Kelly Robertson
The first blockchain was conceptualized by Satoshi Nakamoto in 2008 and implemented as a core component of bitcoin, where it serves as the public ledger for all transactions. Since then, it managed to attract public imagination, with media talking about it as the “next big thing.”
Sure enough, there are many great things to be said about blockchain, but there are also many myths and misconceptions circling around the Interwebs. And here we want to debunk them, so without further ado, let’s start…
1. Blockchain is for geeks only
This could be true, but it is also for major corporations who are looking to use the technology to launch novel services. As applications of the blockchain technology increase, more and more people will talk about it, and eventually blockchain will go mainstream. Actually, the Bitcoin Network — which records transaction in a blockchain — is already used by millions of people all around the world. Not all of them are geeks; in fact, today you don’t need a special software to buy bitcoins — there are web services that make it super-easy. And the same will be true for other blockchain-based services that will emerge in the years ahead.
2. Blockchain is just another buzzword
Sure, we have heard many buzzwords in the last few years, but blockchain is arguably different. As already noted above, its use cases go beyond moving money from one place to the other, promising to revolutionize the way information is processed online. So big companies, not just the banks, are on board to try to get their slice of this emerging pie. The technology promises to solve a few key components of online commerce such as trust, transparency and privacy. Also, it could allow people from developing countries to enter and compete in the world economy. Plus, let’s not forget blockchain’s applications in the healthcare and public sectors, with new use cases emerging on an almost daily basis.
3. Blockchain is a database
Not true. Blockchain is not a database nor a cloud-based storage system. Instead of hosting files, it only contains a “proof-of-existence” for files, transactions, and so on. Actual files could be stored in so called “data lakes” from where the owner of the information can control it — i.e. provide access to third-parties if he/she wants to. Third parties could know about the existence of some files, but without access they can only get meta data, like the date of the document creation.
4. Big companies will avoid blockchain
Yes, big companies are slower to react to new technologies, but with blockchain it’s different. Some of the world’s biggest banks are already on board, including Goldman Sachs and Bank of America Merrill Lynch, with others exploring the ways it could improve their businesses as we speak. Also on board are such known brands as Dell, Newegg, IBM, Microsoft, Sacramento Kings, Expedia, and Time Inc. So no — blockchain is not being avoided by major companies, quite the contrary!
5. Blockchain is only good for the financial sector
Blockchain is still best known for bitcoin, but that doesn’t mean its applications are limited to the financial sectors. Again, some of the world’s largest banks like Goldman Sachs, J.P. Morgan and Barclays have all heavily invested in blockchain, but the technology has also attracted attention (and money) from the likes of Microsoft, IBM and Deloitte. In fact, blockchain holds big promises in such fields as healthcare and real estate; and could also disrupt the sharing economy by removing the middleman.
6. Blockchain is best suited for B2B interactions
Not true. If we look at bitcoin, we’ll see that it works for both business and individual customers. And while many of the big companies are showing interest in technology, we also have startups exploring its use beyond financial transactions. For the time being, this is a nascent market, but that was also the case with internet in the early 1990’s. Also for the time being, you can buy and sell bitcoins whether you’re a business or not.
7. Blockchain is Bitcoin
Yes, it was bitcoin which popularized blockchain, but here’s the deal: blockchain is technology, while bitcoin is application of that technology. So no, blockchain is not bitcoin; users of the bitcoin network (those buying and selling bitcoins) store their transactions into a blockchain. In other words, blockchain enables bitcoin’s peer-to-peer transactions to be recorded on a distributed ledger across the network. On the other hand, bitcoin is a cryptocurrency that makes electronic transactions possible directly between two people without going through an intermediary.
8. Ethereum is a blockchain
Somewhat related to the previous point, this one dealing with a different network — Ethereum. Again not true; similarly to the Bitcoin Network, Ethereum is a platform based on blockchain, but it is also somewhat different than Bitcoin. For one thing, it goes beyond financial transactions to also enable so called “smart contracts,” which let developers build applications on top of the platform. In that sense, Ethereum is more powerful than Bitcoin, though its cryptocurrency — called ether — is not as valuable as bitcoin. But has been appreciating in value recently.
9. There is no privacy on the blockchain
This is wrong in many ways. The distributed ledger is public and anyone can access it, but what they (other users) can find in it are a bunch of letter and numbers that have no meaningful sense without a private key. When it comes to bitcoin, the ledger stores the amount of the transaction and a hash. That hash is a code obtained by running the actual transaction details through a one-way cryptographic function. With just a hash, it is not possible to have access to more information about the transaction. In comparison, the system most banks use today is less secure, containing more customer information in each transaction. So it doesn’t surprise that the biggest banks are looking to the blockchain technology to improve their security.
10. Blockchain can only be public
While the Bitcoin Network is public that doesn’t mean every blockchain must be public. In fact, in addition to the public blockchain where everyone can see all the transactions, there are also consortium and private blockchains. The former could be used to, for instance, gather a bunch of pharmaceutical companies which could partner on clinical trials. As for the latter, this sort of a blockchain can be used inside big corporations or governments, enabling only specific members to authorize transactions and contracts. Nevertheless, it is the public blockchain that has the biggest capacity to disrupt industries…
