978-1-7281-1999-1/18/$31.00 ©2018 IEEE
The Advantages and Disadvantages
of the Blockchain Technology
Dept. of Modelling and Simulation
Riga Technical University
Dept. of Modelling and Simulation
Riga Technical University
Abstract — The Blockchain is the newest and perspective
technology in modern economy. This technology can help to solve
different kind of problems in the industrial sphere, such as trust,
transparency, security and reliability of data processing. In
theory, the use of Blockchain technology shows great and positive
results, but what can say about practice? In this paper the
description of the Blockchain technology, and it advantages and
disadvantages are analyzed. Many already implemented
applications of Blockchain technology were studied, as well as
affected success or problems factors during the implementations.
This paper aim is to analyze conveniences and difficulties, related
to the Blockchain integration and implementation in the different
fields of modern industry.
Keywords — Blockchain technology, industrial cases,
Blockchain implementation success factors
The Blockchain technology will promise us the bright
future. It can help to make the business, government and
logistic systems more reliable, trusty and safety. This
technology has very strong benefits, because it can help to
achieve the above goals in different systems. Certainly, the
Blockchain technology has some disadvantages, mostly they
relate to the costs and the implementation process of the
technology. The successfully implementation of the technology
is depending on many different factors, such as government
and legislative support.
Certainly, the Blockchain is the new type of a database.
This technology is very interesting for people, because it can
solve one of the big problems, which are connecting with
finance. This problem is a double spending without
middleman. How does the Blockchain technology work and
solve this problem? The Blockchain creates the blocks with
different information. Each of these blocks relates to others
blocks in this blockchain. The proof-of-work is used for the
Blockchain’s secure and safety. When the new block is
connected to the Blockchain, it is almost impossible to change
or delete these blocks. For the hacking of the Blockchain it is
necessary to have very huge processing power. The miners are
the people, who calculate the hash value for the new blocks ,
The Blockchain technology always relates to the
cryptocurrency, because this technology is the basis of
cryptocurrency’s work, but these are different things. The
Blockchain technology also is used in another areas, such as
the logistics systems or medicine institutions and others. The
application of this technology improves the quality of the
system’s working process.
In this paper is written about Blockchain technology
benefits and challenges. The main advantages of the
Blockchain technology are decentralized network,
transparency, trusty chain, unalterable and indestructible
technology. In turn, the main disadvantages of the Blockchain
are the high energy dependence, the difficult process of
integration and the implementation’s high costs.
II. ABOUT BLOCKCHAIN TECHNOLOGY
A. The definition of the Blockchain technology
“The blockchain is an incorruptible digital ledger of
economic transaction that can be programmed to record no just
financial transactions but virtually everything of value” – this
statement is one of the most popular definition of the
Blockchain, which is developed by Don and Alex Tapscott .
B. The structure of the Blockchain technology
The Blockchain consists of linear sequence blocks, which
are added to chain with the regular intervals . The
information in the blocks depends on the Blockchain network,
but the timestamp, transaction, and hash are existed in all the
Each block contains the cryptographic hash of the previous
block (Fig. 1). All hash’s information is generated
automatically, it means that it is not possible to change any
information in the hash. In this case, each next block amplifies
the verification of the previous block and the secure of all
Blockchain. The more blocks in the chain - the safer and more
reliable the Blockchain .
Fig. 1. The sequence of the hash value in the Blockchain 
The Fig. 2 shows the signing process, which includes the
signing with the private key and certificate. When the signing
process has finished, then the verification process is started
(Fig. 3). The verification is valid, if the hash values are the
Fig. 2. The signing process in the Blockchain
Fig. 3. The verification process in the Blockchain
The Fig. 4 very simple shows, how blocks signing and
verification processes work in the Blockchain.
Fig. 4. The signing and verification processes 
Also, each block contains the “Timestamp”, which shows
the time of block creation. The transparency of the Blockchain
is achieved by the registration of each transaction – it allows
viewing the information of transaction at any time and it is
public for all users of these chains. The transactions include the
messages with the information to Externally Owned Accounts
(EOAs) or contract accounts. The file JSON contains the
public-private key and it is created when the new EOA is
created. The private key of the sender is necessary for the sign
the transactions. In turn, the private key and the account
password are necessary for sending transactions to other
accounts. The message is produced by the contract, but the
transaction is produced by the EOA , , .
The time of the block generation is checked when the
Blockchain receives the new block. The next block with all
accumulated transactions is created through the 120 second
after the time when the last block was signed by the miner on
the 0 level.
