Blockchain transaction database servers
There are a few key differences between blockchains and databases. One of the main features specific to blockchain alone is that it can establish provenance. Blockchains are able to show you the current version of a data set, as well as every previous version of this same data set with timestamps and cryptographic proof the data has not been altered. Every entry is written permanently into the blockchain, and cannot be changed.
Blockchains are decentralized where the ability to add data is not restricted to a central source. On the contrary, databases all rely on client - server architecture and the server is typically centralized.
Like blockchains, modern databases can store history and previous versions of data. Databases do this much more efficiently than blockchain. The important difference is that blockchains are good at establishing trust and provenance.
Blockchains, while slow and clunky, are immutable. Databases are typically managed by a central authority, and all parties privy to the database demonstrate trust in the central authority to transact honestly.
There is no need to prove the previous versions of the data set because all parties trust the central authority to administer fairly, not favoring one party over the other. If each network node does the same thing, then obviously, the bandwidth of the entire network is the same as the bandwidth of one network node.
But do you know exactly what that is? The Bitcoin network is capable of processing a maximum of seven transactions per second — for the millions of users worldwide. Aside from that, Bitcoin-blockchain transactions are recorded only once every 10 minutes. To increase payments security, it is standard practice to wait 50 minutes more after each new record appears because the records regularly roll back.
Now imagine trying to buy a snack using bitcoins. If you consider the entire world, that sounds ludicrous even now, when Bitcoin is used by just one in every thousand people on the planet. For comparison, Visa processes thousands of transactions per second and, if required, can easily increase its bandwidth. After all, classic banking technologies are scalable.
You have certainly heard of miners and giant mining farms built next to power stations. What do they actually do? The electricity consumed to achieve that is the same as the amount a city with a population of , people would use. This is true, but the problem is that miners are protecting Bitcoin from other miners.
If only one-thousandth of the current number of miners existed, and thus one-thousandth of the electric power was consumed, then Bitcoin would be just as good as it is now. It would still produce one block per 10 minutes, process the same number of transactions, and operate at exactly the same speed. If someone controls more than half of the computing power currently being used for mining, then that person can surreptitiously write an alternative financial history.
That version then becomes reality. Thus, it becomes possible to spend the same money more than once. Traditional payment systems are immune to such an attack. As it turns out, Bitcoin has become a prisoner of its own ideology. Mining is still lucrative, and the network is still stable. That is just an illusion, however. An estimate of computing power distribution among the largest mining pools.
Gaining access to just four controlling computers would gain someone the ability to double spend bitcoins. This, as you can imagine, would depreciate bitcoins somewhat, and doing it is actually quite feasible. But the threat is even more serious than the above might imply, because the majority of pools, along with their computing powers, are located inside one country, which makes it much easier to capture them and gain control over Bitcoin.
Distribution of mining by country. Blockchain is open, and everyone sees everything. Thus, blockchain has no real anonymity. It offers pseudonymity instead. I am transferring a few bitcoins to my mother. Alternatively, if I paid back my friend for some lemonade, I would thus let him know everything about my finances.
Would you reveal the financial history of your credit card to everyone you knew? Keep in mind that this would include not only past but also future transactions. Some disclosure may be tolerable for individuals, but it is deadly for companies.
All of their contracting parties, sales, customers, account amounts, and every other little, petty detail would all become public. Financial transparency is perhaps one of the largest disadvantages of using Bitcoin. I have listed six major disadvantages of Bitcoin and the blockchain version it uses. Is it possible that no one sees the problems? Some people may be blinded, some may simply not understand how the technology works , and others may see and realize everything but feel the system is working for them.
Yes, Bitcoin has competitors that tried to solve some of these problems. Although some of those ideas are quite good, they are still based on the blockchain. And yes, there are other, nonmonetary applications for blockchain technology, but the main disadvantages are found in them as well. So, if someone tells you that the invention of the blockchain can be compared with the invention of the Internet in terms of importance, be skeptical.
From ransomware to Web miners.