The 5 Major Myth-conceptions on Blockchain Tech
Digital dross or gold? The crypto sphere is riddled with controversy. Read on to root out the reality from the myths!
Let’s start small: what is a blockchain? You’re sure to find a dozen different definitions on the web — including ours. A blockchain is a ledger with three major characteristics:
- Decentralization: anyone with a computer can join (no need for approval from a central authority)
- Transparency: any transaction on the blockchain is visible to all (instead of being privy only to your own transactions)
- Immutability: any data on the blockchain will be there forever (unlike a typical database which can be corrupted)
Bitcoin replacing fiat currency, ridding the world of corruption, saving the rain-forest through paperless contracts…Between applications and implications, hype is heavy!
Ready to believe in blockchain magic beans, people are throwing the word around expecting a stalk of riches to sprout.
Myth #1: I need a Blockchain.
Really, you don’t. Yet, with each wrongful iteration, vested interest turned into a trend.
As with any major innovation, companies do ought to look into blockchain technology. But, the blockchain is not a business plan cure-all. From startups to conglomerates, companies have flushed millions of dollars into R&D to integrate blockchain technology. To no avail.
Beware of the cargo cult — and iced tea — built on a hollow use of the term.
Reality Check: You don’t need a blockchain.
Myth #2: The blockchain will make me rich!
While some may have gotten rich using the word “blockchain” as a sound-bite, that has started to change. Instead of rags-to-riches schemes, dabbling into blockchain tech is more likely to be a resource drain. The amount of technological overview, practical application and man-hours required to make a blockchain work is almost always underestimated. Even the world’s runner-up blockchain, Ethereum, has difficulties in keeping it all together.
Reality Check: Nowadays, having a blockchain won’t earn you big bucks.
Myth #3: Blockchain makes processes fast and efficient.
Reputed to be fast, blockchain tech is anything but. A couple of references points on numbers of transactions per second (TPS): Visa manages 1,667 while PayPal manages 193. Bitcoin manages all of 7 TPS (potentially twice that since the SegWit update). The day everyone will pay for their morning coffee with BTC is still ways off.
Rather than fast, an actual blockchain has to be replete with redundancies, check and balances to secure every single transaction. Anyone thinking they can easily improve and purpose a blockchain to fit their use case is likely misunderstanding the technology on a fundamental level.
Reality Check: A blockchain will decrease speed and increase complexity.
Myth #4: A blockchain will solve my database issues.
Other Internet conflation, the amount of data on the blockchain is not infinite. On BTC, each block contains between 1 to 2 MB since bigger blocks would entail a less democratized access, unbecoming of crypto.
Currently in the works, the Lightning Network would counter the BTC blockchain’s inability to scale with demand. Although most promising, the second layer solution will have to deal with a few hurdles first.
Reality Check: A blockchain can’t store an infinite amount of data.
Myth #5: The blockchain is decentralized, therefore superior.
Now that 2017’s fever to decentralize has dissipated, the difficulties behind it appear. Faking it till they make it, exchanges are sometimes decentralized in name only, or truly decentralized but empty: Radar Relay is currently trading about $2,000 a day in volume for their highest trading pair. Requiring slow maturation, proper decentralization is earned in time.
Even Bitcoin, the decade-old epitome of decentralization, is paying big for it. The estimate on a 51% attack of the BTC blockchain is $1.5 billion dollars (adjusted to price fluctuations). Fear not though. Not only expensive, a 51% hack is impractical: a disruption in the blockchain would upset the trust in its currency effectively killing its worth — making the hack moot in the first place.
Reality Check: Decentralization is expensive to sustain and leads to user experience issues down the road.