The process of the block creation is shown at the Fig. 5. In
this case, each block included the previous hash value, the
timestamp, the merkle root and nonce.
Fig. 5. The structure of the Blockchain 
C. The properties of the Blockchain
The Blockchain has different parameters, which are
calculated, if the following properties are known :
nodes in the system;
mining power per node;
The last two properties are chosen.
The calculated given parameters are showed in the TABLE
TABLE I. THE CALCULATED GIVEN PARAMETERS OF THE BLOCKCHAIN 
Total mining power
= ∑ m(i), i є nodes
Number of transactions per
= (blocksize – headersize) / transaction
= total mining power / difficulty
Inter nodes time
= blocksize / b(i,j)
Transactions / second
= (blockfrequency / 60) * transactions
D. Access to the Blockchain data
The Blockchain technology has four varieties, which are
classified based on access to the Blockchain data . The
TABLE II. shows this classification and the definitions of the
TABLE II. THE FIRST CLASSIFICATION OF THE BLOCKCHAIN 
Name of the class
Does not have any restrictions on reading of the
blocks and on submitting of the transactions for
inclusion into the Blockchain
Has limited to a predefined list of users of the direct
access to the blocks and submitting transactions
Does not have any restrictions for the users which
are eligible to create the blocks of transactions
Has the list of the predefined users which are eligible
to performed to process the transactions
Another classification is based on the processing of the
transactions and the access of the data. The Blockchain can be
not only private. The TABLE III. shows that the Blockchain
has multiple levels of access with different opportunities ,
TABLE III. THE SECOND CLASSIFICATION OF THE BLOCKCHAIN 
The processing of the transactions
Proprietary colored coins
The direct access to the
reading and creating of the
transactions for clients and
Colored coins protocols
(Colored Coins Protocol)
which can limit to creating
of the transactions
The direct access to the
data of the Blockchain is
limited and the advantages
of the Blockchain are
It is not possible to apply
E. Proof of Work (PoW)
The Proof of Work is the algorithm of the security. The
mining is the process of solving a computational challenge
imposed by the PoW protocol. The node, which wants to
participate in mining, uses the PoW protocol for the affixation
the block to the Blockchain. In this case, the node must choose
the block with biggest hash’s value and after that it can attach
the block , , , , .
F. Proof of Stake (PoS)
The minting is the process of solving a computational
challenge imposed by the Proof of Stake protocol. This
protocol requires far fewer the computations for the mining.
The trusted entities work together to add records in PoS
protocol and there is the voting process for accepting the block
on the Blockchain , , .
G. Smart Contracts
The smart contract is the script which is stored in the
Blockchain. The smart contract has the unique address, set of
executable functions and state variables. The user launches the
smart contract by addressing the transaction to it. After that, the
smart contract is automatically and independently performed in
the established order on each node of the chain, depending on
the data, which contained in the running transaction , ,
, . The Fig. 6 shows the structure of the smart contract.
Fig. 6. The structure of the smart contract 
The Ethereum is flexible the Blockchain platform which is
open to using by everyone. This platform has the high level of
the security from different kind of the attacks. The users can
create the Smart contracts and the decentralized applications.
This platform is based on the Ethereum Virtual Machine
(EVM) , , , .
The Ethereum platform has four processes :
III. THE BLOCKCHAIN TECHNOLOGY CASES
The Blockchain technology can be used in the different
industrial and technical areas. The biggest IT companies are
implementing the Blockchain technology for the systems’
quality and working capacity improvement.
Some of the using examples of the Blockchain technology
, , :
The government management. There are different
solutions into the government management. The
first decision is Borderless. It is the governance
platform which assures the coalition of the legal
and economic services . The second solution
is the ID2020. This organization is provided proof
of the identity for people without documents .
The electronic voting. The Follow My Vote is the
secure and transparent platform for anonymous
online voting . The E-Residency is the
electronic identification system for the citizens of
Estonia and for the business-people there .
The authorship. The Ascribe is the platform which
confirms and preserves the authorship to the
creative people and to the artists. This solution is
creating the digital editions with unique ID and the
digital certificates for the authorship and
authenticity confirming .
The diamonds. The Everledger is the solution
which releasing the marker to each diamond for
tracking in the connected transactions. This
decision helps to solve the real economic,
environment and societal problems .
