Blockchain technology: love it or hate it, there’s no denying that it has a huge buzz factor.
Like most things buzzworthy, blockchain doesn’t always live up to the hype. While blockchain technology is hugely innovative in many ways, it has its limitations.
So where does the hype stop and reality start when it comes to blockchain? This article explains by offering a sober, grounded analysis of the pros and cons of blockchain technology.
What is a Blockchain, Really?
In essence, a blockchain is just a special type of database. It’s a place for storing digital information.
As with most databases, the information you put into a blockchain could be almost any type of digital data. It could be transaction records for a cryptocurrency, as in the case of bitcoin. It could be personal files that you store in a cloud-based service. It could be learning credentials.
So, what makes a blockchain different from other databases?
The answer is that a blockchain database is decentralized. In other words, the data is not stored in any single location, and no single party has control over it. Instead, the data is spread across hundreds or thousands of individual computers, each controlled by a different person or group.
This decentralized architecture is what makes blockchain technology so powerful. Because no one person or group has control over the data that lives in a blockchain database, the information that a blockchain stores cannot be changed in sneaky ways. Nor can it be lost, unless the network of computers that hosts the blockchain were to suffer catastrophic damage, which is highly unlikely given that on most blockchains, the host computers are geographically dispersed.
The decentralization factor is also what makes blockchain different from the types of databases that came before. The databases that host most of the data for the software you use — think MySQL, PostgreSQL, Cassandra and the like — are centralized databases that are ultimately controlled by a single group. Even if their data is distributed across a cluster of computers in order to increase availability, all of those computers are controlled by a single party, which could do whatever it wants with the data.
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The Pros of Blockchain Technology
The decentralized nature of a blockchain gives blockchain several distinct advantages over traditional databases:
- Fraud and unauthorized manipulation of data are difficult.
- Blockchain-based data is transparent by its nature. That instills confidence in users whose data is stored on a blockchain.
- Because blockchain-based data is distributed across a large network of computers, it is resilient against data loss and infrastructure failures.
- In most cases, the data on a blockchain is immutable. In other words, once data is recorded to the blockchain, it cannot be erased or undone. (Caveat: Some blockchains don’t actually guarantee immutability, but because the bitcoin blockchain was designed with this feature, immutability often comes up as a core function of blockchain technology.)
These features make it possible to support a great many use cases that would be out of reach using a traditional, centralized database. You could build a social network that offers new ways of guaranteeing users’ privacy. You could improve patient privacy in the healthcare industry. You could help to secure devices on the Internet of Things.
The Cons of Blockchain Technology
While the list of problems that blockchain technology could solve is virtually limitless, there are some clear drawbacks to using a blockchain to store data. They include:
- Transaction delays. One of the biggest drawbacks of the major blockchains that have been created so far is that they usually take a fairly long time — typically a few hours — to register transactions. There are ways to work around this limitation, such as using “off-chain” transactions. Still, in most cases writing data to a blockchain is not instantaneous.
- Security vulnerabilities. There have plenty of security breaches involving blockchain-based data. Blockchains are fraud-resistant as long as everyone plays by the rules because the rules say that data can only be changed if a majority of users agree. But if an attacker finds a security vulnerability in a blockchain protocol that makes it possible to manipulate data without the consensus of the community, bad things could happen.
- Blockchain does not guarantee full transparency. Moving data to a blockchain can be one way to help make your software project or company more transparent. But it doesn’t suddenly make everything about “open.” You could have a closed-source application that stores data on a blockchain, for example. In that case, no one except you would know exactly how your software operates, despite the fact that its data lives on a blockchain.
- Access control. In general, all data stored on a blockchain is accessible to anyone who wants to read it. That means that you can’t usually store data on a blockchain in such a way that only authorized users are able to see it. There are potential access-control solutions for blockchain-based data, but they are complicated to implement and may still not guarantee perfect data privacy.
- The risk of “forks.” The decentralized nature of blockchains means that there is nothing to stop part of a blockchain network from breaking off and starting its own blockchain. This type of split in a blockchain community, which is called a fork, has happened frequently. Although a fork doesn’t necessarily spell disaster — your data should remain intact — the risk of forking can create challenges in the event that you write an application that depends on a particular version of a blockchain protocol, and the protocol is then modified during a fork.
Conclusion: Should You Use Blockchain Technology?
Blockchain technology makes it possible to do lots of useful things that are just not feasible using traditional, centralized databases. But before you migrate your data from a conventional database to a blockchain, it’s important to evaluate the drawbacks of blockchain-based data — and to admit to yourself that, despite all the hype surrounding blockchains, a blockchain doesn’t magically guarantee data security, enable instant data transactions, or provide total transparency.
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