Benefits & Drawbacks of Blockchain

Blockchain technology achieves decentralized security and trust in several ways. To begin with, new blocks are always stored linearly and chronologically. That is, they are always added to the “end” of the blockchain.

After a block has been added to the end of the blockchain, it is extremely difficult to go back and alter the contents of the block unless a majority of the network has reached a consensus to do so. That’s because each block contains its own hash, along with the hash of the block before it, as well as the previously mentioned time stamp. Hash codes are created by a mathematical function that turns digital information into a string of numbers and letters. If that information is edited in any way, then the hash code changes as well.

Let’s say that a hacker, who also runs a node on a blockchain network, wants to alter a blockchain and steal cryptocurrency from everyone else. If they were to alter their own single copy, it would no longer align with everyone else’s copy. When everyone else cross-references their copies against each other, they would see this one copy stand out, and that hacker’s version of the chain would be cast away as illegitimate.

Benefits of Blockchains

• Improved accuracy by removing human involvement in verification
• Cost reductions by eliminating third-party verification
• Decentralization makes it harder to tamper with
• Transactions are secure, private, and efficient
• Transparent technology
• Provides a banking alternative and a way to secure personal information for citizens of countries with unstable or underdeveloped governments

Drawbacks of Blockchains

• Significant technology costs associated with mining bitcoin
• Low transactions per second
• History of use in illicit activities, such as on the dark web
• Regulation varies by jurisdiction and remains uncertain
• Data storage limitations