The medicine. The MedRec is the project which
provides secure and transparent access to the
medical records of each patient in the medical
The supply chains. The Blockverify is the solution
for the transparency in the supply chain. This
platform has four main using cases: the pharmacy,
the diamonds, the luxury items and the electronics
. Another example of the solution in the supply
chain is the Bext360 which using the Blockchain
technology for the coffee trade tracking . The
Maersk and IBM corporations are launching the
joint venture for the more efficient and secure
supply chain with using the Blockchain
technology. This platform shows to each
participant of the supply chain the products’
location and specifications of the transportation
IV. THE BLOCKCHAIN ADVANTAGES AND DISADVANTAGES
A. The advantages of the Blockchain
The Blockchain technology is decentralized system and it is
the main benefit of this technology. Why it is important for our
life? The answer to this question is very simple – it is not
necessary to work with the third-party organization or with the
central administrator. It means that the system works without
intermediary and all participants of this Blockchain make the
decisions. Each system has the database and it is important to
protect this database, because when system is working with the
third-party organizations, there is a hacking risk of the database
or the data may turn up in the wrong hands. The process of the
database security might take a lot of time and might spend a lot
of money. If use the Blockchain technology can be avoided,
because the transactions of the Blockchain have own proof of
validity and authorization to enforce the constraints. And it
means that the transactions can be verified and processed
independently , .
Each action is recorded to the Blockchain and the data of
records are available to every participant of this Blockchain
and cannot be changed or deleted. The results of this recording
give the Blockchain's transparency, immutability and trusty ,
The trusty of the Blockchain is based on the believe of two
or more participants, who do not know each other. There is the
main idea is the real and not worthless transactions between
these unknown people. The trust can be increased further,
because there can be more shared processes and records ,
The immutable is achieved on the transactions are agreed
and shared across the Blockchain. When the transaction will be
connected to the Blockchain, it won’t be possible to change or
delete it. It also depends on the system’s kind – if the system is
centralized, it can be changed or deleted, because the decision
is made by one person. But if the system is decentralized, such
as the Blockchain, there each transaction, which is joined to the
Blockchain, is copied to each computer in this Blockchain
network. This benefit makes the Blockchain technology
unalterable and indestructible. The users of the Blockchain
have empowers to control of all transactions and information.
To change or delete the information into the Blockchain is
possible when intruder has the fantastic computing power to be
able to overwrite or delete the information on the all
computers, which includes into the Blockchain before the next
block recorded here. If the Blockchain consists of the small
number of the computers, the technology is more exposed to be
attacked – if there are a lot of computers into the Blockchain
than the system becomes safer and more transparent , ,
, , .
The transparency of the Blockchain is achieved on the
transactions copying process. As it was written above, each
transaction is copied to either computer in the Blockchain
network. Every participant can look all transactions, also it
means, that each action is showed to participants of the
Blockchain. Nobody cannot do anything insensibly , .
The Blockchain designs in a way that it can show any
problems and correct them if it is necessary. This advantage
makes the Blockchain technology traceability .
The high secure of the Blockchain technology is achieved
on the individual entry into the network. Because each person
who enters the Blockchain is provided with the unique identity
which is linked to his account. Another reason of the
Blockchain security is the reliable chain of the cryptographic
hash. When new block is created, it is necessary to calculate
hash value for the new block. The new hash surely includes the
previous hash’s value. In general, the hash consists of the type,
the block’s ID number, the previous hash’s value, the time
when block was created, the user ID number, the miner’s level
and the merkle root where is stored the information about
previous transactions and its hashes. This hash is generated
automatically by the node-key. In this case, it is impossible to
change any information in the hash value .
The multiple ledger causes the clutter and complications to
participants of the system. The Blockchain technology is
simplification of the ecosystem, because all transactions being
added to the single public ledger.
The last one advantage is the faster processing.
Traditionally, the transaction takes a lot of time in processing
and initialing into banking organization. The using of the
Blockchain technology helps to reduce the time for the
processing and initialing to many times – from approximately 3
days to several minutes or even seconds , .
B. The Blockchain disadvantages
If the Blockchain has advantages, this technology has
disadvantages or challenges.
The main disadvantage of the Blockchain is the high energy
consumption. The consumption of power is needed for keeping
a real-time ledger. Every time the new node is created and in
the same time it communicates with each and other node. In
this way the transparency is created. The network’s miners are
attempting to solve a lot of solutions per seconds in efforts to
validate transactions. They are using substantial amounts of
computer power. Every node is giving extreme levels of fault
tolerance, ensures zero downtime and is making data stored on
the Blockchain forever unchangeable and censorship-resistant.
