While Blockchain Technology is a revolutionary technology, it’s not magic, and some of its advantages come with certain weaknesses.
Blockchain is, for example, not the most performative option for data storage, simply because the distributed data needs to synchronize globally. This process takes a few seconds. Bitcoin, the oldest blockchain solution, needs 10 minutes, so more contemporary blockchains like Ethereum or EOS have already come a long way in terms of speed. But nonetheless, this is a far cry from what a client-server application could deliver.
The slower speeds also create a bottleneck with throughput. You can’t, for example, trade live on a blockchain like you can on an exchange. It’s simply not possible, regardless of how fast they become in the future. Private chains perform much better than public ones, but in their case the trade-off is that another blockchain advantage, the fact that it’s a tamper proof registry audited and witnessed by a huge public crowd, is sacrificed.
The propagation of data through the chain makes the data storage slow. You can’t store much data there, at least not economically. Yet again, a private chain might be different, but in a public environment you must separate on-chain and off-chain data.
The execution of complex algorithms is limited, because smart contracts are not really a ‘smart’ as you might think. In most blockchains, there is a limit as to how complex the contracts can get.
Another downside is the availability and reliability of real-life data because blockchains don’t know what happens in the real world. This data points like the temperature in a certain location or whether or not a flight is delayed must be fed into the blockchain by some third party. Although everything happens in a decentralized manner, there is a single point of failure – the third party. Blockchains are all about trust in mathematics in a trustless environment. Yet, at some point, you have to trust the party entering the data.
Finally, there is the issue of anonymity. Blockchain doesn’t use any plain-text names; rather it uses a cryptographic address. However, it is possible to derive information from the transactions between addresses and thereby gain insight into some user behavior. There are public blockchains and technologies, which obfuscate this and, once again, using a private chain behind VPN solves it, too. If the enhanced privacy is worth the trade-off, then it’s a viable solution.
Applications that require speed, need to quickly sync locally or globally, need a lot of data, have complex models, or rely constantly on external data probably won’t take full advantage of blockchain.
Like most IT solutions, blockchain needs a functioning internet connection, and a constant source of electricity. It will of course survive blackouts, but during a blackout it will be offline.
Over the years, CoreLedger has acquired a massive amount of knowledge which we can put towards analyzing your business case to see where blockchain would be a good fit, and then design you the best possible solution for your needs.
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