Since its inception, blockchain technology has begun to be surrounded by all sorts of myths. Often they are so ridiculous that they discourage people from learning more about it. Some of them have been around for years and their existence is supported by the faith of inexperienced users. Let’s not be unsubstantiated – here are a few examples.
What is blockchain?
Blockchain – is a distributed database that allows you to store and track information without changing it. Complete and equal copies of the chain are stored on multiple computers, which are called nodes. New information is entered into the system only after the agreement (consensus) by the majority of users. In essence, there is no single authority over the network, and no one can change or delete stored data at will.
The advent of blockchain has revolutionized many industries. Its ability to guarantee transaction transparency and the absence of intermediaries, while ensuring a high level of data security, has enabled the technology to stand up to skeptics, including those in financial institutions. Despite its still short existence, today the distributed base replaces outdated methods in many spheres of life: economics, logistics, industry, and public administration.
The fact that young startups create and develop new ideas for the application of such registries and receive investment from the world’s largest financial institutions cannot be disputed. It is also clear that not all representatives of the traditional business can quickly reconsider their methods of work and voluntarily or involuntarily try to slow down the use of progressive technologies. As a rule, they are the originators of various myths and misinformation about innovation, particularly about blockchain.
Myth one: blockchain and cryptocurrencies are the same
Indeed, since the advent of bitcoin, the two terms have been used by many as synonyms. But despite their close relationship with each other, they are still not the same concept:
Cryptocurrency is a digital asset used as a medium of exchange, just like regular money. It is decentralized, information about all its transactions is public, and resides in a blockchain.
A blockchain is a distributed ledger that contains data in the form of a chain of blocks.
In other words, blockchain is an environment, one function of which can be the storage and exchange of cryptocurrency.
Myth two: All blockchains are public
The distributed base is often presented as an alternative to traditional financial services because of its accessibility and publicity. Any user can make transactions and see the transactions of other participants without restriction. At the same time, information about recipients remains anonymous. Only the digital identifiers, which are in no way connected with the real identity of the owner, are open.
Not everyone is aware that there are other types of blockchain, such as private, corporate, or hybrid. These types have a common structure but differ in the degree of interaction between the individual elements. The main difference is in the level of access to information, the rights available, and the participation in the network management of different categories of users:
- Public. Transactions are visible to everyone, anyone can participate in the creation of new blocks.
- Corporate. The network is managed by a group of privileged members with nodes that have advanced rights to write, read blocks, and conduct transactions.
- Private. Typically used within a single company, users are sorted into groups with varying degrees of access to the blockchain.
- Hybrid. Combines public and private blockchains. Has the advantages of both. Network participants decide which data will be open to any user and which data will be anonymous.
Myth three: Blockchain is only used in the financial sector
Yes, at the first stage of the crypto industry’s development, this statement made sense. Since then, the technology has greatly improved and expanded its functionality. Blockchain is increasingly being used to store information with a high degree of protection against change: medical data, supply chains, statistics.
But the distribution principle has found the most diverse application in everything that is somehow related to finance and accounting. It can be:
- Controlling working time with appropriate remuneration;
- provision of accessible decentralized financial services;
- digital rights to various goods and public cryptocurrencies, and more.
Despite the rapid development of the technology, several factors are hindering it:
- A lack of skilled professionals to develop blockchain products;
- Concerns of financial regulators regarding insufficient research;
- lack of a clear and transparent regulatory framework;
- The aversion of some government and business representatives to anything new.
Nevertheless, it is already safe to say that blockchain is a long-term thing. It will surely be used more and more widely in all sectors of the economy.