Is blockchain technology a boon or a bane?

by Sonali Mishra Human Resource Executive

In recent years, the hype surrounding cryptocurrencies has become the inspiration for the potentially widespread applications of blockchain technology. Ever since the introduction of blockchain technology by Satoshi Nakamoto in 2008, the idea of using a decentralized database to store and process information makes it an ideal basis for developing cryptocurrencies, such as Bitcoin.

While the rise of Bitcoin has revolutionized the way we think about money and currencies, the ‘decentralized’ foundations that blockchain is built upon may become a major stumbling block for the progress and adoption of blockchain technology.

Even today, many people around the world still believe in the potentials of blockchain technology. Many are still convinced that cryptocurrencies play an important role in tackling economic problems that some countries are facing today, especially for countries that are facing high inflation rates. At times, Bitcoin offers a safer and stabler alternative to local currencies that may be rapidly depreciating in value on a daily basis.

However, the use of blockchain technology comes at a staggering cost. To create and manage a system that is based on blockchain technology, we have to consider the fact that it is relatively expensive and unfeasible it is to maintain such a system on a larger scale.

First, developing on a system that uses blockchain technology is slow and restricted. This is because the idea of blockchain is fundamentally based on consistency, and that there is always a compromise between speed and consistency in development.

Also, scaling becomes a major issue when dealing with a decentralized blockchain system, especially since the same piece of data in a blockchain database resides in many different places. As such, costs of scaling a single piece of data has to be incurred on the entire database, instead of on a single piece of data in a conventional database.

For now, blockchain technology may be headed in the wrong direction. Essentially, the application of blockchain technology in the development of cryptocurrencies strives for a goal that seems to far-fetched — the desire for a secure, decentralized monetary system with the control of a centralized monetary system.