But these actions burning electricity and time – it is wasteful,
when each node repeats the achievement of Consensus ,
The signature verification is the challenge of the
Blockchain, because each transaction must be signed with
cryptographic scheme, the big computing power is necessary
for the calculation process to the sign. It is the one of the
reasons to the high energy consumption .
The next problem of the Blockchain is the opportunity to
split the chain. The nodes, which are operating to the old
software, won’t accept the transactions in the new chain. This
chain is creating with the same history as the chain, which is
based on the old software. It is named the fork. There are two
fork’s kinds – the soft fork and the hard fork , .
The soft fork establishes the new ruleset to the blocks in the
protocol. The nodes are updated to enforce the soft fork’s rules.
If the block, which was considered valid before, does violate
the new soft fork rules, the block won’t consider after the soft
fork activation. For example, the soft fork is restricting the
block size until 500 kB, but before was the 1 MB. It means that
the blocks, which are larger than 500 kB, won’t be valid in the
new chain after upgrades , .
The hard fork is loosed the ruleset to the blocks in the
protocol. This process is the same with the soft fork process,
but the value and result of it is the opposite. For example, the
hard fork is increasing the block size to 2 MB from 1 MB. If
the block is gone through all the rules of the hard fork, the
block will be accepted, even if the block was not in the chain
before , .
Another problem of the Blockchain is the balance between
the nodes’ quantity and the favorable costs for users. Now there
are the nodes are lacked for the Blockchain correctly and
powerful work. In this case, the costs are higher, because the
nodes received higher rewards; but the transactions completed
more slowly, because the nodes do not work intensive .
The Blockchain has grown when the new blocks affiliate to
the chain and the computing requirements increase. Not all
nodes can provide with the necessary capacity. There are two
problems: the first is the smaller ledger, because the nodes can
not carry the full copy of the Blockchain and it breaks the
immutability and transparent of the Blockchain; the second is
the Blockchain becomes more centralized system .
The high costs are a big disadvantage of the Blockchain.
The average cost of the transaction is between 75 and 160
dollars and most of it covers by the energy consumption .
One of the reasons of this situation has been described above.
The second reason is the high initial capital costs of the
C. The Attacks and Problems of the Blockchain
The Blockchain can be attacked by the different threats,
which are connecting with the PoW and PoS protocols. Most of
them are almost impossible , , .
Attack of 51%. It will happen when two miners
are calculating the hash of the block at the same
time and get the same results. In this case the
Blockchain will split and as the result, users have
two different chains, and both are considered true.
Double-spending. Princip of this attack is the
same with the previous attack, but here can be
used the split of the chain to spend the money
Sybil’s attack. Its possible when one node accepts
several essences, because the network can’t
authentically distinguish the physical machines.
The Sybil’s attack can help to fill the Blockchain
with users under its control. It can lead to the
previous two attacks and the ability to see all
transactions with special programs.
DDos’s attack. The attack consists of a large
amount of the similar requests. There is the
protection in the DDos’s attack – size of the block
up to 1 MB, size of each script up to 10000 bytes,
up to 20000 of the signatures can check and
maximums of the multiple signature is 20 keys.
Cracking of the cryptographic. It is possible if
use the quantum algorithms such as ‘Shora’ which
can break the RSA encryption. The scientists work
on the cryptographical algorithms, which based on
the hash functions.
The Blockchain is the new type of the database which
solved some of the problems in the centralized system, such as
the transactions without a middleman, the spent time on each
transaction, the unintentional or special deletion or
modification of data in the Blockchain.
With the advantages of the technology, such as the
transparency, trusty, the multiple copying of the transactions
and the decentralized digital ledger, the Blockchain technology
is reliable and not destructible, and all mentioned attacks could
disrupt the system work, not the technology. It should be noted,
that the attacks, which are described in the paper, are more
theoretical. There are only few examples of the Blockchain
hacking in practice.
The Blockchain technology is useful and versatile for our
world, because it can facilitate most of the systems in the
different industries, but it is new and it`s implementation is
little studied issue on practice. The Blockchain technology
promises us the bright future without the fraud and deception
due to the benefits of the Blockchain technology. The
developers must devote more time to the practical application
and implementation of the Blockchain into the already existing
systems of the main industrial directions, because the
Blockchain can bring the honest and trusty business,
government and logistic systems.
The challenges of the Blockchain are large, but the results
of the Blockchain using have a greater preponderance than
It is necessary to keep exploring the Blockchain
development and application in the different areas for the
nearest future, because this new technology can help to solve
many difficult problems, which are disturbing and preventing
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