Home Blog Common Misconceptions About Blockchain You Should Know! Common Misconceptions About Blockchain You Should Know! 4 minutes read
October 10 2022 Reading Time: 4 minutes Many people now have misconceptions about blockchain and use the technology inefficiently. This is understandable, considering that technology is still a buzzword, and there have been hypes widely spread on blogs and social media over the years.
Thus, we gather all common myths here and give detailed explanations to remove hefty confusion about blockchain and its applications.
Scroll down to read more!
Misconceptions about Blockchain: 7 Myths #1. Blockchain is all about bitcoins Misunderstanding:
It was the popularity of the bitcoin cryptocurrency in 2020 that brought blockchain to the limelight. Since then, many people have considered blockchain and bitcoin as interchangeable concepts or blockchain is equal to cryptocurrencies.
The fact:
Blockchain is the technology behind the creation and facilitation of bitcoin and other cryptocurrencies. Yet, it is far more helpful than such an application.
In the financial industry alone, blockchain can also be used for money transfers, financial security, smart contracts automation, the storage of customer data, etc.
Check more: Blockchain Applications in The Finance Industry
Enterprises have also used the technology across other sectors such as real estate, supply chain, healthcare, digital transformation, insurance, government, ecommerce, telecommunications, and more.
#2. Blockchain Is a Cloud-based Database Misunderstanding:
Blockchain is a cloud used to store and distribute data among specific parties.
The fact:
Cloud-based solutions and blockchain are different.
The earlier requires the internet to deliver services, whereas the latter uses different encryption methods and hash to store distributed ledger blocks.
Data in the cloud platforms are mutable for those having the “edit” permission. In contrast, blockchain information is immutable, meaning no one can edit or delete transactions in the chain. The entire history of transactions is transparently public to its members.
#3. Blockchain is Efficient for Everything Misunderstanding:
Blockchain is a silver bullet for everything on earth.
The fact:
This is among the most common misconceptions about blockchain.
Blockchain technology is interesting and promising to make some businesses more efficient, immutable, and transparent, as mentioned in point #1. That is why technology is under the spotlight.
Nonetheless, it is neither the one-for-all solution nor the complete alternative to traditional centralized approaches. There are limitations that prevent blockchain applications, such as difficult and costly development, scaling issues, and immutability challenges.
We would not suggest using the technology if your project needs to scale quickly to store a large amount of non-transactional information; or if your team changes transitional rules, update or delete data at some points.
#4. Data in a Blockchain Is Public Misunderstanding:
Blockchain is always publicly accessible to everyone.
The fact:
Many misconceptions about blockchain come from the idea of bitcoin, which is public to the worldwide community.
In fact, cryptocurrency is merely a way blockchain can work. Besides being public, blockchain can be private or hybrid.
What type of blockchain to use is based on its purposes.
A public chain is suitable for a truly democratized and authority-free organization that encourages as many participants as possible. In reverse, a private blockchain is preferred by businesses in logistics, finances, healthcare, etc., to enhance efficiency and immutability. Members can only join the network through an invitation.
Hybrid lies in between public and private blockchains. Anyone cannot participate in the network unless they meet a strict identity verification process. Among those members, only some give designated permissions.
Read later: How does blockchain work?
#5. Blockchain Can Return High Interest Misconceptions about blockchain: The technology leads to rich! Misunderstanding:
Blockchain always makes a significant profit for individuals and businesses.
The fact:
Bitcoin – the most famous blockchain application, reached its all-time high price in 2021 – over 65,000 USD . Since then, many people have believed blockchain and its cryptocurrencies, like Bitcoin are significantly profitable.
Unfortunately, the prices of many cryptocurrencies have witnessed a significant violation this year. Industrial experts imply such a collapse of the war in Ukraine, the potential recession of the worldwide economy, stubbornly increasing inflation, high-interest rates, etc.
As a result, many investors in the blockchain end up losing their money rather than making profits.
#6. Blockchain Is Unhackable Misunderstanding:
Blockchain cannot be hacked thanks to its securely encrypted mechanism.
The fact:
At heart, blockchain works on a hashing algorithm. A new transaction in the network is signed with a unique and random 32-bit nonce and tightened with a 256-bit encrypted hash. Those numbers are almost unguessable, which prevents hacking opportunities.
Such an ideal concept is not secure enough against hackers.
Because blockchain technology still has many limitations, criminals find certain ways to sneak into the network, such as attacking the verification process, exploiting coding errors and flaws, or taking advantage of weak security practices.
Must-check: Top practices to write an enhanced blockchain!
#7. Blockchain is Not Prepared for Business Adoption Misunderstanding:
Many businesses fear a blockchain has security, privacy, and performance flaws. Thus, the technology is not ready for business adoption.
The fact:
Although there is room for blockchain to improve, it has been adopted by many businesses.
In 2018 alone, 29% of businesses joining the Global Blockchain Survey of Deloitte revealed that they had adopted at least one blockchain consortium, and 45% confirmed to continue using the technology the next year.
This year, the usage percentage has grown for sure.
Do You Have Any Other Misconceptions about Blockchain? Here are some takeaways from the above:
Blockchain is a decentralized ledger, not a cloud-based solution. The technology can be public, private, or hybrid, depending on the data storage and distribution. Bitcoin is only an application of blockchain. Besides that, blockchain is also helpful for different industries and business adoption. Blockchain is not 100% secure, efficient, and profitable. Thus, individuals and businesses must be extremely careful while investing in technology. We hope you can clear out all misconceptions about blockchain now, and feel free to let us know if you are confused!
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