockchain is insecure due to its encryption algorithm. Cryptography can be broken using quantum techniques or computation. However, quantum-resistant cryptographic methods are now used in Blockchain applications.

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7) Privacy issue 

The information on a public Blockchain is accessible to all network nodes despite being anonymous and encrypted. Thus, this data is adequately accessible to all network users. Transactional data is used to locate a person within a network, much like websites often utilise cookies and web trackers. This, unfortunately, shows that Blockchain Technology is not entirely safe. 

8) Users are their own bank: Private Keys 

For Blockchain Technology to become decentralised, anyone must be able to serve as their own bank. But this brings up another issue. Private keys are required to access resources or data contained in the Blockchain. Valuable information about the private key acquired when creating the blockchain wallet must be taken care of. They must also make sure that nobody else has access to it. Users cannot access their wallets if they misplace their private keys. A challenge to Blockchain Technology is its reliance on its users. Because not all users are digitally skilled, there is a higher chance of mistakes, which is a drawback. 

9) Thorough knowledge 

It's challenging to implement and manage a Blockchain project. To complete the process, the business must have in-depth expertise. One of the disadvantages of Blockchain is that it necessitates hiring numerous experts in the sector, which creates a problem.

10) Legacy Systems

Not all companies have upgraded from outdated systems. Many firms continue to run their operations using legacy systems. However, if companies want to use Blockchain Technology, they must entirely abandon their current systems and switch to it, which is only practical for some businesses. 

11) Scalability is an issue

Blockchains are not scalable as opposed to their equivalent centralised systems. If you have ever used the Bitcoin network, you must be aware that the speed at which transactions are executed depends on how congested the network is. This problem is related to Blockchain network scalability problems. In simple, the likelihood of a network slowing down increases as more users or nodes join it.

Yet, the way Blockchain Technology operates are becoming more modified. With the rapid Technological growth, Scalability solutions are also being incorporated into the Bitcoin network. The best solution is to use Blockchain for information storage and access, leaving off-chain transactions.

Finally, we can say that Blockchain may not yet be ready for practical applications. It needs to be significantly improved before it can be adapted to our daily lives.

12) Maturity

Blockchain Technology is about a decade old and still needs some time to mature and grow according to realistic expectations. If you closely analyse a few other guilds, you will find that they are creating unique solutions to the problem of decentralisation.

Hence, Blockchain Technology requires a lot more time to bring in the trust of businesses, where they can adopt this Blockchain Technology without hesitation. Thus, maturity is a concern that Blockchain Technology has to understand and take seriously into consideration how to address these issues.

This problem might not be solved very soon, as many other core concerns need to be addressed on priority and find standardised solutions.

13) Interoperability

Interoperability is another disadvantage that Blockchain Technology faces. There are several Blockchain network types which operate differently, trying to solve the Distributed Ledger Technology (DLT) problem in their distinctive way. Leading to an Interoperability problem as these chains are unable to effectively communicate. Any traditional systems or systems integrated with Blockchain Technology are bound to face the interoperability problem inevitably.

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The Top Blockchain Advantages

After having a brief understanding of the Disadvantages of Blockchain Technology, now let us look into a few significant advantages of the technology. These advantages described below might give you a hint on why businesses are eager to integrate this Technology.

1) Decentralised Trust

One of the most significant advantages of using Blockchain Technology is that you don’t have to trust a third party to make a transaction. As people using Blockchain Technology are more confident and have an assurance that any transaction will not be manipulated by any third party. Therefore, the companies feel that there is increased security and privacy attached to Blockchain Technology, which prevents any misuse of personal information or transactions.

But still, it doesn’t mean that Blockchain Technology-based applications are secure every time – it depends on the security code created by the blockchain developers. However, Blockchain has far better opportunities than traditional applications that can make you confident about your data and identity.

Companies feel a sense of confidence after adopting Blockchain Technology, obviously because of the type of services and quality the Technology provides to its users. Also, the payments are carried out in an instant without having to wait for days to get cleared.

2) Low operational Cost

Adapting Blockchain Technology in your organisation will reduce the overhead costs, as it does not require any servers or authority to maintain operations. Also, it has no sort of banking fees or payment processing involved as it opts for transactions that are peer-to-peer.

By applying Blockchain Technology, all kinds of third-party involvements are avoided reducing the unnecessary costs and expenses. The encryption system of Blockchain Technology secures your data against any identity thefts, minimising all kinds of operational costs.

3) No Single Point of Failure

Adapting Blockchain Technology leaves no room for failure.

Hackers always try to find the vulnerabilities to barge into your server or database. If they get unauthorised access to your system, the data is prone to be completely wiped out and affect the entire workflow and privacy of your sensitive information stored.

Blockchain Technology is in a distributed form and not centralised. It can protect your essential data if the network goes down. It is almost impossible for hackers to break into the central grid and affect any accounts connected with Blockchain.

The characters used to create a strong password can go up to 100 in number. The characters used in creating a password can include numbers, letters, and symbols. Generally, a password of 8 characters long can be said to be strong enough in a regular context.

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4) Enhanced Security and Confidentiality

Blockchain is inherently supposed to be more secure than any other centralised system protected by cryptography across the globally distributed network of computers.

As the attempt to make any changes to the record reflect in real-time, it is very tough to tamper with the records of any system. 

Blockchain can help you keep confidentiality, assisting you to lay down and keep your details away from the track of malicious hackers. You can complete your transactions while staying anonymous. 

The added layer of confidentiality in Blockchain can help keep the advertisers at bay and avoid thieves tracking your identity or financial activity.

5) Quick Transactions

Processing transactions with Blockchain technology is much faster than anyother conventional banking system. Thus, businesses that have adopted Blockchain Technology can save a substantial amount of time and amount (required as processing fees).

Blockchain transactions are more of an automated process involving minimal human involvement and monitoring. Blockchain does not need any massive data structures as it is decentralised. It is predicted that Blockchain can save billions (of amount) for companies, which they spend as banking fees.

Conclusion

This brings us to the conclusion of our blog post on the disadvantages of Blockchain Technology. Blockchain Technology is still undergoing constant transformation and modification. Therefore, throughout this development, it continues and will continue to face some challenges. Before adopting Blockchain Technology, it is essential to be informed about these disadvantages.

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