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Let’s Bust Some Major Myths about Blockchain

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Blockchain in a Nutshell

Blockchain is powered by the “distributed ledger” technology (DLT). It has emerged as an object of interest in industries such as Technology and Finance. It is designed such that it provides a secure, transparent, auditable, and efficient way to make transactions. Hence, this technology carries possibilities of disrupting many industries and empowering new business models.

Blockchain is a distributed database that secures a continuously growing set of records. It is “distributed” in nature, meaning a single entity does not manage all the transactions.

The entire working of blockchain can be condensed into two stages:

  • Transactions are the actions made by the participants in the system.
  • These transactions are recorded by the blocks, which is in a sequence and non-tamper able.

Features of blockchain technology

  • One of the best features and advantage of blockchain is that it’s public. All peers in the blockchain network can see the blocks and the transaction stored in them. However, they cannot see the actual content inside the block.
  • A blockchain is decentralised, which means there is no single authority that can approve the transactions. It can be approved only by consensus among the participants in the network.
  • Blockchain is extremely secure. The blocks (database) can only be extended, and the previous blocks can be altered.

Do you think all the information about blockchain on the internet is entirely accurate? Well, most of it is, but not all of it. That is, there are some myths about blockchain as well.

Myths about blockchain that you shouldn’t believe

Myth 1: Blockchain is Bitcoin

This is the most common misunderstanding among the newbies in the industry. To clear it once in for all, blockchain is not a digital currency (Bitcoin). It is a technology that allows peer-to-peer transactions to be recorded on a ledger (distributed type) across the network. These transactions are stored in blocks, in the form of a chain. Hence, the name “Blockchain”.

On the other hand, Bitcoin is a cryptocurrency (digital currency) used to make digital transactions without the involvement of a third party. In simple words, Bitcoin is money, but virtual.

Myth 2: Blockchain is free

Blockchain provides exceptional features, so how can we expect it to be free of cost? Note that, blockchain is neither free nor efficient to run. If we were to dig up into the hardware side of blockchain, it involves mathematical algorithms which require multiple computers to solve them. Moreover, each ‘block’ in the blockchain uses a large amount of computing power to solve them. And, this computing power costs a significant amount of money.

Myth 3: There is only one blockchain type

Blockchain is a “distributed ledger”. Based on this common denominator, blockchain can have several versions. Broadly speaking, they come in public and private versions, open and closed type, and general-purpose or specific purpose type. Examples of different blockchains are Bitcoin’s blockchain, Ethereum, Hyperledger, and IBM and Microsoft’s Blockchain-as-a-service. All of these come under the roof of a “distributed ledger”.

Myth 4: The blockchain ledger is locked and immutable

Blockchain is a powerful technology in the present world. The reason for its potency is that the code is public, transactions are verifiable, and is cryptographically secure. However, as the computational resources are improving very significantly, room for deception is building up. Therefore, the impact of future processing power on the reliability of the modern blockchain remains unclear.

Myth 5: Blockchain network can never be hacked or altered

One of the main selling features of blockchain is its security and transparency. When people read that, they think that blockchains are invincible to outside attacks. However, this is not entirely true. Though the probability of a blockchain network being hacked is relevantly low, there are ways to hack a blockchain network.

Examples of how a blockchain network can be hacked:

Sybil Attack

In this type of attack, a huge number of nodes are owned by hackers, where they flood the network with bad transactions. Performing these bad transactions in a large number disrupts the processing of valid transactions.

Routing Attack

In this method of hacking, blockchains are hacked by corrupting the internet service provider network and intercepting the internet traffic between an autonomous system and a node.

Myth 6: Blockchain can be used only in the financial sector

When blockchain was created, it got all its credits only in the financial sector. Precisely, the first application of blockchain was the Bitcoin cryptocurrency, which massively impacted this field. However, as people began to understand the characteristics and the advantages of blockchain, it started to flourish in many sectors. Apart from the financial sector, blockchain is used in real estate, healthcare, identity, Internet of Things (IoT), Insurance, music, etc.

Myth 7: Blockchain is designed only for business interactions

Businesspeople are convinced that this technology will take the business (financial) industry to a whole new level. However, its reach is not open only to big business corporations. The blockchain technology is accessible to everyone everywhere. An internet connection is the only requirement to access it. Once this is established, millions of people will be able to interact efficiently with each other.

Myths 8: Blockchain is a source for executing illegal activities

Many people still believe that blockchains are full of illicit activities. Well, of course, criminals do use blockchain for illicit activities; however, it does not mean that this technology is built for illegal purpose. Blockchains are used for legal, legitimate, and vital tasks, just like any other technology.  Moreover, blockchain is now officially recognised in many countries. The US recognised blockchain as a commodity. Germany and Japan consider blockchain as a financial instrument.

These are the important myths about blockchain you should be aware of. How many of the myths mentioned above have you believed before reading this article? Let us know in the comments below.

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