Demystifying The Myths of Blockchain
Demystifying The Myths of Blockchain
Since it's still fairly cutting edge, there's a lot of misconceptions that swirl around blockchain technology. We take a stab at clarifying them.
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Blockchain is an encrypted technology where every transaction made on the open public ledger is cryptographically locked in the public record which is unchangeable, making the blockchains eternal.
Blockchain forms a huge global platform that enables two or more parties to enter into a transaction without requiring a third party to establish trust in the form of varied computations and heavy duty encryption.
Blockchain technology is popularly termed a Trust Protocol too, for trust is built in its system and is ensured via mass collaboration and intelligent code. Blockchain technology is believed to be the second generation of the Internet which is going to shake up the older order of things and revamp the economic power grid for the better.
The innovative and disruptive business and cultural potential of blockchain, developed by Satoshi Nakamoto, has excited developers and people around the world for a decade now but the technological reality of blockchain is often misunderstood.
Here are a few myths regarding blockchain technology.
Myth #1: Blockchain = Bitcoin
Since bitcoins are more popular than the underlying technology, Blockchain, used to devise them, people mistake blockchain to be bitcoins.
Blockchain is a technology based on a distributed public ledger that allows peer-to-peer value exchange across the network. These digital transactions are stored in blocks where each block is linked to the previous one, thereby creating a chain. Each block comprises the entire, time-stamped record of the digital transaction.
Bitcoin is a cryptocurrency that is created using blockchain technology. It makes digital transactions between 2 parties possible without the existence of an intermediary, like governments or banks. Bitcoins are then stored in a virtual wallet. No one can control the cryptocurrency for there is no intermediary. Thus, bitcoins that will be released are limited and driven by mathematical algorithms.
Myth #2: Ethereum Is a Blockchain
Ethereum is a decentralized platform which is used to create various other applications that run without any chance of cyber risk or without the need of a third party. It uses blockchain technology.
Ethereum, thus, is not itself a blockchain but it enables developers to develop various applications and programs that run on the fundamental characteristics of blockchain technology.
Myth #3: Blockchain Is All Free
Disregarding the commonly held belief, blockchain is not at all cheap to run.
To arrive at an immutable result, blockchain uses multiple computers solving various mathematical algorithms. Thus, each block in the blockchain uses an enormous amount of computing power to solve all the algorithms. Hence, someone has to pay for the computing power.
Myth #4: Blockchain Can Only Be Used in the Finance Sector
Blockchain began creating an upsurge in the finance sector because of its first application, bitcoin, which used blockchain as its underlying technology. This directly impacted the financial sector, which is one of the many undeniable areas of its applications.
Blockchain technology holds great promise to revolutionize finance, from banks to credit cards and everything in between. Banks could potentially speed up the process and massively cut down costs.
Yet, the finance sector is just the tip of an iceberg.
Apart from the finance sector, Blockchain has potential uses in the healthcare industry, real estate, or even at a personal scale to frame a digital identity.
Blockchains have the potential to be at the heart of the IoT trend that's animating the physical world by, for instance, enabling different smart devices to securely transact, contract, and share peer-to-peer data using blockchains.
Myth #5: Blockchain Is Designed for Business Interactions Only
Blockchain technology experts are very much convinced that this technology will revolutionize the global economy like the internet did in the '90s. Blockchain is accessible to everyone everywhere and is not confined to just B2B interactions.
If all it takes is an internet connection to access blockchain technology, we can imagine how many people can interact globally. Indian craftsmen, for instance, can sell their products worldwide and no commission or third party interference would be required. Anyone can exchange remittance without going through expensive intermediaries.
In today’s world, many people from developing nations struggle to open bank accounts due to lack of identification documents. Blockchain can bridge this conveniently.
Myth #6: Private Information on Blockchain Is Public
Privacy is one crucial thing that is projected by everyone who tries to explain blockchain. People assume that, since the distributed ledger is public, all their information and other transaction details are public as well. This is absolutely not true.
What is stored on the ledger is nothing except the hash and the transaction amount. You might wonder, what is the hash? The hash is a code which is obtained by running the real transaction details through a one-way cryptographic function. This makes it impossible for anyone to access any information when one only has the hash.
Myth #7: Blockchains Can Never Be Altered or Hacked
One of the USPs of the blockchain is its transparency and inherent permanence. People’s reaction to this is that blockchains are invulnerable to hacks and other outside threats. No system or database can be 100% secure. What blockchain offers to its applications is the way to catch any unauthorized changes in its records, if any are made.
Myth #8: There Is Only One Blockchain
There are several technologies that go by the name blockchain. What is common in them all is that they are all shored up by cryptography, have some kind of consensus mechanism, and are distributed.
Bitcoin’s blockchain, Corda, and Microsoft’s and IBM’s blockchains-as-a-service can all be classified as distributed ledger technologies.
Myth #9: Blockchain Is a Database in the Cloud
Blockchain can be conceptually viewed as a linear list of transaction records or a flat file. In this list, the entries are never deleted and the size of the list grows indefinitely and must be replicated at every node in the peer-to-peer network.
Blockchains do not allow the user to store any kind of physical data. All it provides is the proof-of-existence of particular data. The code that runs only certifies the existence of a certain document but doesn’t indicate the document itself.
However, one can store the documents in the data lakes which are owned by the owner of the document.
Myth #10: Blockchain Can Be Used for Anything and Everything
Although the code is powerful, it isn’t magical. In the minds of techies, Blockchain will sooner or later replace money and other abstract bodies.
Opinions expressed by DZone contributors are their own.