Benefits and Challenges of Blockchain Technology

Benefits of Blockchain Technology:

  • Decentralized consensus formation without intermediaries. The trust is placed in the network and the Blockchain technology and not so much in individual participants or transaction partners.
  • Lower costs for operators will also have a positive effect on the transaction fees.
  • Transparent costs and the further development of the technology through open source code, coordinated via “consensus mechanisms”.
  • Highly redundant and fail-safe.
  • High network and process transparency while preserving anonymity and pseudonymity of the participants. This reduces imbalances in power, abuses, and arbitrary decisions.

 

Challenges of Blockchain Technology:

  • The environmental impact of energy consumed by the widespread proof-of-work method is a strong counterargument to the potential offered by this increasingly attractive technology.
  • Transactions cannot be made retroactive, which may result in irreversible errors. There is already some uncertainty and ambiguity with smart contracts and how to handle flaws in the contracts.
  • Scalability is another critical issue for all Blockchain solutions as the number of subscribers and transactions to be processed will increase as the technology becomes increasingly attractive.
  • An unclear legal situation, particularly in Germany, poses the risk of new Blockchain applications running afoul of future changes to the law.
  • The digitalization and transfer of existing documents, objects, and processes into the Blockchain environment will be a challenge.
  • Anonymity cannot be guaranteed in certain Blockchain environments.
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