10 Misconceptions of Blockchain Technology
With the popularity of blockchain technology rising, there comes many misconceptions. Like any complicated and popular topic, the facts can often be missed and misunderstood which can produce false facts that spread like wildfire. Let’s take a look at some common misconceptions of this revolutionary technology.
1.Blockchain is Bitcoin
It’s hard to think of blockchain and not Bitcoin. After all, when Satoshi Nakamoto introduced Bitcoin to the world through the release of the whitepaper, Bitcoin: A Peer to Peer Electronic Cash System in 2008, blockchain, it’s lesser known root technology also made it’s introduction to the world.¹ At the time the two concepts were so new that people often mixed up the two. Sally Davies, FT Technology reporter explained the relationship between the two well,“Blockchain is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.”
2. The Only Application for Blockchain is Cryptocurrency
Similar to the idea that ‘Blockchain is Bitcoin’, people often think that only cryptocurrency and finance companies can leverage the power of blockchain. Every business and industry can use the underlying technology of distributed ledgers.
Blockchain can be applied to the entire healthcare value chain by using a secure public ledger to remove slow and outdated workflows. According to Deloitte, “The healthcare industry is planning the most aggressive deployments of blockchain, with 35 percent of health and life sciences planning to deploy by 2018.”²
The real estate market is also being disrupted by blockchain technology, potentially cutting out the middleman, which means being a quicker, more cost effective, transparent and secure alternative for buyers, sellers and lenders.³ If you’re not ready to buy, ManageGo allows tenants to pay their rent in Bitcoin, Ethereum and Litecoin! For property managers, the company converts the crypto to USD and deposits the amount into a linked bank account.⁴
Who’s car insurance is in the glove compartment, under a pile of napkins and random paperwork right now? What if you didn’t have to carry it around or keep track of where it was, and let the blockchain store the information for you. A group of insurance companies in US are currently testing a blockchain solution called RiskBlock to provide proof-of-insurance information. This will help law enforcement, insured and insurers verify insurance coverage in real time and accelerate claims processing in times of accidents.⁵
3. There is Only 1 Blockchain
There are many blockchains; private business blockchains, like Hyperledger Fabric and open-sourced or public ones, like Ethereum, or Bitcoin.
4. All Blockchains are Public
Private blockchains do exist. These blockchains spark the debate of whether it should be considered a blockchain since the authority is centralized; the various rights are exercised and vested in a central trusted party but is still cryptographically secured.⁶
5. Blockchain Activity Isn’t Public
The majority of blockchain activity is traceable, contrary to popular belief.⁷ Etherscan allows you to keep track of blocks and see public transaction histories.
6. Blockchain Is Just for Storage
Although one of the uses can be for storage, typically for unchangeable or trackable information, but gas costs can be quite expensive. The real advantage of blockchain is to be used as an exchange between two parties.
7. Blockchain is Free
Creating a blockchain involves multiple computers solving mathematical algorithms to agree a final immutable result, which becomes the so-called single version of truth (SVT). Each block requires a lot of energy to solve, which can be costly.⁸
8. Smart Contracts are Regular Real-Life Contracts on the Blockchain
Smart Contracts have no relation to legal contracts in real life. Smart contracts are programs that execute exactly as they are set up to by their creators. Nick Szabo describes it as a kind of ‘digital vending machine’ where users could input data or value, and receive a finite item from a machine, such as a real-world snack or a soft drink.⁹
9. The Blockchain is a Magical Database in the Cloud
The blockchain is conceptually a flat file; a linear list of simple transaction records. The blockchain lives on any miner and blockchain client program. So every node on a blockchain network, has the blockchain.¹⁰
10. The Blockchain can be Used for Everything and Anything
Although very versatile, the technology still has it’s limitations. For example, the blockchain is an authority tied to mathematics, not the government or lawyers but it cannot replace government or lawyers.¹¹ Some solutions that are attempting to make blockchain more scalable and to be used for anything are State Channels or payment channels, which is something that STACK & STK is using, Sidechains, Sharding and ZK Snarks. Once blockchain becomes more scalable, the can utility can expand and be more likely to become mass-adopted.
Although there are misconceptions due to popularity, for the same reason these will lessen over time as the general public becomes more educated with blockchain technology; whether it’s through self-education and interest or adoption by a company they recognize. What are some incorrect “facts”, you’ve heard about blockchain? Share in the comments below!