Blockchain is a cryptographically secure, shared, and distributed ledger of records, aiming to simplify transfer of digital assets from an individual to another. It’s a peer-to-peer network, wherein thousands of computers are connected, running complex algorithms to validate a transaction.
As Blockchain technology advances and continue to find its use cases in various sectors, a lot has been pictured and predicted about it. This incite myths around the technology, which may question its possibilities at different levels. Here, we discuss a few misconceptions about Blockchain and debunk them with relevant facts.
MYTH 1. Blockchain Records are Immune to Cyber-Attacks
The immutable nature of Blockchain technology is one of its selling points. This has eventually lead to a mindset that Blockchain records are invulnerable to attacks or can never be tampered. However, the truth of the matter is, no system or database is 100% secure. It’s the immense, distributed network of nodes that make Blockchain safer than other (powerful, centralized) databases.
When a transaction is initiated, a broadcast is made to the entire network about it. The connected node of computers then validate the transaction by running a complex set of algorithms. Since there are thousands of computers involved in validating the transactions, hacking the network would require breaking all of the computers around the world, which is impractical. Similarly, manipulating the records would require involvement of thousands of computers at once. The quality of database being decentralized makes it highly permanence, compared to centralized DBs.
MYTH 2. Blockchain is Single Entity, like Internet
There is a perception that Blockchain has a distinct, independent existence (very similar to Internet). However, the fact is that there are a number of Blockchains existing, each designed and created for a specified purpose. For example: Bitcoin, Ethereum , Litecoin (cryptocurrencies) are public Blockchains wherein anyone can participate, at any level. Then there are federated networks like E3 (banks), EWF (energy), B3i (insurance) wherein, limited number of nodes in network have permission to participate in validating transaction. And then, there are private networks wherein specific members are allowed to access and process a transaction.
MYTH 3: Blockchain is Huge Database in Cloud
Blockchain is a flat file database with append-only properties. Therefore, the entries in the database are never deleted. The file can grow indefinitely and is replicated on all the nodes in P2P network. While Blockchain is a huge database, it does not allow storing any physical information (like an image or document). All that it holds is a proof-of-existence (in the form of codes) for a document but not the document itself.
MYTH 4: Blockchain can only Disrupt the Fintech Sector
Certainly, fintech industry realized the possibilities and perils of Blockchain; thanks to Bitcoin (the first practical and popular application of Blockchain technology). Amongst the various industries where Blockchain technology is known to have and is causing disruption is Fintech. However, with the benefits that this distributed ledger brings in, it has got its qualitative use cases in healthcare, real estate, internet identity, rights management etc.
MYTH 5: Blockchain is Bitcoin and Vice Versa
Bitcoin cryptocurrency unveiled its underlying technology and ever since, a lot of people have misconception that Bitcoin and Blockchain are same. Bitcoin is a cryptocurrency that makes buying and selling of digital assets possible, without a trusted third party (like bank). On the other hand, Blockchain technology enables P2P transactions to be recorded on a decentralized ledger, across a huge network of nodes.
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MYTH 6: Smart Contracts and Regular Contracts have Similar Value
Smart contracts, another application of Blockchain is making waves in the legal industry. They are pieces of codes that gets triggered, when certain actions are executed. Therefore, in terms of precision and legality involved, they can’t be compared with regular contracts. However, they can be a great source of proof for execution of a task. Nevertheless, despite having no compliances to validate their actual worth, Smart Contracts can offer optimum value to legaltech, when collaborated with Internet of Things (IoT).
MYTH 7: Blockchain is absolutely Free
Till data, Blockchain technology is not cost-effective at all. When implementing the technology at the back-end, a number of computers for validating a transacting using mathematical calculation would be required. And the fact is, each block in the chain requires immense computing power to finalize processing of a transaction with single version of truth (SVT). And when such a powerful set-up is needed for a transaction, it would call for huge investment.
If you had any of the above mentioned misconceptions about Blockchain before, these facts must have given you some good reasons to invest in the technology. For any queries, suggestions, get access to 30 minutes free consultation with our Blockchain expert.