Blockchains are tamper-evident and tamper-resistant digital ledgers (computerized files of financial data) implemented in a distributed fashion (Business-to-business process) and usually without a central authority. At their basic level, they enable a group of users to record the transactions in a shared ledger within that community, such that, under the regular operation of the blockchain network, transactions can’t change once published. In simple terms, it is a technology with advanced mechanisms that allows the transfer of data /information within a business community. Despite having a high future scope and many advantages, this technology has disadvantages too. As we know, every coin has two sides, and so does a cryptocurrency. So, let’s discuss its disadvantages. The top 10 disadvantages of blockchain technology are:
1. High Energy Consumption
The power consumption is needed to keep a real-time ledger. The network’s miners seek to solve large solutions per second to validate transactions. They use substantial amounts of computer power. As more mining capacity joins the network, the Proof Of Work Puzzles must be made more complex. This way, it still takes the same time to solve them, but it just takes more energy. Additionally, a significant amount of processing power is required for the computation process because each transaction needs to be signed using the cryptographic system, which results in high energy consumption.
2. Expensive Blockchains
Blockchain is expensive and resource-intensive. Every node in it redo a task to reach a consensus. This way, transparency is created, which requires miners to decode complex mathematical puzzles to validate transactions. Because the entire process uses a lot of energy, nurturing these networks can be expensive.
3. Slow Processing
Transactions are verified based on certificate authentication, land titles, cryptocurrencies, etc. A transaction can only be settled in the Blockchain when all nodes have successfully validated the transaction. The process can be prolonged as the block inserted needs to mark the transaction as authentic by all nodes. It can limit its potential for high-throughput applications.
4. Complexity
The concept of Blockchain is still latest, and full of complex and complicated concepts that don’t make it easy to understand for a general human being. It is not yet ready for conventional usage because the concepts, and procedures have not polished to the point where the average person might readily understand the directions and instructions provided on how to use it effectively.
5. Lack Of Privacy
In Blockchain, all information related to the transaction is publicly available, making it transparent and traceable. It can become a significant liability, where privacy is crucial when distributed ledgers are used in regulated environments such as dealing with government data or patient-medical data. The ledger is needed to make a difference and should be limited with proper clearance only. Blockchains open to the public, such as Bitcoin, are available to all, and all the data stored on them is viewable to all members.
6. Security Vulnerabilities
This technology, known for its high level of security, is not completely foolproof. Although, having a standing for being secure, they are not safe from vulnerabilities and attacks. It is vulnerable to various threats such as an Attack of 51%, Double-spending, DDos’s attack, and cracking of the cryptographic. It has appeared that these are mainly possible in permissionless Blockchain, which is open to everyone. Permissioned Blockchain is more secure as there is no access to this network outside of the approved nodes or users.
7. Immutability
It is a feature in a Blockchain when the transaction connects to the digital ledger it won’t be possible to change or delete it. While it’s a key factor, it can become a disadvantage in some situations where either the other party was a fraud or maybe a case where both the parties are unsatisfied with the deal.
8. Splitting The Chain
In Blockchain, splitting of the chain is known as forking and is categorized into two parts – soft and hard fork. If the soft fork establishes the new ruleset for the blocks in the protocol, the nodes are updated to enforce its rules. If it is validate before violating the new soft fork rules, the block won’t be considered. A hard fork is quite similar to a soft fork but, with a little difference. If a specific block follows the rules set by the hard fork, it will be welcomed, even if it was not in the chain before.
9. Limited Adoption
Blockchain ecosystems need to be widely adopted to function correctly. For instance, to implement track-and-trace capabilities in supply chains, a business must embrace a blockchain network, and its suppliers must do the same. The three most important elements influencing blockchain adoption are institutional, market, and technical. Institutional arrangements are a set of rules that regulate the interaction between parties. These rules are often shaped over time and might differ among markets and cultures. Another factor is that blockchain technology needs to overcome cultural resistance by market incumbents.
10. Lack Of Regulation
Blockchain relies on collective governance to provide trust in markets to ensure that all stakeholders play accordingly. The absence of such sovereignty is the main reason behind blockchain cybercrime and other criminal activities. Laws and regulations can impact how fast the technology could develop. So, administration with policies, procedures, mechanisms, and applications is needed to realize the real societal benefits of blockchains.
