Blockchain Advantages and Disadvantages (Useful Guide)

Blockchain Technology is one of the emerging technology in this digital ear.

Specially in last few years Blockchain gained so much popularity. More and more people are now connecting to this tremendous technology.

And because of that everybody is trying to learn more and more about this mind boggling technology.

Today we are sharing some Advantages and Disadvantages of Blockchain. If you interested to know more about blockchain you can read our What is Blockchain? article.

Blockchain Advantages and Disadvantages

While blockchain may initially seem to be full of drawbacks, it still has plenty of benefits. The benefits include allowing for a secure transaction, increasing transparency, faster verification and more user friendly.

As for negatives, it is simply difficult to separate them. Blockchain has not yet proven itself in its ability to create a secure transaction. It does not lend itself well to proofing transactions and creating more time to verify transactions for users. It does not lend itself well to risk, since people may end up trusting the people in their transactions rather than the blockchain itself. Overall, blockchain has  some things to work on, but it may still be the future for financial institutions.

Lets looks their pros and cons pointwise:

Blockchain Advantages:

Cost-effective Off-chain Management

Decentralized computing technologies provide robust management of blockchain transactions at a relatively low cost, or in other words, they offer a level of convenience that would have been unobtainable at much higher costs.

Blockchain would have required a considerably high amount of infrastructure for off-chain management in order to provide similar facilities.

Allows the Sharing of Value Through Encryption

Financial services providers are providing services using a centralized infrastructure in order to share secure data with their customers. However, such applications require sensitive and confidential data to be shared on a central platform. Blockchain has demonstrated its ability to secure a wide range of financial transactions.

Privacy of Transactions

The privacy of transactions made with blockchain solutions is extremely important because it allows organizations and individuals to store their information in a virtual space. This facilitates the exchange of information across borders as well as organizations.

Secure Data Protection

Blockchain holds a very important place in protecting both confidential and sensitive data. Data on blockchain can be encrypted and shared with organizations, organizations or consumers via the blockchain network. Financial transactions and other kinds of data can be stored on the blockchain, with companies that have invested in creating such platforms and other trusted parties.

Validating Records

Most of the financial institutions are using blockchain to validate their data. Since there is no centralized entity to validate blockchain data, its validity is authenticated by an independent third-party that has been validated by the organization. In other words, the validity of the data is validated without a centralized entity.

These are blockchain’s blockchain advantages.

Blockchain Disadvantages:


Because blockchains must be computed, the cost of maintaining the blockchain is the equivalent of an external processor. Fees charged by external providers result in increased costs. Blockchain has some advantages in cost, however, because less resources are required for the time it takes to synchronize the blockchain. Many potential blockchain applications do not require a lot of computation or some computation, but rather something else to process the blockchain. The simple example of a vote could be entirely managed by a blockchain without requiring additional computing resources. Most decentralized applications, however, do require some processing of the blockchain.


Because of the consensus layer in blockchains, the security of each transaction is controlled and validated by a select number of peers participating in the consensus. In practice, only a few members of a consensus group can validate the transaction and establish security. On top of this security challenge, all the changes to the ledger are always recorded on the blockchain, which means that users have to keep all the data in a permanent public database. Such a database can be lost and the information lost forever. The database will always remain private for everyone, as it is a public record. Any changes to the ledger would still be present and recorded in the blockchain. In contrast, if a database were not recorded in the blockchain, it would be lost forever if a single entity deletes the data.


In a blockchain system, every time data is accessed, it is recorded in the database. This creates a log, or history, of all the information from that point in time. When the data is accessed, the system will record a log entry as data is being accessed and stored. Every change in the database is stored in the log, which means it is a permanent record. Users would have to retrieve this information, however, to verify the correctness of the blockchain.


The existence of so many copies of the ledger generates unnecessary data storage. To avoid duplication, a blockchain can just aggregate the data in the ledger and store it in one database.


Some of the transactions in a blockchain can exceed the processing capabilities of a single processor, even one on a modern computer with multiple cores. While blockchain applications can generate some processing power, there are applications that need multiple processors.


In order for a peer to validate a transaction, a specific sequence of transactions must be verified by the peer. If a peer does not perform its job properly, there is a possibility that no valid transaction is completed, thereby adding additional data to the database. The peer also has to have a sufficient processing power to process the transaction data and resolve it. As more people join the network, it would need more processing power.

As a peer connects to the network, the peers communicate and exchange data. However, not everyone is communicating. Sometimes a peer doesn’t have the needed processing power to be able to communicate to other peers. The problem is even worse, in cases when one peer has a high processing power and doesn’t communicate to others, the blockchain database will remain incomplete.

This problem is solved by requiring nodes to have a strong consensus with the ledger system. For example, a large fraction of the users have to agree with the ledger before it is allowed to be updated. If a small fraction of the users disagree with the ledger update, the ledger cannot be updated.


Performance is important because a system’s performance is determined by the data it is handling. A blockchain would need to process the most recent transaction, and would have to communicate with other peers over the network. Some of the transactions would require hundreds of transactions to be verified, as well as transaction data. There would also be data that requires processing time, including transactions that have already been verified by a peer.

The blockchain network would also have to maintain a certain speed that could support the load from additional users and their transactions. In particular, some of the transactions require a high load on external storage units. There are three fundamental performance parameters: energy efficiency, resource efficiency, and processing speed. Energy efficiency is the system’s efficiency in processing data. This can be measured by using resources, as well as the amount of energy spent. In energy efficiency, resource efficiency refers to how fast data can be processed by a blockchain. Based on these parameters, a blockchain would need to have the capacity to process large transactions quickly. However, if there is too much load on the blockchain, processing speed would have a limited limit, resulting in large processing errors.

Is Blockchains Sustainable?

Compounding the challenge of deploying a blockchain is the cost of maintenance. When there are so many peers in the system, each one must have its own external processor. In practice, it is possible that one particular peer cannot host the computation because of its limited processing power. To circumvent this issue, the blockchain is transmitted over the network and aggregated by other peers. When a peer connects to the blockchain, it creates a contract with other peers by sharing a portion of the processing power. In some cases, a peer can also merge multiple transactions into one transaction in order to reduce data storage space, thus making it possible to support multiple transactions in one place.

As time passes, there are more applications and more users that generate more transactions. However, each peer in the network would also need more external processing resources, as it would be needed to transfer the ledger information back to the ledger system. In the end, the number of external processing units would increase, which would result in additional cost and more load on external resources.

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