Since the start of 2017, there’s been a lot of hype about the blockchain technology. People have been talking about its use cases and its future potential. But where there's money, there is corruption and fallacy. At the end of 2017 Bitcoin reached $20 000 each and market hype reached it’s maximum. There was a crash that did 2 things.
The first is that it created a group of young, immature, overly optimistic and insecure individuals that believe cryptocurrency will change their lives forever, fix all of life's problems and make them rich.
The second is a group of people that believe the blockchain technology is a scam, a bubble, and just a trend. They usually get their information from the media hype and have an overall unoptimistic view of the technology.
This article is meant to address those two groups of people by correcting some misconceptions about Blockchain Technology/Distributed Ledger Technology.
1. The blockchain will bring down the banking system:
People very often forget that banks, companies, governments, etc are all made up of people and those people want the same things you do. They want a free and open market, they don’t want a single point of failure and some big wig on top dangling their retirement off a cliff. Because of this banks are very malleable and are incorporating blockchain technology into their traditional system, making it a hybrid system.
Banks are here to stay, same with governments and companies. They will just evolve and change forms hopefully for the better.
2. The blockchain can only be breached when 51% of the nodes have malicious intent:
This is a big one and it’s something that needs to be addressed carefully, it’s also something that’s complicated so if you’re new please try and stick with me on this.
There are a few known ways this can be done. An interesting way is an Eclipse attack on a blockchains peer to peer network.
What is an Eclipse attack?
An Eclipse attack is an attack that focuses on the network layer of the blockchain and gives the attacker control of the peer to peer network. In a peer to peer network, nodes are linked to nodes and those nodes are also linked to more nodes, this creates an entire network of nodes that are listening and speaking to each other on the regular. For example, node A listens and communicates with node B and C, B and C then speak to D, so on and so forth. The eclipse attack works in a way that “Eclipses” or cuts off node A from the rest of the network and can manipulate just that one node, that node, in turn, can manipulate other nodes since Node B’s view of the network is reliant on Node A.
How much of damage can the Eclipse attack do?
Double spending.
Attacks against second layer protocols such as lightning network, e.g., an attacker can obtain the products without paying by tricking his victim into the thinking the payment channel is still open while the non-eclipsed part of the network sees that payment channel is closed.
Smart contracts may be attackable if users see inconsistent views of the blockchain.
Are there any other attacks?
Yes, there are other attacks that can cripple a blockchain both directly or indirectly. There are DDOS attacks, I recommend you google more about it.
3. All Blockchains Are Public
Majority of the blockchains available now are transparent to the public but the blockchain is also used by companies to store user data securely. This data can’t be available to the public for security reasons, they are created to be private and work privately in the control by the heads of the company.
4. The Blockchain is completely immutable
This is statement is true in some regards but not always, some blockchains aren’t immutable, some are immutable in special cases and some are fully immutable.
Blockchains were designed to be immutable. Here’s a quick refresher on how blockchains remain immutable:
Blockchains, in essence, are a network of nodes all working together to validate a transaction and add it to the blockchain. To do this there needs to be a consensus between those nodes on what defines a good or bad transaction. This is called a consensus algorithm, all nodes perform this algorithm and come to an agreement that a transaction is correct and adds it to the blockchain. As more blocks are added to the chain the security increases and are stored permanently also known as confirmation.
That is a simple explanation of how things are added to the blockchain, there are in fact many ways to remove a transaction from the history. Here are some well-known ways below:
The 51% attack:
The 51% attack is when 51% of the entire blockchains nodes are all attacker nodes that have malicious intent, they can completely overpower the other 49%, cause double spending and reverse transactions. This renders the blockchain completely mutable.
Forking:
Forking allows you to rewrite the transaction history and create a separate chain with a new history. Forking has already occurred in 2016 on the Ethereum blockchain where the DAO was hacked and millions of dollars were stolen. Ethereum held a referendum and the vote was passed to create a hard-fork to reverse the transaction and return the Ether that was stolen during the Attack.
Private Blockchains:
Private Blockchains are blockchains that are controlled by companies privately and they have the power to change any information they want but have a moral and ethical obligation to do so.
There are other ways that prove that the blockchain isn’t immutable so if you’re interested please leave a comment down below and I’ll do a more in-depth article about immutability in a blockchain.
5. All Blockchain Products/Services Have an ICO and a Token/Coin
Tokens/Coins:
Firstly let me say that this is a 100% NO!. Coins and Tokens are incentives that when used properly can help a product or service. In the case of Bitcoin, it was mandatory since it was meant to be a digital currency from the start. Coins and Tokens can be used to incentivize mining, incentivize free advertising with the user receiving tokens/coins in return. There are many use cases for tokens and coins but you as a user need to know when they aren’t useful at all as well. Here is a use case where a token/coin is completely useless and not needed:
- Adding a token to an already established product/service because it’s the cool thing to do now. For example “StarbucksCoin” you get coins for buying products from a Starbucks store. This isn’t real but it’s a good example an idiotic product, it’s not necessary and has no benefits to the end customer.
The blockchain is a technology, cryptocurrency is a use case for the technology. It’s not needed at all at times. For example, safe storage of data that can be validated for accuracy.
