Is Blockchain Technology technology really good?

In previous article What is Blockchain Technology?, we understood what the Blockchain technology is, how it emerged and developed.

Everything has two sides. In this way each technology has benefits as well as some challenges.  In fact some challenges of technology are not challenges of technology itself, but these challenges emerged due to some ills of human mind like greed, enmity etc. As a good citizen, we should absorb benefits of technology while minimizing its draw backs.

Benefits of Blockchain Technology

• Transparency

Blockchain is a transparent system. When any member of the network tries to make any change to a block, all other members in the network can see where the changes happened. The other members can verify the authorization of that change.

• Speedy

Payment, transfer and reconciliation of transaction take couple of minutes. We have not to wait for hours like third party systems.

• Secure

Blockchain works on distributed network. Practically distributed ledger is shared across more than 10,000 computers worldwide. If any hacker wants to change any information recorded in the block, that hacker will have to hack all ten thousand computers simultaneously worldwide which is practically impossible task.

• Anonymity

Blockchain technology shares minimum personal information to create private key cryptography.  The private key cryptography preserves anonymity and pseudonymity of the participants while keeping high transparency. Anonymity of participants reduces imbalances in power, abuses and arbitrary decisions.

• Empowered users

Users have control over all their information and transactions.

• Able to withstand malicious attack

Blockchain is decentralized network. Blockchain has no risk of a central point of failure. Thus, blockchain is better able to withstand any malicious attack than centralizes system.

• Simplification

All transactions are recorded in a single public ledger. This process reduces the clutter and complications of multiple ledgers.

• Lower transaction costs

There is no third party intermediary in blockchain system. So there is no overhead cost of exchanging assets. Hence, blockchain has reduced transaction fees.

Challenges of blockchain technology

• Lack of awareness

The main challenge against this technology is lack of awareness.  In developing countries like India, People and corporate firms still have fear of this technology due to unawareness about blockchain technology.

• Uncertainty

Blockchain technology is not widespread yet. This technology has only a few successful initiatives like bitcoin and land registry in some countries. Use of blockchain technology in healthcare industry is still imaginary concept. Thus, we are still uncertain about situation because we have not seen many successful models of this technology.

• Limitation of data storage

Each block of chain can only contain 1MB of data. Blockchain is able to handle 7 transactions per second.  In comparison, VISA has capacity to handle 56,000 transactions per second.

• High marginal Cost

Blockchain has law cost of transactions. But blockchain is newly adopted technology. There is lack of scale that increase marginal cost and makes transactions costly compared to existing systems.

• Legal and regulatory status is uncertain

Blockchain technology has the most successful modal of bitcoin. Modern currencies are created and regulated by national governments. Financial institutions face a hurdle in adoption of bitcoin until their national government settles the regulatory and legal issues.

• Large energy consumption

According to Deloitte, the bitcoin blockchain network’s miners are attempting 450 thousand trillion solutions per second in efforts to validate transactions, using substantial amounts of computer power.

• Transition concerns

Blockchain applications require changes or complete replacement of existing systems. To make switch to blockchain applications, companies must set transitional strategy and high initial capital costs.

• Cultural adoption

Past trends show us that each new technology has affected our culture. Blockchain technology is complete shift from centralized to decentralized network which needs some cultural adoptions.

Blockchain technology is still in initial stage. As the technology become popular, many challenges will disappear gradually.