What is the Drawback of Blockchain
In our earlier examination of blockchain’s possible advantages, it is evident that although the technology has some advantages, there are also serious drawbacks, difficulties, and misunderstandings that may prevent its broad use and efficacy. When thinking about its use, it is critical to comprehend these factors.
The following are some significant drawbacks and misunderstandings about blockchain technology:
Overhype and Misunderstanding
- Blockchain technology has been hailed as the solution to nearly all transactional problems and as possibly more disruptive than the internet.
- The inclination to overhype and abuse the technology is a result of this hype. Because it is new, poorly understood, surrounded by misunderstandings, and associated with FOMO, many projects try to include it even when it is not essential.
- Blockchain isn’t a panacea, though, and it can’t solve every issue. Traditional systems that are already in place could be more appropriate. Blockchain is used in some applications where traditional peer-to-peer technologies are enough. Blockchain should not be used by businesses until the use case really calls for that design, according to Forrester researcher Martha Bennett.
- Instead of attempting to shoehorn an issue into the blockchain paradigm, organizations should look at how blockchain may be beneficial to them.
Maturity and Development Challenges
- The development of blockchain technology is still in its infancy. It is said to be far from finished and still has obstacles that may not be overcome for years or perhaps ten years.
- Compared to conventional IT systems that have undergone decades of development, this technology is still in its infancy. Blockchain and other distributed systems invariably increase overhead.
- The difficulties of creating blockchain-based systems may exceed the anticipated advantages. From conception to production, the majority of ongoing ventures suffer. Investment losses and unmet expectations might result from trial-and-error development.
- The blockchain ecosystem isn’t standardized enough. Numerous rival blockchain versions and specifications exist. Blockchain networks struggle to communicate due to this inconsistency.
- The unfamiliar technology may make legacy system integration challenging.
Performance and Scalability
- Scalability is a major obstacle. At the moment, blockchain networks are less scalable than conventional financial networks.
- Transactional throughput, latency, and size limitations are present in the majority of blockchains nowadays. Compared to their centralized or decentralized equivalents, they are less nimble.
- The pace of transactions is sluggish. Bitcoin transactions can take minutes or days, depending on network load, yet credit card networks can handle hundreds every second. Ethereum handles 14 transactions per second, which is slow for fast-moving organizations.
- Steer clear of use cases that include a lot of data and transactions because this may cause the blockchain to lag and become less effective.
- Large volumes of data cannot be directly stored on public blockchains due to scalability concerns.
- It takes a lot of energy and processing power to reach consensus, especially in permissionless blockchains that use Proof of Work.
Immutability and Data Handling
- The ledger is not necessarily immutable, despite being hailed as such. It is resistant to tampering and tamper evident.
- The ‘tail’ or recently released blocks may be swapped out for a longer, different chain. Users frequently wait for many block confirmations before deeming a transaction complete because to the limited immutability of tail blocks.
- It is very difficult to change or remove data once it is stored on a blockchain. Erasing a mistake that has been entered is difficult and may take more time and effort to correct. Usually, the data remains permanently.
Security and Trust (Nuances)
- The idea that blockchain networks are “trustless” settings is a frequent misconception. Working in a blockchain network requires a lot of confidence, even though permissionless systems sometimes lack a single trusted third party. This involves having faith in the developers, the proper functioning of smart contracts, the cryptographic technology, and the fact that the majority of users are not conspiring.
- Blockchain networks are secure in terms of cryptography, but the apps that operate on them could not be. Software vulnerabilities, not network security flaws, can compromise security. In addition to immutable problems that cannot be easily fixed, smart contracts may contain unanticipated vulnerabilities.
- Attacks can target transactions that haven’t been included to a block yet. Denial of Service (DoS) and timestamp spoofing are examples of potential attacks. Hackers could be able to access data while it’s in route.
- A 51% assault is feasible if one organization or person has control over more than 50% of the network’s processing power, which enables them to break the chain. Smaller membership sizes on private or permissioned blockchains may make this simpler.
- A node’s private key might be lost or destroyed, rendering the blockchain worthless.
- Due to its association with cryptocurrency, which might be unlawful, blockchain has a poor reputation. This has made it less appealing and flexible. Once posted on a blockchain, illegal content is nearly hard to take down.
Privacy and Confidentiality
- Public blockchains are typically pseudonymous, while some provide anonymity. Usually, every participant can see every transaction.
- In finance, law, and healthcare, this intrinsic openness risks critical data privacy.
- Identification is not inherently supported by blockchain technology. Infrastructure that uses public keys does not always support identity. Processes outside of the blockchain itself are frequently needed to link participants to real-world identities. Conventional implementations are not intended to function as identity management systems on their own.
- Data visibility is an issue, particularly when it comes to laws like GDPR and PII.
Implementation and Adoption Hurdles
- Adoption is difficult due to the high implementation costs of blockchain technology.
- Data governance and privacy remain key issues.
- Lack of technical knowledge and skills hinders blockchain implementation.
- Customers and intermediaries must adjust to a system without physical, reliable third parties, which might cause resistance to behaviour change.
- The process of bootstrapping current systems onto a blockchain involves a lot of time, money, and migration work. One problem is clients who are hesitant to cooperate with data shifts.
- Decision-makers are hesitant because the return on investment (ROI) for blockchain projects is unclear.
- Adoption may be slowed down in many nations by unclear legal frameworks and regulatory ambiguity. Problems with jurisdiction might occur in dispersed networks that span several legal domains.
- Due to its immaturity, DLT adds complexity and, at least for the moment, danger.
Specific Blockchain Type Issues
- The integrity of authorized users is crucial to security on permissioned blockchains. Because ledger managers have the ability to limit transactions, there may be a degree of censorship. One may consider permissioned blockchains to be semi-centralized.
- Although permissionless blockchains provide anonymity, this might make it challenging to find the fraudsters if it happens. They may also be employed for illegal purposes.
To sum up, even though blockchain promises ground-breaking advantages like greater trust, transparency, and efficiency, businesses and individuals must deal with these serious drawbacks, continuous development issues, security quirks, and misunderstandings to decide if it is the best option for a given issue or sector.