Myths Surrounding Blockchain

With every technology that turns heads, there is hype and there is reality. The same goes for Blockchain, as well. A technology that can be best understood as a collection of records, or as a ledger that contains transactions (financial and non-financial), Blockchain came to the foreground because of cryptocurrencies and its applications there, especially in Bitcoin. However, the technology grown by leaps and bounds since, and solve legacy challenges of more industries that were earlier imagined.

Despite being a technological marvel, Blockchain isn’t something that is easy to understand, and that has raised a lot of myths and misconceptions. Through this article, let’s debunk some such myths:

1. There’s just one, universal Blockchain

This is a categorically false myth. While Blockchain is readily compared to the Internet in terms of disruptiveness and technological significance, it should be noted that unlike the Internet, there are numerous Blockchain — each one designed to serve specific purposes. The prevalence of this misconception has died down largely due to the increasing popularity of other Blockchain networks beyond Bitcoin — but there are still many that stand with this myth.

2. Blockchain is where criminals thrive

The association of Blockchain, especially Bitcoin, with criminality as its roots in the dark web, Sil Road, as well as the mistaken belief that Blockchain offers complete anonymity. In reality, most public Blockchains are extremely traceable. It’s even possible to track what is being sent, who’s the sender, who’s the receiver, and more. Companies specializing in Blockchain analytics can simply, using analysis tools and Blockchain explorers, track illicit transactions to their sources. Blockchain offers pseudonymity at best. Not anonymity.

3. Blockchain and Bitcoin are interchangeable terms

This is probably the most common fallacy that continues to evade something. As mentioned previously, while bitcoin is the first and, undeniably, most well-known implementation of blockchain technology, there many, many other blockchain networks. Blockchain is just one of the technologies that underlie the bitcoin protocol upon which the Bitcoin cryptocurrency is built. The bitcoin network itself consists of various solutions and cryptographic technologies. Within this, blockchain technology records peer-to-peer transactions in real-time.

4. All Blockchains are public

While it’s true that Bitcoin, along with many other well-known blockchains, are public, not all Blockchains are. There also exist private and semi-private Blockchains that offer varying degrees of accessibility and transparency. On a public Blockchain, everyone can participate at all levels of the consensus process. This is limited on a private Blockchain as only parties in possession of necessary keys can view private transactions. It is also important to note that it is possible to stack a private blockchain on top of a public blockchain. Some Blockchain use-cases require private ledgers with limited access to transactions — in such cases, building on top of a public blockchain facilitates crowdfunded auditing and authentication, without exposing private data.

Also Read : Blockchain — A Game changer for the insurance sector

5. Immutability

This is another universal belief that Blockchain records can’t be hacked or altered. The truth, however, is that no system is ever completely secure. For instance, any person within the Blockchain network is capable of gathering resources to take control of the Blockchain. Although way too unlikely, as they would require mining skills and capacities larger than the rest of the network, it’s definitely theoretically possible. This is called the 51% attack. The larger and more distributed a network is, the more difficult it is for this to happen, and therefore, the more secure the network is. In truth, however, the only promise Blockchain makes is to catch any unauthorized changes made to the records.

6. Smart contract = legal contract

Despite having the word ‘contract’ in its name, Blockchain smart contracts are in fact not contracts. It is a piece of code written into a program that follows the instructions written within an agreement between parties. Basically, they’re a list of if/then statements that operate based on whatever condition is met. For example, if x happens, then y must be enacted, and so on. They are definitely not legally binding and can only exist within the Blockchain. In this respect, they’re not more than a tool, and definitely not a legally binding contract.

7. File storage

Another misconception that Blockchain works like the cloud is most likely due to their intangibility. A Blockchain cannot store physical information like a word file or a pdf file can, but instead provides a proof-of-existence. In other words, the Blockchain holds code that certifies the existence of a particular document. Like any other traditional ledger, Blockchain too is a record of transactions.

With that, we come to the end of mythbusters for today. We hope some of your questions, queries, confusions, or even outright myths were solved today, and you now see Blockchain technology in a completely different light!