In our last post on the subject of blockchain ” Blockchain Success: Blockchain Technology on the Rise “, we presented how blockchain technology works and shed light on the story behind how it works. In today’s article we will go into the advantages and disadvantages in particular and show you the potential and opportunities blockchain technology can bring to you and your company in the future.
Advantages and disadvantages of blockchain technology
Companies and businesses often waste a lot of time with double recording of business processes (e.g. double bookkeeping) and corresponding validation by third parties. In addition, the lack of transparency slows down the process, the high volume of transactions and systems and platforms are vulnerable to fraud and cyber attacks. Blockchain technology can help here!
Benefits of blockchain technology
More Trust: Members of a blockchain network can be assured that only appropriate network members with access receive the accurate, transparent, and up-to-date data, and that your confidential blockchain records are shared only with them.
- More security: All network members must agree on the accuracy of the data and all validated transactions are immutable as they are permanently recorded. Nobody, not even a system administrator, can delete a transaction.
- More efficiency and speed: With a distributed ledger that is used jointly by the members of a network, the time-consuming comparison of records is no longer necessary. And to speed up transactions, a set of rules — called a smart contract — can be stored on the blockchain and executed automatically.
- Authentication and tracking: What is documented is irrelevant to the concept of blockchain. Crucially, later transactions build on earlier transactions and validate them by demonstrating knowledge of the earlier transactions. This makes it impossible to tamper with or erase the existence or content of the earlier transactions without altering all later transactions as well. Other participants in the decentralized accounting then recognize a manipulation of the blockchain from the inconsistency of the blocks.
- Every participant in the blockchain network has equal rights: The blockchain network is a peer-to-peer network (peer = equal). In other words, with this network structure, all participants are linked to one another and have the same functions and therefore equal rights.
- Reduction of costs: When using the blockchain, you can significantly reduce the costs for administration, as well as internal and external financial transactions and reporting, since you do not need external trading partners and platforms and can therefore save.
Disadvantages of blockchain technology
- Storage effort & capacity volume increases: With each processed block and data record, the blockchain and the associated storage effort grows
- Complex implementation: The blockchain technology is not yet widespread and a corresponding integration is complex, since the general knowledge (know-how) is currently still missing
- Increasing performance: The processing of the data will require a corresponding level of performance, since the data is decentralized (distributed).
- Transparency: The disclosure and transparency of past transactions can also unintentionally influence future movements.
Where is blockchain technology used?
The blockchains are used to verify the data transactions of those involved. Blockchain technology helps with all processes in which data is secured, authenticated and distributed without any intermediary person or organization. In theory, contracts, payment transactions, capital market movements, certificates, certifications, copyrights, patents and registers can be managed without notaries, banks, trustees or state institutions. This explains the growing interest in the most diverse branches of the economy.
These include sectors such as…
- Banking and finance sector (more on this in the blog post on the subject of cryptocurrencies and digital currency)
- real estate industry
- automotive industry
- Transportation and Supply Chain Management
- insurance industry and
Proponents also see potential in the legal system , in the energy industry and in public administration .
The IT industry is already using blockchain today!
Many areas of the information technology (IT) industry are decentralized today, i.e. tied to a “spot”. This is due to today’s digitization through the Internet and cloud technology. The blockchain will also continue to advance the development of the technology in order to gradually reduce the disadvantages listed.
The best example of the use of blockchain today is the cryptocurrency around Bitcoin, Ethereum & Co., because here too there is decentralized computing power between the blockchain and company systems. Blockchain application platforms for the financial industry such as ERIS, R3CEV or We.Trade are intended to bring secure, transparent and verifiable business models into IT, especially in the financial sector.
As already presented in the disadvantages, the integration with the existing company systems is a challenge. Nevertheless, the listed advantages are a justification for integrating them into the company structure.
Blockchain is the music of the future!
Every technical revolution started out small! This also applies to the decentralization of communication, which also includes blockchain technology. At that time it started with the Internet, every Internet user got additional information on different platforms and sources that could be consumed. Then, a few years later, the following trend emerged: The decentralization of computing power and storage capacities. We are talking about cloud storage and cloud computing here. The next and current step is blockchain technology. The decentralization of the blockchain not only controls ideas and cryptocurrencies such as Bitcoin & Co via the network, but also digital content such as art, music or photos as “Non-Fungible Tokens” (NFT) .
At present, it is mainly private users who use the public blockchain applications for cryptocurrencies. Companies are not too willing to experiment in this regard and are initially relying on private blockchain solutions.
Whether blockchain architectures will prevail against centralized systems also depends in part on the hurdles in the areas of data security, data protection and the processing effort to be overcome. Blockchain technology offers the potential to make processes faster, more transparent and more cost-effective for almost all industries. Also:
- Transparent auction
- Marriage via QR code in the USA 2014
- Payment for the charging stations of electric cars with the Bitcoin variant Etherum (cooperation between Slock.it and RWE)
- “Permanent elections” for more democracy
- No more manipulated odometer readings
- Measure against prescription fraud
Also Read: Future Of The Media Technology