Which is true and which is a lie?
Just like other cryptocurrencies out there, Bitcoin is also covered with myths and misconceptions. Despite Bitcoin’s relevance in the society, there are still myths about Bitcoin that are fooling the general public. Bitcoin is indeed sometimes not that easy to to understand because it requires a basic understanding of many different areas of study such as cryptography, economics and computer science.
In order to use blockchain technology to its full effect it’s necessary to cut through the noise and better understand what blockchain is and more importantly what it is not.
1. Blockchain and bitcoin are quite different things
This is only conditionally correct. Although Bitcoin can be understood as an application of a more general blockchain technology, both are very closely linked: the validation of blocks in the blockchain takes place, at least in open blockchains, basically by the “mining”, which works only with bitcoins.
Without Bitcoins, there is currently no reason for potential miners to take on the, not inconsiderable, validation effort. But, without validation the whole procedure won’t work.
Only in closed systems, for example, between banks, can alternative methods of validation be used and for this reason, there is virtually no representation of blockchain technology which does not require the Bitcoin example.
2. Blockchain is encrypted
Blockchain technology uses cryptographic methods to identify users and validate the blocks but the contents of the blockchain are visible in the plain text for each user.
3. Blockchain is a database
When compared in the context of blockchain is not a database but merely a list in which transactions are documented as forgery-proof. There is no separate “logic” containing this list; algorithms are only used where software is used to access the blockchain.
4. Blockchain will replace the “intermediary”
Blockchain technology is a method of self-validating documentation in a peer-to-peer network; “Intermediaries” such as notaries, bailiffs or civil servants must document more tasks than just processes. Moreover, blockchain users generally have to use blockchain experts thus creating new intermediaries in the blockchain world.
5. Blockchain will spell the end for banks
Banks are currently monitoring blockchain technology more than any other sector, largely due to the many ways in which closed-block systems can be used in the transfer of securities between banks. Rather than losing their roles as intermediaries banks are highly likely to take on the role of blockchain intermediaries in a blockchain world.
6. Blockchain is revolutionising the world
Currently there is only one broadly based implementation of blockchain technology which is Bitcoin. Apart from that there are only studies and declarations of intent; most application examples are not even pilot projects, but only thought-proving games. How far blockchain technology can “revolutionise” the world is impossible to predict.
7. Blockchain is a technology for everyone
Blockchain experts are very rare. Blockchain technology is highly complex and has no user-friendly interfaces and requires deep technical understand making it currently unusable by the masses.
8. Blockchain is safe
The cryptographic methods used provide a high degree of security yet examples show that the software which accesses a blockchain can be vulnerable to programming errors or being hacked.
As with the rest of the IT world blockchain technology will also be the subject of targeted attacks by cyber criminals.
9. Blockchain is generally trustworthy
Once out of completed test system and in the hard reality of the business world blockchain technology will need to prove itself, questions about the legal framework will need to be answered including: who is liable for damages resulting from faulty protocols and program codes?
Can “smart” contracts (smart contracts) be effectively implemented? What about cross-border issues, which necessarily result from the aspect of decentralisation? Ultimately, the “how” of implementation depends on the trustworthiness of a block-based solution.
Blockchain provides the basis for creating faster and more secure processes, but does not automatically provide a guarantee for a worry-free solution.
10. Blockchain is merely a short-lived hype
Despite all the myths blockchain technology offers an interesting approach, providing that the technology is used for what it is intended for and designed: a document validating itself in a peer-to-peer network itself.
Blockchain is undoubtedly a trending topic which means that there is an overload of facts and predictions surrounding it. Technology provides us with a kind of ‘trust engine’, no more and no less, because in many application scenarios, it is just what you need.