Blockchain has emerged as a transformative technology that is poised to radically alter multiple global industries. With the advent of Bitcoin, blockchain technology surfaced from relative obscurity as a financial application for transferring economic value to a revolution that upends the way businesses and individuals track assets, records, or anything of value. However, despite the technology’s increasing adoption, blockchain myths abound as it remains a nascent development. Moreover, blockchain’s novel and frequently technical nature can make it challenging for individuals to grasp and fully comprehend the technology. This, along with a profusion of misinformation spearheaded by hype, has contributed to the prevalence of blockchain myths or misconceptions surrounding its capabilities.
Some of the most prevalent blockchain myths are that its application is limited to cryptocurrency transactions, all blockchain networks are public, and transactions conducted on the technology are entirely anonymous.
1. Blockchain’s Application Is Limited to Cryptocurrencies
The ascent of the cryptocurrency sector to a peak market cap of nearly $3 trillion has brought blockchain, its underlying technology, to the spotlight. However, while cryptocurrencies are powered by blockchain technology, their strong ties often lead individuals to mistakenly think of the two terms as being interchangeable. This blockchain myth has also grown as a result of the fact that the technology gained popularity along with the launch of Bitcoin, the first and largest cryptocurrency.
Cryptocurrencies like Bitcoin and Ethereum are digital currencies or assets that can be used as a medium of exchange. Through blockchain technology, transactions are facilitated in a decentralized and transparent manner, away from the purview of centralized institutions like banks. Blockchain, on the other hand, is an entirely new technology stack that represents a decentralized digital ledger that records transactions on multiple computers or nodes in a secure, transparent, and immutable way. The features of security, audibility, and verifiability make the technology a compelling use case for businesses as well as non-financial applications.
Since blockchain technology can be used to store, manage and transfer any type of digital data or records, its utility extend to a variety of real-world applications such as supply chain management, healthcare records, and the decentralized storage of virtually any information. The technology effectively undermines the monolithic, centralized databases and systems that dominate web2 today in favor of a more democratic version of the web or web3. Therefore, while cryptocurrencies operate on the blockchain, the technology itself exists independently of cryptocurrencies and has a broad spectrum of potential use cases in a variety of industries, dispelling another common blockchain myth.
Day 859— Nischal (Shardeum) ⚡️ (@NischalShetty) March 9, 2021
Myth: All Crypto = Currency
Reality: Crypto = Asset/Utility/Currency/Security
Myth: Blockchain, not Crypto
Reality: Crypto = Public Blockchain
Myth: Crypto ban will solve all evil
Reality: Regulation will solve all evil
Bust myths, spread knowledge#IndiaWantsCrypto
2. All Blockchain Networks are Public
Blockchain technology has expanded and developed in its applications from its original use case as an open, publicly verifiable distributed ledger. Businesses understand the need for technology to improve efficiency and streamline operations while also modifying features like public transparency to meet their needs and requirements.
In the healthcare industry, for instance, it is necessary to securely store sizable portions of sensitive patient records away from the general public while maintaining immutability and transparency for a limited number of authorized personnel. This has resulted in the creation of different types of blockchains, such as a private or a permissioned blockchain. Therefore, one of the most pervasive blockchain myths is the notion that all networks using this technology are by nature public.
Public blockchains, such as the type of network used on cryptocurrencies, and private blockchains share operational similarities, such as operating on a peer-to-peer network run by a cluster of nodes. However, they fundamentally differ in terms of accessibility, visibility, and participation in the consensus process. For a more in-depth guide on the differences between the two types of blockchain networks, read this article.
3. Blockchain Ensures Complete Anonymity
Complete anonymity is among the most common blockchain myths. While anonymity and privacy are central components of blockchain technology, the degree of anonymity on offer is often misconstrued by individuals new to the technology. Every transaction on the blockchain is stored and recorded in a public ledger, which means it is possible to trace the users’ flow of funds.
For instance, the largest public blockchain network is designed to provide significant transparency and traceability. Every transaction on the Bitcoin blockchain can be viewed by anyone, all the way back to the genesis block. Similarly, the history of transactions for all addresses can be traced and identified by a user’s public keys.
The technology undeniably raises the bar for user privacy because creating an address on a blockchain network does not require any personal information like a user’s name, phone number, or email. However, the technology’s transparency negates the notion of total anonymity, making it another blockchain myth. Therefore, blockchain technology represents pseudonymity rather than total anonymity.
Blockchain technology is a powerful resource that has the capacity to radically transform how individuals conduct transactions, share information, and interact with one another. Big Four accounting firms like PwC have recognized its potential, projecting that by 2030, blockchain technology will have a $1.76 trillion impact on global GDP.
As blockchain adoption rises over time, its expansive utilities and capabilities will become commonplace among the masses. Just as the internet was an emerging and disruptive technology that required a learning curve in the 1990s, the technology will inevitably become more widely understood. However, while the technology is still developing in its nascent years, information asymmetry about this transformative technology can lead to a proliferation of common blockchain myths. Therefore, before delving into the blockchain, it is vital for businesses and individuals to distinguish fact from fiction to create a more secure, transparent, and decentralized digital world.