Blockchain is hailed by many as a revolutionary and transformative technology that will effectively alter the state of modern cybersecurity and digital transactions. It was developed to power the infamous Bitcoin, one of the more popular cryptocurrencies currently in use.
In layman’s terms, blockchain is a modern, digital ledger designed to record and secure all transactions that happen under its reach. It’s distributed, meaning it’s not a centralized network, and it’s not controlled or affected by a single entity or party. Rather, the entire blockchain is a public and open network of sorts, meant to facilitate the exchange of data and information. Every entry or transaction — referred to as a block — that happens along the chain is both verified and secure from external influence.
Before a transaction or digital “block” can enter the network, it must be verified. This process includes gathering information, such as answers to the following:
- Is the currency or “valuable” asset truly there?
- Are the sender and receiver reputable and verified?
- Is the transaction request legitimate, and can the involved parties be trusted?
This verification is part of what makes blockchain technology so alluring because it's transparent, accurate and decentralized.
In truth, blockchain is closer to a foundation. It provides the structure, basis and support for future transactions and data exchanges and will likely be expanded upon over time. More technologies and similar platforms, for instance, will be overlaid and incorporated into it.
A deeper and more intrusive understanding of blockchain requires a considerable guide. For now, we’re going to focus on the pros and cons of the technology, which will probably influence whether or not you want to adopt it for yourself or within your organization.
The Many Pros of Blockchain Technology
Blockchain is built upon an incredibly secure yet open network that’s decentralized and free from direct corruption or alteration. Anything of value — data especially — can be transferred or exchanged in a safe, confidential and transparent manner. All transactions are also free from subsequent alterations after being stored on the chain. Blockchain is considered to be like a ledger. The difference is that anything recorded via the digital chain cannot be erased or changed like written details in a paper ledger.
This characteristic highlights the most important benefit of blockchain. Anything you see on the network is accurate, verified and trustworthy. At the same time, all parties remain confidential. What you can see is the transaction, how much “value” or currency was exchanged and some of the minor details, like dates and times.
All transactions are stored via a massive peer-to-peer and global network, which is the "chain" in the technology's name. To change a particular detail or entry, you'd need to simultaneously alter the information across the entire network, which is seemingly impossible.
Another benefit is that the value or currency being exchanged is free from a conventional and centralized influence. For example, in the event of an economic crisis, banks and financial agencies can freeze fiat currencies. This interference is simply not possible with cryptocurrencies and the content stored within a blockchain. Furthermore, transactions are irreversible. This quality can be considered both a pro and a con, but provided you’re careful and smart, it should work in your favor.
Blockchain Benefits Apply to More Than Digital Currencies
Before we touch on the cons, we want you to understand what implications blockchain has for more than just digital and cryptocurrencies. You see, while that’s the common application of the technology, it’s not the only way blockchain can and is being used.
The “currency” or “value” exchanged along the chain can be just about anything. It can be used in the modern supply chain to keep track of goods and foods being transported. It can also be used in business settings to exchange sensitive documents, like a real-estate buyer’s agreement. In healthcare, blockchain is being used to store, share and facilitate the transfer of important health and patient records. It’s even being applied in the music industry to handle media ownership rights, royalties and content distribution.
In every one of these situations, the above benefits apply to the related content. Real-estate transactions and contracts, for example, see greater levels of transparency and security when exchanging hands via a blockchain system.
Blockchain Technology Cons: What You Need to Know
The biggest setback of blockchain technology relates to adoption. Since blockchain is relatively young, support can be hard to find or build momentum toward. It also means that if you have an idea or use-case for the technology, you’ll have to develop its structure yourself, in-house. This issue is considered to be one of the biggest — if not the biggest — barriers to entry.
To put it into perspective, with cryptocurrencies like Bitcoin, many governments, offices and retailers don’t accept them. Their value fluctuates, and they’re not widely understood. Therefore, if you invest in cryptocurrencies like Bitcoin, Monero or Etherium, you may find yourself unable to use the profits you’ve earned. With digital data and content, the issues aren’t quite so glaring, but it does mean that adoption may be slow and partners or interested parties may need time to begin using the system(s) in place.
Furthermore, because of the nature of blockchain technology — especially since all transactions are final — it’s a rampant market for scammers, seedy characters and hackers. Manipulation can and does occur, which shows that even highly secure technologies are not infallible.
Since blockchain is decentralized, it cuts out the need for intermediaries like banks, financial professionals and advisors, lawyers and even government or regulatory agencies. In today’s world, there are still a lot of people involved and employed in these institutions. As a result, swapping to blockchain — at least in a financial sense — will be resisted heavily. It’s likely that this pattern will be seen in other industries too because there are other intermediaries that might feel the impact of the technology’s adoption.
For applications of blockchain in the real estate industry, for example, anyone dealing with legal documents — like notaries and financial or estate managers — could be cut out of transactions entirely. Imagine a buyer selling directly to another party, with all documents and contracts exchanging hands via the blockchain. Only the buyer, seller and required legal professionals would be accessing and handling the digital documents — everyone else would be effectively removed from the transaction.
Blockchain Is Promising but Not Perfect
As you can see from the list of cons, a few quirks and issues still need to be worked out with the technology. The barriers to entry and slow adoption rates are just a couple examples, which will eventually be less of a problem as support and training continue to grow.
Don’t be discouraged completely by the aforementioned cons. They may show that the technology isn’t right for you at this stage, but that could change in the near future. You may even find that the security, transparency and decentralization boons outweigh the setbacks.