ICO’s:
This is a big one and a lot of people do not know what an ICO is let alone it’s use cases. An ICO is an Initial Coin Offering. An ICO is a way to crowdfund an idea, product or service. A user gives their fiat/crypto-currency to help the company and get tokens/coins in return that will hopefully grow in value over time as the company uses the funds from the ICO to develop their product/service or idea.
ICO’s aren’t necessary in many different cases, some people want private funding instead of crowdfunding for their company so an ICO is not needed. There are many other reasons that people/companies might have for not having an ICO. But to conclude an ICO is not needed all the time!
6. All Blockchains Allow For Anonymous Transactions
Not all blockchains are created equal and there are a few blockchains that offer anonymity like Monero. But most of them aren’t anonymous, the Bitcoin blockchain, for example, is traceable but has some level of anonymity to it. This is how a lot of criminals using Bitcoin to pay for illegal items on the darknet were caught.
So think again if you’re about to buy something illegal on AlphaBay.
7. The Blockchain Will Solve All The Worlds Problems
No….it won’t. Don’t get me wrong, it’s a great technology but it won’t solve wealth inequality, corruption and many other problems plaguing our society. But it’s a great step forward in the right direction and gives people who didn’t have a chance to start with finally get one now. Like with ICO’s allowing people from poor countries to get funding for their idea, being able to send money to family members overseas without intermediaries using cryptocurrency, being able to store money in a cryptocurrency when a country is in a crisis like with Venezuela.
The blockchain is a technology, a powerful one at that, it’s not going to solve all the worlds problems but people can use it and combine it with many other technologies to truly help people over the long term.
8. The Blockchain Can Only Be Used In The Financial Sector
Like was established above, the blockchain is a technology and it can be applied to any sector, the sky is the limit when it comes to the use-cases of the technology. Here are some amazing use-cases for the technology:
Ensuring Ownership
A company by the name of TrustToken has created a platform for proof-of-ownership using smart contracts. The company has developed a digital-legal protocol that allows physical assets to be owned and managed by smart contracts.
Supply Chain Industry
Blockchains can be used to reduce the human component of the supply chain industry by using algorithms and create a safe and secure blockchain that stores the data automatically and allows transactions to take place instantly without the need of human intervention. This helps both the user and the company as the user receives the benefit of getting rid of the human component and automating everything, thus reducing risk across the board. Companies gain the benefit of saving money on staff, increasing productivity because computers can work around the clock but also better reputation and higher success rate.
Employment
Freelance work has become widely spread all over the world, the blockchain makes it easier to pay freelancer and validate work done.
There are many sites that offer freelance using the blockchain for payments. My two personal favorites are:◆ Gitcoin:
Gitcoin allows you to bounty coding related problems and it’s incentivized by Ether/DAI. Meaning that you get paid for finding issues and fixing them, there’s a wide variety of work available on the site and I recommend you check them out.
◆ Bounties Network:
The Bounties Network is a website that allows you to bounty anything and receives payment in Ether, this is a viable solution to freelancing while making transactions between a worker and a hirer a lot easier. Especially if you live in a country that makes it difficult to accept money for your service, this makes the process seamless.
Blockchain tech can be used in almost every industry so BUIDL!.
9. Bitcoin is the Blockchain
This gets tossed around a lot with people who don’t really understand what the blockchain is and their first exposure to the blockchain is Bitcoin. Bitcoin is a cryptocurrency that uses the blockchain technology for transactions. The blockchain technology itself has many different use-cases as stated above.
10. The Blockchain Technology Is All Hype
The blockchain industry has taken quite a big negative hit recently due to its growing popularity and cryptocurrency being used for illegal activities. It’s true that the technology is being used for illegal behavior and a lot of manipulation of the uneducated and unfortunate. But this is the case with every breakthrough technology when the internet first became popular there was an enormous amount of illegal activities and scams. In fact, it’s still a growing problem today but we still use the internet and it’s a huge part of our lives.
As the internet technology, infrastructure and top layers were improved it created a lot of positivity. It makes things significantly easier for students to get information, for people to work from home, to connect with loved ones from another country and a lot more, so much so that you could probably write a book about it.
The same thing can be said about the blockchain, the technology is new and still needs to be developed. The technology has a huge amount of potential of helping millions of people just like the internet did. The use cases of the blockchain like DAO’s and instant transactions with little to no transaction fees has enormous potential for changing the way we interact with people, governments, and companies.
11. The Blockchain Will Replace Fiat Currencies And Governments
The potential of this technology is still being researched and it has only been 10 years since Bitcoin was created and it has a really long way to go before it becomes an industry standard. DAO’s and cryptocurrencies can replace traditional systems but it doesn’t mean it should. There are many cons to using Cryptocurrencies instead of fiat currency like stability and it’s usage in the informal sector to pay for goods and services. Same with DAO’s, the Ethereum hack of 2016 was a huge wake-up call for many thinking of using DAO’s. Clearly, there’s a lot of problems, glitches, and loopholes that need to be fixed but right now the blockchain won’t replace fiat currencies and governments.
I hope this list helped someone understand the confusing and mysterious world of blockchain technology. If you like articles like this please upvote it and I'll know to do more and please comment your constructive criticism below.