Blockchain is a decentralized database. It can be thought of as a ledger in which entries cannot be faked because copies are stored on thousands of computers. The data entered into the blockchain is divided into blocks, encrypted and sequentially linked to each other.
In this article, we will consider the advantages and disadvantages of blockchain. We'll also look at how to mitigate one disadvantage that could affect the average user.
Advantages of Blockchain
The data stored in the blockchain is duplicated on a large number of computers in different countries. Therefore, the system is resistant to disruptions and hacker attacks, because it is impossible to hack at once thousands of computers set up independently. If one node of the network goes down or fails, it does not affect the performance of the blockchain - it continues to function stably and perform its tasks.
Traditional databases, on the other hand, which are still in widespread use, are stored on one or more servers. Therefore, in the event of a failure or targeted attack by hackers, the system may be unavailable for use.
Traditional payment systems have the disadvantage of being dependent on intermediaries. It can be a bank confirming transactions or another financial service provider. Even if both counterparties trust each other, they cannot be 100% sure that the funds will reach the recipient without any problems.
With blockchain, this problem disappears. The system checks and confirms transactions automatically. This reduces fees and eliminates the influence of intermediaries on the parties involved in the transfer.
Blockchain has no government or banking control, which is one of the major advantages of blockchain.
The blocks confirmed and attached to the main chain remain there forever. It is impossible to change them. Consequently, the data stored in the blockchain cannot be tampered with or deleted.
The technology allows you to securely store financial or other records that require rigorous accounting. Anyone can check their authenticity or simply examine them.
This is useful in a number of areas. For example, in business, blockchain can be used to protect against employee fraud. If all transactions are stored in a distributed and public register, an employee cannot hide any of them.
Disadvantages of blockchain
The algorithm on which Bitcoin and most similar cryptocurrencies run has proven itself to be a reliable and stable technology. However, in theory, hacker attacks are possible that can temporarily disrupt its operation. The best known and most likely of them is called a 51% attack.
To realize this possibility, more than 50% of the hashrate (the power produced by the mining equipment connected to the network) of the entire blockchain must be in the same hands.
In this case, the attacker will be able to:
- keep specific transactions out of the blockchain;
- change the order of transactions;
- exert control over the blockchain confirmation process, making it impossible for other network participants to influence the blockchain.
In practice, no one has yet succeeded in a 51% attack. And with each passing year, the likelihood of its implementation is falling. Bitcoin blockchain's hashrate is growing all the time because more and more capacity is being added to it. Consequently, the amount of power needed to conduct an attack also grows
Since a successful 51% attack can only cause a temporary disruption and cannot steal funds stored in users' wallets, its implementation is simply unprofitable. An ordinary participant of the cryptocurrency market does not have to worry about anything at all - the attack does not threaten him in any way.
You can read more about the 51% attack in another article on our blog at https://broex.io/ru/blog/blockchain/ataka-51.
The difficulty of making changes
Some advantages of blockchain technology can be also regarded as disadvantages. For example, the network stability discussed above. The data added to the network cannot be changed. The only option is to make a hard fork (a change to the blockchain protocol that is incompatible with previous versions), creating a new blockchain with the necessary changes and leaving the old one unused.
To make changes to the blockchain through a hard fork, miners must reach a consensus - a majority of them must vote in favor of the changes. That's why it takes a lot of effort on the part of enthusiasts to, for example, update the network.
Every address in the blockchain (you could conventionally call it a wallet) has two keys: a public key and a private key:
- The public key can be shared with other members of the network, so they can send you funds - it's secure;
- The private key is important to keep secret, as it gives you access to the funds stored in the address and allows you to make transactions.
Since blockchain is not controlled or regulated, users are responsible for keeping their personal funds safe. If the public key is lost, it is impossible to regain access to the wallet and their cryptocurrency. In this case, funds can be considered lost.
Looking ahead, we note that the problem can be solved by using a custodial wallet. Then a trusted company will be responsible for storing the user's funds. More information about this will be given at the end of the article.
Bitcoin's blockchain and others like it work with a highly inefficient algorithm. The reward of a miner who keeps the network running by connecting computing equipment to it depends on the power of the latter. Accordingly, miners constantly increase the power they use in order to increase their profits.
As a result, the amount of power consumed by the Bitcoin blockchain has already exceeded that of entire countries, such as Denmark or Ireland.
To become a full member of the network, supporting its operation, you need to download a full copy of the blockchain to your computer. By the end of 2021, it will reach about 400 GB in size. And the larger it gets, the larger hard drives are needed to store a full-sized copy.
Over time, some nodes on the network may cease to function simply because their owners won't have that much disk space.
Blockchain technology, the advantages and disadvantages of which are discussed above, has made the creation of cryptocurrencies possible. Many of them, like Bitcoin, are independent of any banks or states. This makes cryptocurrencies a secure investment, the popularity of which is constantly growing.
But as stated above, if the private key of the personal wallet is lost, the user will lose access to the stored assets. To avoid this, one can use a custodial wallet, such as Broex. It is a reliable company officially registered in Estonia. It has a license from the regulator to operate. Broex takes care of the safety of cryptocurrency stored in users' accounts.
Advantages of Broex
Broex is also a cryptocurrency exchanger. It can be used for buying or selling Bitcoin, Ethereum, Dogecoin and other popular coins. At the same time, the platform has a number of advantages:
- Simple Russian-language interface. The exchanger and the wallet were created in such a way that even a beginner could understand them.
- Instant deposit of funds. You can replenish your account with a bank card, electronic wallet, or by many other methods.
Low commissions - starting from 0.1% for the exchange. In some cases, there are no fees at all. Therefore, buying and selling cryptocurrencies through Broex is more profitable than in a number of other exchangers.
The minimum deposit is 1500 rubles. To invest in popular cryptocurrencies, you will not need to allocate a large sum at once.
And if you have a problem or need advice, you can contact the technical support. Operators are available 24 hours a day and 7 days a week. So any question support will help you solve quickly and easily.
If you've been thinking about buying your first Bitcoins for a long time, do it with Broex, a convenient and reliable cryptocurrency exchanger.