Due to the tremendous advancement in science and technology, concepts such as Bitcoin and Blockchain are getting noticed every day and gaining immense popularity. Blockchain, without a doubt, is going to be the next big thing owing to its capabilities which impact our lives on a personal and professional level. In the simplest of terms, blockchain is regarded as a simple digital platform used for recording and verifying transactions in such a way that it is visible to everyone and cannot be erased by anyone.
In technical terms, blockchain can be described as a distributed, immutable (tamper-proof), decentralized public ledger which records transactions in the form of blocks and uses an autonomous peer-to-peer payment system which relies on secure cryptographic protocols
The One Very Dear Reason To Have Confidence In Blockchain
As we know, trust is a foundational element of any business and any industry, for that matter. Maintaining it, especially in a global economy which is becoming increasingly digital, consumes a great deal of time and money and is inefficient in most cases. But the one very dear reason to keep track of blockchain, the technology which is the backbone of the very existence of cryptocurrencies, is trust.
Blockchain possesses the highly valuable quality of creating trust between individuals and organizations which do not have prior relationships and even an existing mistrust. Blockchain provides the option of creating self-executing and enforcing contracts which cannot be modified or tampered with. Cryptology is the keeper of trust in a blockchain as complex algorithms are run by all participants to certify the integrity of the whole. It replaces intermediaries with mathematics.
Let’s assume that you are investing in a building project with 100 other people. Since none of you know each other, there is no trust among each other. Here, a smart contract is created to receive investment funds, payout to contractors, and payout of the earnings after the sale of the project to a third party. This requires trustworthy third party services. The deliverables from the contractor can be confirmed by the surveyor. The official building ownership registers can act as a source to provide details such as the year in which the building was sold to the third party and when it will trigger an investor payout. As the contract is open to all parties, it cannot be altered, and it would be executed as per plan, thereby needing no trust between parties. This is one scenario which perfectly depicts the trust offered by blockchain.
Let us now analyze the three compelling reasons for being skeptical about blockchain or for completely bypassing it.
1. The Immutability Of The Blockchain Ledger
Immutability of a blockchain acts as both a blessing and a curse. On one side, it paves the way for a transparent, honest, and trust-less global economy. On the other side, it has been the main cause for many people losing millions of dollars due to hacks and data breaches. As there is no central authority, these hacks are always completely finalized, which implies that the funds are lost forever. Have you ever written a program free of bugs and released it into the world? By using the smart contracts provided by a blockchain, you will only get one chance of doing it right. There is no turning back after the code is uploaded and mined. If you have missed a scenario in your code which would lead to malfunction, it is really a bad state for both you and your customers. New versions of the contract can be released with self-fixing code, but the one which you uploaded on the blockchain before can never be called back. Though the immutability of blockchain is touted as one of the most efficient benefits, it is not always a good thing as the transaction once recorded by a participant can never be deleted or modified.
2. Costs Incurred
Executing transactions and contracts in blockchains, especially in those like Ethereum are ridiculously expensive. There are numerous services on a blockchain for which we are charged. A blockchain can never be forever free. The various costs covered are the cost of storing data, sending and receiving data, operational costs such as employees, facilities, legal and accounting expenses, marketing and outreach, etc. Think twice before making the crucial and costly decision of storing all your data safely and securely on a blockchain. The cost of cloud storage is becoming lower each day while storage in blockchains keeps increasing.
3. Speed Of Transactions
Due to its rising popularity and use, the blockchain network is congested. Even otherwise, the blockchain works very slowly as it is built that way. It can be compared with a register or logbook which consists of several pages. On each page, there are multiple transactions. When a page is filled, it also depends on the type of blockchain. It takes time to be entered in the registry following which you can move on to record transactions in the next page. Each block, before being entered into a blockchain undergoes a verification process to make sure that the information provided is true. This takes 10-20 minutes to process. For example, Bitcoin takes 10-15 minutes to process transactions, while Ethereum only takes 10-15 seconds. In a traditional Point-of-Sale (POS) system, the time taken to process transactions is only two seconds. This is where blockchain falls short.
Blockchain is certainly a disruptive technology. But the question as to whether it is too disruptive for its own good is still open. Though this article has highlighted three reasons to bypass blockchains, the objective is not to discredit blockchain. It rather aims to act as a guide to encourage enterprises to think before acting. Apart from the disadvantages, blockchain also has a lot of strong points which are unique and true to their nature.