Blockchain is one of the biggest buzzwords in the tech and finance industries today.
Just as machines and AI begin to transform digital marketing, blockchain transforms the way we think about storing data.
Otherwise known as “distributed ledger” technology, the blockchain provides a way to securely record digital interactions. The nature of the cryptocurrency can be difficult to understand, but it’s intended to be auditable, efficient and transparent – ready to create new business models.
Blockchain technology is still in its earliest stages, with widespread adoption still a long way off. The first step for any company considering blockchain is to separate the fact from the myths surrounding this new idea.
Myth 1: Blockchain is Cryptocurrency (Bitcoin)
Cryptocurrencies like Bitcoin are currently better-known than the underlying technology that supports them. While Bitcoin and similar currencies often use blockchain technology, they aren’t the same thing. However, the media attention directed towards Bitcoin has led to some confusion in this area.
Bitcoin uses the blockchain to make transparent, electronic payments possible. It provides an alternative to using a bank to make digital transactions by recording transactions in “blocks” on a distributed ledger. However, cryptocurrencies are far from the only technology associated with blockchain.
While Bitcoin may generate much of the attention that the blockchain sees today, the underlying ledger can tackle numerous problems within the digital world. Outside the financial sector, blockchain has roots in real estate, healthcare, and identity creation.
Myth 2: There’s Only One Blockchain
The confusion around Blockchain’s relationship to Bitcoin and cryptocurrency has also prompted many people to believe that there’s only one blockchain in existence. However, “blockchain” is the name of an overarching technology concept. A blockchain can come in many different formats, to closed and open-source chains, to private and public.
Most blockchains are supported by cryptocurrencies, and they are all distributed using a consensus mechanism. This means that when someone wants to add or remove a block from the chain, everyone involved with that chain must agree to it.
Though all block chains have a similar design, there are many different types, using countless forms of new technology.
Myth 3: Blockchain is Immutable
In an agile tech environment, companies want innovations that are reliable and scalable.
One of the most attractive features of blockchain is the idea that it’s “immutable,” or impossible to change. However, the immutability of the blockchain is another myth. There are two ways that someone can make changes to a blockchain.
First of all, the chain can be recomputed to a point before a specific event occurred. This issue has happened in the past during the early days of Bitcoin.
Another alternative is to fork the blockchain, which preserves the original chain, before allowing it to move in a new direction. For instance, an Ethereum fork emerged to deal with the DAO disaster that led to the theft of around $79.6 million in cryptocurrency.
Permissioned blockchains are also much easier to change than public blockchains. This means that individual business chains are more open to adjustment.
Myth 4: The Blockchain is an Unbreakable Cloud Database
When most people imagine a blockchain, they imagine some ever-growing entity in the cloud. However, as today’s tech stars know, the blockchain is actually a much flatter concept than this.
A blockchain is simply a list of transaction records. The idea is that entries in the list will never be deleted. Instead, the chain constantly grows as more transactions or digital interactions take place. Unlike a standard cloud database, blockchains don’t allow for the storage of physical information.
The blockchain can only provide “proof of existence.” This means that your ledger can contain a code that shows a document exists, but it doesn’t include the document itself.
Additionally, blockchain isn’t as secure as people assume. While the blockchain is a highly secure concept, many organisations believe that it can never be hacked or altered. The truth is that blockchain technology can only provide a way of seeing the changes made to records. Blockchains can’t necessarily stop unauthorised alterations from taking place.
Myth 5: Blockchain Will Change the World
Finally, the code making up blockchain technology is a powerful and innovative concept. However, that doesn’t mean that blockchains are capable of anything.
The blockchain is simply a digital entity that focuses on mathematics, rather than adhering to government authorities. Though many people believe that the blockchain will play a part in our future, it’s potential is limited.
For instance, the transparency of transactions made on a blockchain is often touted as a key benefit. However, transparency isn’t always as beneficial as it seems. For enterprises, the presence of digital transparency means more confidentiality, scale, and privacy issues for developers to solve.
Additionally, until we make significant progress in the potential of blockchain, the technology remains inefficient in many use cases, when compared to using traditional ledgers.