In this article, we will explain top 5 blockchain myths.
Blockchain technology has developed significantly in recent years and has become increasingly adopted worldwide. However, as with many new technologies, lack of understanding can lead to confusion, doubts, and the development of myths. Here are 5 top blockchain myths and the truth behind each one.
1. All Blockchains Are Public
One of the most common misconceptions, particularly for beginners, is that all blockchains are public. Although many successful and well-known blockchains have been public, these are only one type of blockchain. There are also public and hybrid blockchains on offer. Depending on the case and enterprise you are involved in, different types of blockchains may be better suited to your needs.
2. Blockchain Is A Cryptocurrency
For a long time blockchain became synonymous with Bitcoin. As a result, there is often a misconception that blockchain is a cryptocurrency. However, in reality, cryptocurrencies are simply one example of blockchain technology in use.
“A blockchain is a system that allows transactions between different parties to be recorded,” explains Carl Hill, a project manager at Essay Roo and Academized. “These records can then be stored through the use of computers which are connected to one another through peer-to-peer networks. Ultimately, this means that blockchains function as a form of an open and distributed ledger.”
Furthermore, not all cryptocurrencies use blockchain technology. Although blockchain technology lends itself particularly well to cryptocurrencies and use in the financial sector, it was not intended for this specific use. Blockchain technology is also in use in other industries, where it can be used to improve administration or maintain records. One such example of this is the use of blockchain technology in healthcare.
It’s true that blockchain greatly reduces the possibility of information being changed or even accessed because it uses encryption technology. However, this does not mean that all blockchains are entirely invulnerable. In the case of public or permissionless blockchains, hacking is further reduced because the transactions cannot be changed. Yet any point at which data is stored off-chain does present an increased vulnerability.
With private or permissioned blockchains, an administrator can make changes, which does increase the opportunities for hacking to occur. However, most blockchains make use of the SHA-256 cryptographic hash algorithm which has been highly recommended by experts for continued use. Yet, there is the risk that the algorithm itself could be compromised. In that instance, the entire blockchain itself would be vulnerable.
4. Blockchain Is Simply A Cloud-Based Database
“Many people believe that blockchains are merely cloud-based databases. However, there are several differences between the two. In the first instance, blockchain should be downloaded and run on internet-enabled computers designed to operate the blockchain. Every single computer worldwide that runs a blockchain is accounted for within the network,” says Lillian Cadena, a business writer at Via writing and Best British Essays.
Some blockchains store data on a secure cloud with a hash to allow individual users to connect with or access a specific document. In the case of permissioned and private blockchains, access to data is restricted and, by virtue of being permissioned, is managed by an administrator.
However, with blockchain there is the further added advantage that digital files can be stored in different formats. Furthermore, all documents stored on a blockchain are recorded with a Proof of Existence (PoE). A PoE is extremely valuable as it provides evidence that the document in question exists, without ever needing to show the document itself.
5. Transactions On Blockchain Are Completely Anonymous
In the case of public or permissionless blockchains, all transactions are visible and blockchain does record the public address of all wallets. Yet, the identity associated with the party or individual in question (the name of the wallet owner) involved in the transaction is removed. In this way, many transactions can become seemingly anonymous. However, not all transactions are entirely untraceable. If the public address of a wallet is correctly linked to its owner, then the wallet can be used to trace all previous transactions by that wallet owner.
Misconceptions about blockchain can lead to poor business decisions and a waste of resources. In order to make the most of all blockchain offers, it’s essential to fully understand how it is operated and its functionalities. Similarly, gaining a clearer understanding of its limitations will allow you to become more confident when using it and capitalize on its benefits.
Elizabeth Hines is an experienced digital marketer and content writer at Top Canadian Writers and Simple Grad. She regularly writes articles about the latest tech and marketing trends, innovations and strategies. Elizabeth also writes for Best essay writing services, as well as a range of other online magazines and blogs and enjoys sharing the innovative applications of new technologies with her readers. When not writing, Elizabeth enjoys attending conferences and hiking with friends.
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