7 Common Myths About Blockchain
Blockchain is a versatile technology, and while it may not be a one-size-fits-all solution, the vast majority of supposed drawbacks stem from misunderstanding how it works. The most common mistake is that people tend to oversimplify issues that some blockchain solutions face and then apply that to every blockchain. In a similar vein, the best way to see through these myths is through self-education. Here, we will list the seven most common myths plaguing the nascent technology, as well as explain why they are not true.
1. Blockchain uses lots of Power
The most common myth comes from the fact that many blockchains use a Proof of Work (PoW) consensus algorithm, which is admittedly computationally heavy. However, PoW is far from the norm, and some existing blockchain platforms such as Ethereum are abandoning it in favor of less energy consumption offered by the Proof of Stake (PoS) consensus algorithm.
Additionally, a significant reason why some blockchains use a lot of power is because they’re public. When it comes to enterprise-oriented solutions, they tend to be private and permissioned for a number of reasons, so they use much less power than their public counterparts.
2. Blockchain is Slow
This is yet another pervasive myth born from public networks. It is true that it can take even a few hours until your bitcoin transaction has enough confirmations, but you must know that Bitcoin’s blockchain is public and therefore accessible by everyone—and for the sake of security and transparency, its creator decided that speed would not be its main feature.
Private and permissioned networks, on the other hand, can handle much bigger transaction volumes. This is in part due to the fact that they’re not universally accessible, but also because they are much more often designed with speed and scalability in mind.
3. Everyone can see my data
This is true on many public networks; in the interest of transparency, all transactions on these networks are visible. However, some privacy coins employ a concept called zero-knowledge proof: this is a cryptographic method by which all parties are assured that one party possesses certain information without them actually disclosing said information.
When it comes to private and permissioned blockchains, special cryptographic protocols are often not even needed—these platforms can be designed so that only those with special permissions can see and/or change the data.
4. My business cannot use cryptocurrencies
Luckily, it does not have to! While public networks do require tokens (not necessarily cryptocurrencies) to run, this does not have to be the case with private and permissioned networks. This is due to the fact that public networks are by definition required to allow participation to anyone as long as they have tokens; in other words, all the participants need to use the network are its native tokens. In the case of private blockchains, you can set the criteria for who can participate in the network, which completely eliminates the need for tokens or coins.
5. Blockchain is not ready for the mainstream
Many mainstream businesses would beg to differ. For example, esteemed business magazine Forbes has an annual Blockchain 50 feature in which they list the companies that have already implemented the technology, but have a value or revenue of at least USD 1 billion as well. Here, you will see names such as A.P. Moller-Maersk, Boeing, CME Group, Daimler, IBM Corporation, National Basketball Association, Visa, and Walmart—each of them a giant in their own industry. The feature also lists the way in which blockchain is used in each business, as well as how far along this implementation currently is.
6. No one in my industry is using it
In short, this is very unlikely—most industries have already implemented blockchain in one way or another. Some examples include:
- Tech: as the tech industry is the birthplace of blockchain, it shouldn’t come as a surprise that many of the largest tech companies offer blockchain platforms, including Amazon, Microsoft and Oracle.
- Banking: another good fit for blockchain, the banking sector is also making good use of the technology: The Central Bank of The Bahamas (CBOB) launched the world’s first central bank digital currency (CBDC), called the Sand Dollar, in October 2020, while a number of other central banks are either researching or even piloting their own CBDC.
- Insurance: the American Association of Insurance Services (AAIS) has developed the OpenIDL network on top of the Hyperledger Fabric blockchain to streamline the process of data collecting and sharing across the insurance industry.
- Supply chain: aXedras is a Swiss software developer leveraging the Corda blockchain for the tracking of precious metals, allowing for increased visibility, but also substantial time and cost savings. The live version of their Bullion Integrity Ledger ecosystem was launched in October 2020.
- Healthcare: in the wake of the COVID-19 crisis, the Digital Health Pass is a solution based on the IBM Blockchain that lets people track their health credentials and share them with whoever needs them—like employers, customers, travel agencies, etc.
- Pharmacy: LedgerDomain is an enterprise-grade blockchain solutions provider working on innovating the pharmaceutical supply chain through their BRUINchain ecosystem, based on Hyperledger Fabric, which was selected by the FDA as part of its Drug Supply Chain Security Act (DSCSA) pilot project program.
- Government: Joisto is an electronic archive and retrieval platform now looking to meet GDPR demands through their Hyperledger Fabric-based blockchain platform—by using blockchain, they make sure that the stored documents and their metadata are tamper-evident.
- Gaming: Horizon, a blockchain infrastructure company innovating gaming, is using Ethereum’s public blockchain for their SkyWeaver game as the basis for their cards, which are Ethereum ERC-1155 tokens.
- Real estate: the Japanese NEXCHAIN consortium is using the ConsenSys Quorum platform to provide end-to-end solutions for home leasing.
- Social impact: Hala Systems is another solution opting for the public Ethereum blockchain: they are using the technology to improve their already existing Sentry Early Warning System, used as an airstrike alert system in the Syrian Civil War, and ensuring the data has not been tampered with. The company and its technology have already saved countless civilian lives.
7. Blockchain lacks maturity
The number of case studies proves otherwise—and so does the fact that the major platforms have existed for a number of years now. For example, the ConsenSys Quorum was originally developed by JP Morgan in 2017, the Hyperledger Fabric has existed since late 2015, while the R3 consortium behind Corda was founded in 2014, while the blockchain itself was introduced in 2016.
Blockchain is an already established solution implemented by a number of big players across the board, which means you shouldn’t be afraid to consider where it could fit in your own organization. With the worries about energy consumption, speed, data visibility, token use, mainstream use, and maturity now assuaged, you can learn more about its particular strengths by watching our video What Is Blockchain Great At?
Are there other blockchain drawbacks keeping you from implementing the technology? Which other myths do you believe we should cover? Drop us a comment below. To learn more about enterprise-grade blockchain implementations, sign up for one of our upcoming Principles of Successful Deployments webinars.