Get a better understanding about blockchain technology and cryptocurrencies by learning about their common myths and misconceptions
Blockchain technology and cryptocurrencies, although still quite new, have slowly become household names over the past years. From the financial industry, to healthcare and supply management, down to intellectual property rights, the applications of blockchain technology have become more widespread all around the world. In fact, international companies such as Facebook, Microsoft, and Google have recently invested in blockchain technology to expand their services and offerings.
The fact remains, however, that despite its explosive popularity, there is still a lack of basic understanding on blockchain and cryptocurrencies. Before businesses can fully realize the potential of blockchain in their respective industries, there must be a clear separation of mythology surrounding blockchain from the real and solid facts.
Here are some of the most common myths about blockchain and cryptocurrencies, and the reality behind these misconceptions.
Myth 1: Blockchain and Bitcoin are one and the same
Reality: With Bitcoin being the pioneering cryptocurrency, its popularity overshadows the real deal about its underlying technology, the blockchain. Most, if not all of the time, people think that Bitcoin equals blockchain. However, the truth is that blockchain and Bitcoin are two separate entities. While Bitcoin and cryptocurrencies are, as the term suggests, digital money that is used and exchanged as commerce, blockchain technology is a distributed ledger that records all the transactions that have taken place on the network. Follow this link to learn more about blockchain technology and how it works.
Myth 2: Cryptocurrencies are so volatile, so we can’t rely on the blockchain
Reality: In relation to the first myth, many of the misconceptions about blockchain stem from its association to the volatility of the market value of cryptocurrencies with the credibility of blockchain technology—if the market value is so unstable, then so is the blockchain. The truth is that, blockchain has many applications beyond cryptocurrencies. The volatile cryptocurrency market value has nothing to do with blockchain; the technology can stand on its own and is not affected by the cryptocurrency market. Follow this link to know more about how blockchain is separate from cryptocurrencies.
Myth 3: It’s impossible to hack the blockchain
Reality: One of the key value propositions of the blockchain is the immutability of data—that is, once certain data has entered the chain, there is no way to alter it; hence, it’s impossible to hack. However, the reality is that it’s not entirely impossible to guarantee complete immutability. Data on the chain can still, in fact, be changed once it’s written. The caveat is that doing so requires an incredible amount of energy, far greater than mining the block itself. There are also other ways in which a blockchain’s security could be compromised. One famous example is the 51% attack, where there is a threat of an attacker gaining control over a majority of the hash power on the network, opening the possibility of double-spending. Follow this link to learn more about common cryptocurrency and blockchain scams.
Myth 4: Data on all blockchains are public or anonymous
Reality: Another key selling point of the blockchain is its inherent transparency. While the standard blockchain network is public—meaning that anyone can access the network and participate in validating and viewing transactions at any given point—it’s not always appropriate or even legal in some cases. Today, there are privacy and data protection laws in place that cover data stored on the blockchain. There are also other types of blockchain networks that allow for more data privacy: a private blockchain, in which the system is owned by a single entity, and a federated blockchain, in which permissions are vested in a group of companies or individuals. Large enterprises such as JPMorgan and Microsoft are also deploying private and permissioned blockchain networks in which only known entities (for example, customers, partners, and suppliers) can access and participate.
Myth 5: Cryptocurrencies facilitate illegal transactions
Reality: Decentralization is perhaps the number one strength of blockchain technology and cryptocurrencies, but it could also be its downfall. This and the anonymity of transactions on a public blockchain seem to be attractive qualities to criminals. In fact, in the earlier days of Bitcoin, they were popularly used in black markets. However, at this time, the Silk Road has long been closed, but the reputation of cryptocurrencies being used to facilitate illegal transactions continue to linger. Currently, certain laws and regulations are adopted in some countries to somewhat regulate the exchange of cryptocurrencies, protect its consumers, and to eradicate the illegal use of cryptocurrencies.
As with any emerging technology, it is quite understandable why there are a number misconceptions about blockchain and cryptocurrencies. With prominent companies leading the adoption of blockchain technology, as well as the presence of countless blockchain startups, it will be quite soon that more people will become familiar with the technology. In the long-term, blockchain is a game changer in many more ways than one, but it all starts with at least a basic familiarity of its concepts and understanding of its uses in order for it to be effectively utilized.
– Article written by Tinny
Tags: bitcoin, blockchain technology, cryptocurrencies, decentralized, emerging technology, federated blockchain, illegal transactions, impossible to hack, mining, private blockchain, public blockchain, silk road, volatile