Since its inception back in 2008 by the elusive individual or group of individuals collectively known as Satoshi Nakamoto, blockchain technology has situated itself on an ascending path in terms of popularity. In the last couple of years, it has garnered an extensive following, not only in the tech community but also among entrepreneurs who have come to forward bold claims that the technology represents a panacea for every major issue which plagues the business sphere. Furthermore, computing giants IBM, Microsoft, Accenture, etc have allocated a significant amount of funds towards blockchain research. This undoubtedly suggests that the potential behind the technology has a solid foundation. Decentralization, distribution, data integrity and immutability, transparency and increased security are game-changing traits which can have a significant impact upon existing business models, but this does not mean that blockchain is an answer to every problem.
It’s not uncommon for people to attribute a series of misconceptions to popular topics, and technology is no exception. The fact that many people propagate misconceptions related to blockchain, signals the fact that although the technology has become a hot topic and the subject of extensive research, average people oscillate in their perception of blockchain, which can range from perceiving it as a technology shrouded in a mystical aura which can solve everything, to a hotbed for illegal activities and so on. The following, text aims to shed light on some common misconceptions that gravitate in the blockchain space and inform the reader about the true potential of the technology.
Bitcoin is blockchain and vice versa
This is probably the most prevalent misconception regarding the technology, and somewhat understandable to a certain degree. Bitcoin is the original digital currency, also known as cryptocurrency, which exploded in popularity in recent years, reaching a staggering value of almost USD 20 000, in December 2017. In turn, blockchain is the underlying technology which acted as a supporting framework for Bitcoin. Yes, both of them are interconnected, but Bitcoin and cryptocurrency, in general, are just one use case of blockchain technology. Financial Times reporter Sally Davies, perfectly outlined the relationship between the two, by making an analogy to the relationship between the internet and email: “Blockchain is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.”
Blockchain is only a cryptocurrency enabler
Satoshi Nakamoto created blockchain technology to support the first successful peer to peer electronic cash system, Bitcoin. With respect to this issue, it has been a ground breaking achievement. Since the 90’s there have been numerous attempts to create digital cash, but all of them failed because they did not manage to provide a solution to the Byzantine Generals’ Problem, a classic problem faced by any distributed computer system network. Namely how to achieve a state of consensus on the data introduced into the network. This is the crowning achievement of blockchain technology, but as time passed and the technology matured, people came to the realization that blockchain can be successfully applied across multiple industries.
Blockchain is already being used in healthcare to secure health records and make patients the true owners of their data. An early adopter of blockchain, Estonia taped into the potential of the technology since 2012 to protect national data, e-services, and smart devices both in the public and private sector.
Estonia is not an isolated case. The Republic of Georgia has initiated a pilot project for land title registration on the blockchain. It is aimed at reducing property registration fees in Georgia and guarantees safe transactions, transparency, and flexibility. The state of Delaware (USA) is implementing a blockchain system to track stock ownership through a single ledger in real time. The city of Dubai (United Arab Emirates) has partnered with IBM and Consensys to implement a solution to enable all government transactions on the blockchain as a part of the ‘Smart Dubai’ initiative.
Blockchain can also be used in tandem with other technologies to unlock a window of opportunities in the enterprise sphere. One project which aims to facilitate the adoption of the technology in enterprises is Modex BCDB, a fusion between traditional database systems and a blockchain powered back end. The advantage of this type of approach is that businesses and enterprises maintain the front end experience and functionality of a database, but with the added benefit of a blockchain back end. Data immutability and integrity are instrumental to any type of business, and Modex BCDB facilitates a seamless transition to blockchain.
There is only one blockchain
This statement was true back in 2008, but once people realized the potential behind the technology, new blockchains emerged, each of them with their unique set of characteristics and functionality. The Ethereum blockchain is a global, open-source platform for decentralized applications. On Ethereum, developers can write code that controls digital value, runs exactly as programmed, and is accessible anywhere in the world. Ethereum has hosted the majority of Initial Coin Offerings (ICO) a fundraising mechanism made possible by blockchain.
As a general rule, there are two types of blockchain: public and private. As the name implies, public blockchains are permissionless, anyone can download a node and join the network. It has more complex rules for better security, computational power is distributed globally. The most notable examples of public blockchains are Ethereum and Bitcoin. This type of blockchain is mostly used as a backbone for cryptocurrency. Private blockchains are permissioned, individuals and companies outside the network require permission from the owner or the protocol to join and are more restrictive in the sense that only authorized entities can interact with data. This is why public blockchains are more suited for business applications.
Another point of confusion is between cryptocurrencies and tokens. The main difference between the two is that a cryptocurrency requires its own blockchain network, while tokens are created through an ERC 20 smart contract on the Ethereum network.
Every Distributed Ledger Technology (DLT) is Blockchain
Distributed Ledger Technology is an umbrella term used to describe technologies which store, distribute and facilitate the exchange of value between users, privately or publicly. Blockchain was the first functional example of DLT, but it is not the only form of DLT. This is why people mistakenly use the two interchangeably. HashGraph, Nano, IOTA are all DLTs, but they are not blockchain. Blockchain is a type of DLT, a subcategory of a more broad definition.
In an effort to help promote widespread adoption of blockchain technology and stimulate education in this segment, Modex, a blockchain company, has put together an extensive curriculum to make blockchain technology understandable for anyone. With a step by step approach, the Modex Business Analyst course is designed to introduce non-technical individuals to the essential concepts and inner workings of blockchain technology.