Advantages and Disadvantages of Blockchain

Advantages and Disadvantages of Blockchain

The applications of blockchain technology have expanded beyond cryptocurrencies. Because it is a solution for creating and maintaining a centralized digital ledger, it is at the core of emerging digital technologies and applications to include non-fungible tokens or digital asset tokenization, smart contract protocol, new-generation video games, anti-counterfeiting of digital and physical goods and documents, and supply chain management, among others.

Of course, it is also important to highlight the blockchain is fundamentally a continuously expanding list of records of digital transactions linked together using cryptography. Each record is represented as a block and contains all data or information relevant to a particular transaction. Furthermore, each new transaction creates a new block that is linked to a previous block and further to the rest of previously related blocks to create a chain of blocks.

Pros: The Advantages of Blockchain

1. Managed by a Peer-to-Peer Computer Network

The entire process of authenticating transactions and creating blocks or transaction records is called blockchain mining or minting. This process transpires through a peer-to-peer network of computer systems scattered across a large geographic area.

Hence, one of the defining characteristics of blockchain technology is that it can be operated and maintained through an open-source community or via a distributed peer-to-peer structure.

The combined computing capabilities of this network provide specific advantages to include faster transaction processing and block creation, distribution of hardware and other resources, and decentralization of the entire operation.

In addition, a peer-to-peer network lacks central vulnerabilities or points of failure that can be exploited by hackers. Because the ledger is shared across the network, it is not only more secure than a centralized network but also allows for public cross-checking.

2. Transparency and Decentralization of the Ledger

Another notable advantage of blockchain is that it is a decentralized or distributed digital ledger of transactions. But what are the specific benefits of decentralization?

Of course, the ledger is essentially available to the public. There is no need for stricter access control and guarding against bad actors.  The entire technology is somewhat autonomous and self-correcting due to the participation of multiple individuals.

Decentralization is also a solution for decentralized currencies: one of the main selling points of cryptocurrencies. No single government or financial institution can control a cryptocurrency based on this technology. The value of the currency cannot be politicized.

3. Security and Legitimacy of the Transactions

Several individuals have described blockchain as an indestructible digital ledger. There is some truth to this. One of the advantages of this technology is that it cannot be manipulated or controlled by a single authority due to its decentralized nature.

It is fundamentally a solution for securing a particular transaction. Note that this technology can be applied to maintain not only financial transactions or cryptocurrency creation and exchange but also everything that has economic value.

The decentralization of the digital ledger also means that the records of transactions are considerably available to the public. This lessens fraud.

Moreover, the records cannot be edited or manipulated. Remember that a single block contains transaction data is related and linked to the previous block of transaction through cryptography. Alternations to one of the blocks are virtually impossible.

4. Faster and More Efficient Transactions

Another remarkable advantage is that transactions via this technology are almost instantaneous. The digital nature of the blockchain and its peer-to-peer characteristics allow transactions to be completed in several minutes.

Remember that the decentralized digital ledger is maintained by individuals or organizations spread across a large geographic area using their own computers. The combined efforts of the peer-to-peer network make all of the involves processes more efficient and faster.

Traditional transactions can take days because of the bureaucracy that comes from centralization. As an example, inter-bank transactions usually take a minimum of two business days.

3. Provides a Mechanism for Income-Earning Models

Anyone can apply to become a blockchain miner and receive compensation for participating in a particular peer-to-peer network. Note that mining or minting is the process of adding transaction records or creating blocks to an existing blockchain.

Miners use their computers or lend their computer resources to a peer-to-peer network to solve computational math problems. They get paid whenever they add a new block to a transaction.

Blockchain technology has also enabled other revenue-generating business models to include the selling and trading of digital assets or non-fungible tokens, the development and marketing of NFT-based play-to-earn video games, and cryptocurrency trading.

Cons: The Disadvantages of Blockchain

1. Demanding Computing Requirements

However, although anyone can theoretically become miners, it is important to highlight the fact that mining requires the use of powerful and capable computers. This is particularly true for blockchain platforms based on proof-of-work consensus mechanism. Individuals who want to become miners need to purchase an expensive computer system.

Running powerful computers consumes a lot of energy. In addition, it also generates too much heat. These computers need an effective cooling system to remain operational and avoid overheating or other hardware damages due to excessive heat.

Nevertheless, profiting from mining is almost exclusive to organizations or individuals with access to financial resources needed to achieve economy of scale and offset expenses related to energy consumption. In addition, setting up a blockchain operation or introducing a new cryptocurrency or whatever blockchain applications and standards is not for everyone.

2. Blockchain Tech and the Environment

Another major disadvantage of blockchain, especially one that is based on PoW mechanism, is that it consumes too much energy. Remember that the technology runs on powerful computers that require effective cooling systems. This can have negative impacts on the environment, especially when considering that electricity still comes from unsustainable sources such as fossil fuels.

Several studies have estimated the total energy consumption of blockchain operations. For example, the technology that powers major cryptocurrencies such as Bitcoin consumes an amount of energy that is greater than the energy consumption of a particular country.

Experts have raised concerns over the sustainability of the technology. Some have further raised concerns over the expansion of its applications, including tokenization of digital assets and the creation of novel digital ecosystems that would ramp up energy demand.

3. A Note on the Drawbacks of Decentralization

Decentralization has numerous advantages or benefits. However, it has drawbacks that limit a particular system or its numerous applications.

For starters, because of the decentralized nature of a distributed ledger technology, data modification can be difficult. It would require a laborious and extensive process just to add or modify data once it is recorded and linked to the rest of the chain.

The peer-to-peer network that is collectively responsible for adding new blocks or authenticating transactions must also be synchronized. The records must be updated on each participant or node, or forked if only one of the nodes rejects any changes.

Summary: The Pros and Cons of Blockchain

The biggest advantage of blockchain lies in the fact that it is a distributed ledger technology that runs on a peer-to-peer network of computer systems. This defining characteristic provides specific benefits that include decentralization, security, resource sharing, and public participation, which in turn, serve as the advantages of cryptocurrencies and benefits of non-fungible tokens, among others.

However, despite its advantages, the use cases or applications of this technology have been met with criticisms due to a major disadvantage: it consumes too much energy because of the intensive computing requirements, especially for platforms that use PoW as consensus mechanism. The growing popularity of cryptocurrencies and the emerging NFT applications have raised concerns over the feasibility and sustainability of this technology.


  • Haber, S. and Stornetta, W. S. 1991. “How to Time-Stamp a digital document.” Journal of Cryptology. 3(2): 99-111. DOI: 1007/bf00196791
  • Leible, S., Schlager, S., Schubotz, M., and Gipp, B. 2019. “A Review on Blockchain Technology and Blockchain Projects Fostering Open Science.” Frontiers in Blockchain. 2. DOI: 3389/fbloc.2019.00016
  • Xu, M., Chen, X., and Kou, G. 2019. “A Systematic Review of Blockchain.” Financial Innovation. 5(1). DOI: 1186/s40854-019-0147-z