Blockchain Technology is best known for its characteristics such as decentralization, immutability, high security, privacy, and much more. We have seen several applications of blockchain technology. For example, in cryptocurrencies, NFTs, and various industries and organizations.
Since then the adoption of blockchain technology has increased rapidly and is still growing. However, since blockchain is still emerging there are several myths about what exactly it does for us. In this article, we will debunk several myths to help you get a better understanding of this awesome technology.
Myth 1: Blockchain And Bitcoin Are The Same
The most common myth is that blockchain and bitcoin are the same. As Bitcoin is more popular and has got the most exposure than blockchain technology, it got many people jumbled between the two.
Bitcoin is a cryptocurrency that was created in 2009 by Satoshi Nakamoto to solve major flaws with our fiat currencies and to solve how money works. This was the time when blockchain technology was first implemented to create Bitcoin. However, blockchain technology was first researched in 1991 by Stuart Haber and W. Scott Stornetta.
A blockchain is a database of information or transactions recorded in blocks interlinked with each other on a distributed ledger throughout several nodes on a network.
Every block in the blockchain also consists of time stamps of transactions, its own hash, and the hash of the previous block. Blockchain is also decentralized, which means blockchain is not controlled by anyone even the government cannot govern it. Transactions or data on the blockchain are secure and permanent.
However, bitcoin is a cryptocurrency that works on blockchain technology. It is a digital currency that can be used to make payments among each other without the need of any third party like a bank. Bitcoins are stored either in hot wallets or in cold wallets. Unlike fiat currencies, bitcoin has a limited supply.
Myth 2: Blockchain Is A Cloud-Based Database
One of the biggest myths is that blockchain and cloud-based databases are the same. Both of them have been emerging in this decade and to some extent are related to each other, i.e., for storing data but that is not the case.
Data and transactions stored in the blockchain are completely decentralized whereas cloud-based databases are centralized. Cloud-based databases are mutable, whereas, blockchain on the other hand is immutable, which means information stored cannot be changed.
Transactions in blockchain are recorded permanently and are viewable to anyone. Blockchain stores record with Proof of Existence (PoE) which means that a particular data exists on the blockchain without showing the real information.
Myth 3: Blockchains Are Public
Since the launch of Bitcoin in 2009, a lot of people have assumed that blockchains are public. Public blockchains are not the only type of blockchains, there are different types of blockchains for different uses like private, hybrid, and consortium blockchains.
Public blockchains are permissionless and distributed ledger systems which means anyone can join the network. However, private blockchains are permissioned blockchains and are restricted which means these are used in businesses or institutions where only specific members can become part of the network. Like this, there are other types of blockchains used for different purposes.
Myth 4: Blockchain Is Completely Secure
One of the main ideas behind blockchain technology is the encryption of information related to particular transactions between two individuals. Bitcoin which works on blockchain uses SHA-256 cryptographic hash algorithm for the encryption of data.
This hashing algorithm is recommended by several experts to solve various encryption needs. If this algorithm is put at risk then there will be several problems regarding the whole blockchain technology.
This will disagree with the fact that blockchain is completely secure. Smaller blockchains like private blockchains can easily be compromised whereas public blockchains provide better security from malicious attacks.
Myth 5: Transaction On Blockchain Are Anonymous
Every newcomer who gets interacted with blockchain thinks that all the transactions carried out on the blockchain are completely anonymous but this is not the case.
If we take Bitcoin as an example that works on blockchain technology, is that it only records the public address of the wallet without disclosing the owner of the wallet.
However, the use of cryptocurrencies for the use of illegal activities has been increasing day by day. Recent reports show that these activities can be only tracked if the respective individual has linked his wallet’s public address with his actual identity.
Myth 6: Blockchain Can Only Be Used In Finance
As blockchain technology was first implemented for the creation of a digital currency called bitcoin which impacted the fact that it can only be used in finance. Apart from the financial sector, blockchain has several applications.
Blockchain can be used in various industries such as healthcare, real estate, smart contracts, voting, managing supply chains, and much more.
Check This Out For More – Applications Of Blockchain.
Myth 7: Blockchain Is Immutable And Unhackable
Blockchains store data in blocks and these blocks are linked with each other. Every block consists of a digital signature called hash value based on cryptographic algorithms. Every block on the network records all the transactions, its own hash value, and the hash of the previous block.
If a bad actor changes transactions in a previous block then the output hash of the block will also change which will lead to all the hashes after it change as well. So to successfully tamper with the data he would need more than 51% of the network computing power which is very unlikely.
Therefore it is almost impossible to hack blockchain networks that are largely distributed like public blockchains. But attacks can still be performed for smaller blockchain networks like private blockchains.
Our enhancements in computing power has made it easier to perform these types of malicious attacks.
Myth 8: Blockchain Is Free
This is one of the myths that people mostly come across. It is neither free nor efficient to run such advanced technology. The cost of blockchain is primarily related to the use of powerful computers to solve various mathematical algorithms and the respective person needs to pay for all this.
As in the case of bitcoin which works on blockchain technology, it requires expensive, strong computers and lots of electricity for its mining. Therefore, running a blockchain is not free.
Myth 9: Smart Contracts Are Valid Legal Contracts
This is also one of the most common myths about blockchain where people assume that smart contracts and regular legal contracts are the same. Smart contracts are digital contracts saved in the blockchain. It is a contract written into codes that executes by itself when specific conditions are met between the two individuals.
Also, it is used as proof of whether that specific task has been achieved or not. Thus, they are not identical to legal contracts.
Myth 10: Blockchain has reached its full potential
There is no doubt that blockchain technology is still growing rapidly. It is one of the best and most advanced technologies out there but few people consider that blockchain technology has reached its peak.
It is clear that blockchain is life-changing for many industries but it depends on its adoption and how they execute in their models. So there is a lot of room available for everyone to explore and implement this technology.
Conclusion
There is no doubt or second thought about what blockchain technology can do. With only a few years of using this technology, it has reached certain heights and is still growing rapidly. With this extensive growth, it also brought up some myths regarding itself.
Finding the right information about it is necessary if you want the benefits of this awesome technology and it is also essential to debunk these myths to improve it’s implementation. The more you clear these misconceptions, the more confident you will become regarding blockchain technology.
Check Out: What Is Blockchain? How Does It Work? Everything You Need To Know