Common misconceptions about blockchain

The market is abuzz with the advent of the blockchain. It has now become a 'term' which evokes strong public opinion, comments- whether valid or not.  Let us begin by understanding the term blockchain. In simple terms, blockchain is a technology that serves as an alternative to centralized data storage. Instead of the data being stored on one or multiple servers which are prone to hacks, blockchain is distributed among computers. Radically challenging the status quo, blockchain works on a  peer-to-peer verification of transactions. It allows for complete transparency as no single entity can possess the system.

However, the contemporary era is always 'high' on misconceptions surrounding any innovation.  Just like the introduction of smartphones and internet dazzled the market and 'legendary myths' engulfed the mass, the world of blockchain has already created a lot of misconception.

DEBUNKING MYTHS

• The existence of one and only blockchain. Nooooo!

This belief is conclusively false. Although blockchain is commonly compared to the internet, unlike the internet, there are numerous blockchain- each designed to serve a distinct purpose. The common denominator is that they are distributed, have some form of consensus mechanism. Examples could be Bitcoin's blockchain, ethereum, hyperledger, IBM and Microsoft blockchain, etc.

• Blockchain applications are used for criminal activities. Nooooo!

The collective mass is tied to the belief of cryptocurrencies supporting nefarious activities. It has its roots in the silk road and the dark web along with the mistaken belief of blockchains offering anonymity.  While it is true that, to an extent, cryptocurrencies are a virtual boon for drug-trafficking, illegal pornography, and even terrorism, it's ignorant to assume that it is an untraceable underworld enabler. On the open side, cryptocurrencies are a means to exchange digital assets. Bitcoin being a public ledger, there is always a record of any transaction taking place. The transactions can be traced anytime, anywhere, regardless the purpose of the transaction.

• Blockchain and bitcoin can be used interchangeably. Nooooo!

For beginners and most of the mass, blockchain is always understood as bitcoin and vice versa, creating a lot of confusion.

The blockchain was born with bitcoin, as the underlying technology. Simply put, blockchain is a technology whereas bitcoin is the application based on this technology. What bitcoin is to blockchain is what email is to the internet – its first ‘killer app.'

• All the blockchains are public. Nooooo!

It is true that bitcoin, along with many well-known blockchains are public, but not all blockchains are. There exist private and semi-private blockchains with varying degrees of penetrability, approachability, and transparency. A public blockchain is open to the public where all the transactions are visible, and anyone can participate at any level. On a private blockchain, only parties with necessary keys can review private transactions. Technically, public blockchains utilize proof-of-work methodology whereas private blockchains use proof-of-stake.

• The blockchain acts as magical data storage in the cloud. Nooooo!

The working of blockchain and cloud are poles apart. The common misconception is due to their intangibility. A blockchain doesn't store physical information like  PDF files or a word documents. It only provides for a proof-of-existence. Blockchain, conceptually, is a flat file, a linear list of simple transaction records. This 'flat file' holds code that certifies the existence of a particular document and not the document itself.

• The blockchain is used only in the financial sector. Nooooo!

Blockchain technology was highlighted because of the introduction of bitcoin, its first application.  Blockchain can be used in numerous areas referencing its implementation; finance incontestably is one of them. In fact, the Indian government is looking forward to employing the blockchain technology in education, health, and agriculture to fulfill its aim of India going truly digital.

• Cryptocurrencies are a replacement to traditional currencies. Nooooo!

As no single entity, corporation or a nation owns or controls the blockchain, it is often hailed as a revolutionary technology.  With financial intermediaries,a.k.a middlemen flocking every sphere of our lives, this technology might bring in a new global economy. However, it is unlikely to happen, not anytime soon. The reason accounts for the exorbitant cost of mining, and also that blockchains are not scalable or efficient enough to support global usage. The difference can be seen in the duration of the transaction. Bitcoin can process a maximum of seven transactions a second whereas Visa can process thousands of transactions a second.

The blockchain technology is very much in its nascent stage- or experimental, according to some. The misconceptions mentioned above are few of many, and debunking such myths will provide a field for developers and researchers to produce more viable and efficient solutions. The blockchain technology can transform the society at all the levels. All we need is exploration and experimentation with the aim of a new invention.