10 Common Myths about Blockchain
Blockchain is one of the biggest topics of interest in the tech and business industries today. This technology offers an ingenious way of recording digital transactions.
Thanks to its transparent, immutable, auditable, and efficient nature, blockchain has enabled new business models. However, the technology is still in its infant stage. Despite this, its potential is undeniable.
Blockchain has many positive aspects. However, there are various points of misunderstanding about what blockchain actually is.
Blockchain Can be Used for Everything
Blockchain can be used for many technical and complex transactions. There are also countless applications of blockchain in finance, health, and trade. These applications are potentially revolutionary in the sense that they would dramatically decrease costs and speed of transactions.
Blockchain is seen by many people as a new shiny “one-size-fits-all” opportunity that can solve most business problems. However, there still needs to be adjustments made before this happens.
Although the code behind blockchain is powerful, it is not powered by magic. Since it is an authority tied to mathematics, many people think that it will one day replace some arbitration bodies and financial institutions. However, its code has limitations, too.
All Blockchains Can Be Accessed
Although blockchain is a distributed ledger, not all blockchains are open for the public. Many blockchains are private or based on permissioned formats. This is in stark contrast to its public and open ledgers such as the one used in Bitcoin.
There are also private blockchains which feature controls that require authorization. Its data can only be opened by parties with access.
Data on the Blockchain Is Secure
When people refer to blockchain as secure, they mean that it is immutable. Data on the blockchain can be accessed by anyone who wants to read it. Although no one can alter it without leaving a trace, public blockchains are not a good option for storing private or sensitive information such as bank account numbers, social security numbers, or passwords.
Because blockchain is known for its transparency and permanence, many people think that it is not vulnerable to hacking or other online attacks. However, no database is completely secure.
Blockchain Is Only Meant to Be Used by Financial Sectors
Blockchain is popular in the financial sector because of its application in the Bitcoin cryptocurrency. However, finance is only one of its many potential applications. Blockchain can also be used on a personal level for digital identity, healthcare, and real estate.
Blockchain Is in the Cloud
If you know about Blockchain, you understand that it is actually a linear list of transaction records. These items cannot be deleted or edited. Instead, the file continues to grow indefinitely as it is replicated in every node that belongs to the network.
The system of blockchain does not allow its users to store physical data. It can only store files that give a proof of existence. Meaning, this distributed ledger can only store the code which certifies the existence of a particular document. However, the file can be stored in data lakes.
Furthermore, blockchain is not the best option for storing large data. Because each node in the network has a copy of the blockchain, it would be inefficient to replicate the file on the entire blockchain.
Blockchain Is Full of Illegal Activity
Because of the mysterious nature of blockchain, you think it is a system full of illegal activity. Although criminals can use it, blockchain is similar to other systems that can facilitate crimes such as postal systems or the Internet.
Blockchain’s main purpose is to be used in legal and legitimate tasks. In fact, Bitcoin is now recognized in many countries as a commodity. It is even used by large corporations as financial instruments.
Blockchain Use Is Free
Many people wrongly believe that Blockchain is free or inexpensive. In reality, it involves tons of computers which solve mathematical algorithms to agree on a single answer. Of course, someone needs to pay for all the power that supports the entire network of Blockchain.
Blockchain Is the Same as Bitcoin
Bitcoin is a type of cryptocurrency which uses blockchain. On the other hand, blockchain is a distributed ledger technology which powers Bitcoin. The comparison is limited to this relationship.
Blockchain Is Only Hype
Many emerging technologies are considered by pessimists as something temporary. However, the hype behind Blockchain is anything but that. In fact, the hype has powered blockchain to change for the better thanks to investors, and individuals exploring the technology to solve many problems.
There Is Only a Single Blockchain
There are many technologies that go by the name blockchain. These come in private and public versions, closed and open sources, and are tailored to certain solutions.
The common denominator behind every blockchain is that it is shared by cryptocurrency and have a consensus mechanism. For example, Bitcoin’s Blockchain, Hyperledger, Corda, and Ethereum can all be classified as the blockchain.
Unlock the Potential of Blockchain
Blockchain promises to revolutionize a number of industries. Given its relatively recent introduction, blockchain is often misunderstood. So, it’s important to become familiarized with this technology to maximize its utility in your life.