There are some facts about blockchain that are mostly ignored. Here, we debunk some common myths and misconceptions about this technology.
New technologies are usually related to hefty levels of confusion, which lead to different ideas about what new technology is, which causes the creation and spreading of myths. Among different tech advances in current times, blockchain has been a famous competitor. Consequently, the lack of understanding clearly has brought about several blockchain myths over the years.
The following explanation will help you debunk some of the common myths about blockchain and put an end to all the questions surrounding it. Knowing those facts about blockchain and comparing blockchain myths vs. reality is an excellent way to improve your knowledge about this technology.
FACTS ABOUT BLOCKCHAIN AND Common myths vs. reality
Whether you are a newbie or a professional in blockchain, you may have already come across one or multiple blockchain myths. Let’s explore some of them and unveil the reality behind them!
1. Blockchain is a cloud-based database
One big misconception about blockchain, also known as distributed ledger technology, is that it is a cloud-based database. The origin of this confusion may come from the fact that they both are emerging technologies in the latest years and are related to some degree to data storage. However, the main purpose of each of them and how they store information are completely different.
Remember that records of the ledger databases in blockchain technology are immutable, whereas data stored in the Cloud is mutable. Cloud is the delivery of computing services over the internet, and blockchain is a system that uses different styles of encryption and hash to store data in a distributed ledger over the internet.
Moreover, data accessibility in a cloud-based environment can be either public or private, which defines if it can be visible or not for users. Blockchains are public ledgers where anyone can view the entire history of transactions.
Another difference between cloud-based databases and blockchain is that blockchain stores the records with Proof of Existence (PoE), which enables anyone to anonymously and securely store an online-distributed proof of existence for any document. This clearly proves that a particular document exists without showcasing the actual document.
2. Blockchain is not prepared for business adoption
Many people believe that blockchain presents flaws related to performance, security, and privacy that make it inappropriate for business adoption.
However, in the past few years, the industry-specific blockchain consortium has played a major role in educating businesses, as well as developing standards and driving innovation. As per the 2018 Global Blockchain Survey of Deloitte, 29% of businesses said that they have already adopted a blockchain consortium, 45% mentioned they want to join one within the upcoming year, and 13% stated they want to start their own consortium.
Thus, there are many companies that are working together to find solutions for the challenges blockchain has and defining business standards for a massive adoption of this technology.
3. Every transaction on blockchain is anonymous
The most important aspect of the comparison of blockchain myths vs. reality is the one related to anonymity. Nearly every beginner in the blockchain landscape thinks that blockchain-based cryptocurrencies help to make anonymous payments, but this is not completely true.
The blockchain only records the wallet’s public address while abstaining from disclosing the wallet owner’s name. Nevertheless, the utilization of cryptocurrencies to make payments for illegal purposes can be traced. If anybody can link the wallet’s public address with a person’s real-life identity, the former can trace the whole list of blockchain transactions related to that address.
Do not miss this reading: How Blockchain is transforming the banking industry
4. Blockchains are 100% secure
One of the main features of blockchain technology is the encryption of data associated with particular transactions between two parties. Most of the blockchains, like the Bitcoin blockchain, utilize the SHA-256 cryptographic hash algorithm for this purpose. Most often, several professionals recommend SHA-256 due to its value for solving encryption needs.
If the algorithm is put at risk, the whole blockchain may be at risk, too. This contradicts the claim that this technology is completely invulnerable. Experts understand that smaller blockchains can be broken into with less effort. On the contrary, public and larger blockchains are more solid for protection from cyberattacks.
5. All blockchains are public
Some people have assumed this after the launch of worldwide public blockchains like Bitcoin. However, this is one of the most popular blockchain myths that can puzzle any newcomer. In reality, public blockchains are not the only type of blockchain. Hybrid and private blockchains are also appropriate for use in various cases.
The invention of Bitcoin has caused a phenomenon across all private enterprises and financial institutions called permissioned blockchain, also named private or federated blockchain. Several ledger technologies you discover in the current world are instances of various kinds of blockchains. They are public, but some permissioned blockchains are private. So that is one misconception resolved for you!
6. Blockchain is equal to Bitcoin
This is possibly one of the most common blockchain myths. When people read about Bitcoin, they think that it is a synonym for blockchain and utilize both terms interchangeably. Apart from serving as the underlying technology used by Bitcoin and other cryptocurrencies, blockchain has several other possible uses throughout all enterprise activities — incorporating identity verification, supply chain, healthcare, and insurance.
Blockchain is the technology that supports Bitcoin, and although Bitcoin uses blockchain technology to trade digital currency, the reality is that blockchain is more than just Bitcoin.
7. Blockchain can just be used for strengthening cryptocurrencies like Bitcoin
This is another fallacy about blockchain. Similar to the concept that blockchain and Bitcoin are the same, many people believe that the only use for blockchain technology is strengthening cryptocurrencies.
But the fact is that several industries and business procedures can get advantages from blockchain technology. From insurance to real estate, finance, and healthcare, this underlying technology’s applications are vast. Cryptocurrencies are just the initial stage on the long journey to blockchain acceptance.
Related content: What are Smart Contracts, and how can we benefit from them?
8. Blockchain is the most effective solution for everything
Some people consider that blockchain technology is the best solution for everything on earth; however, this technology is only applicable to its specific domain. With advantages like improved efficiency, immutability, and transparency, you can easily understand why it attracts many people.
Nevertheless, it is not a silver bullet, and your decision to execute blockchain into your technology stack needs consideration and planning. Sometimes, other approaches would better fit your needs.
Final Words
As you unveil all the misconceptions, you get closer to an accurate perception of blockchain and its features. You will even discover its drawbacks, hence contributing to a clear understanding of it.
With a little over a decade since its introduction, blockchain technology has attained a high level of success. If you are willing to capitalize on its advantages, you should understand all possible misconceptions regarding it. The more you discredit the myths, the more confidence you build when grasping blockchain technology.
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