Blockchain is used in various areas of business, including supply chain and logistics, healthcare, and, of course, the crypto market.
In fact, global spending on the blockchain might reach almost $19 billion in 2024. This means it will grow at a five-year compound annual growth rate of 46.4%.
And yet, even being so widely used, there are still lots of myths and misconceptions around blockchain technology.
Below, we’ll debunk five common myths about blockchain and explain how this type of tech actually works.
Check if you’ve fallen for one of these misbeliefs yourself!
Myth #1: Blockchains Are Always Confidential
The very first myth we’ll debunk is that blockchain transactions are always confidential. This misconception formed because Bitcoin and all other major blockchain-powered cryptocurrencies are associated with confidentiality and top-notch security.
The Truth: It Depends on Whether It’s a Public and Private Blockchain
While it’s true that there is a level of anonymity built into blockchain systems, these don’t actually guarantee confidentiality by default. Let me explain.
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Blockchains can be private or public. In public blockchains, anyone can become a member, conduct transactions, see the system’s history, and even become a node.
In private blockchains, all stakeholders need to be pre-approved by the manager or owner of the network. In these cases, the information on the blockchain is confidential.
Myth #2: Blockchain Technology Has Stagnated
Because blockchain technology has got so much attention, some people believe that its resources have already been exhausted and it’s already reached its peak.
Truth: Blockchain Tech is Constantly Evolving
The financial growth of an industry or sector is a solid indicator of its potential and maturity. From this perspective, it is clear that blockchain technology is far from stagnant, as it will almost triple in value before the end of the decade.
Basic blockchain theories have existed for more than 30 years. Today, we’re in the fourth iteration of blockchain systems. So, there’s no doubt that more powerful servers and faster internet connections will continue to push this technology forward.
Myth #3: The Scalability Potential of Blockchain Tech is Limitless
In theory, blockchain technology creates a transparent system that works seamlessly. This has led many to believe that, if applied properly, the scalability potential of blockchain is limitless.
Truth: Some Factors Present Challenges that Haven’t Been Solved
There are many characteristics of blockchain technology that are not well-known. For example, the fact that blockchain transactions are resource-intensive.
Take any Bitcoin transaction, which can generate up to $100 of electricity expenses, according to some reports.
So, rather than having the ability to process thousands of transactions per second, blockchain technology can merely complete dozens.
This is due to a lack of processing power and inherent design limitations. In fact, expanding a blockchain system without proper preparation can create vulnerabilities and lead to system failure.
Myth #4: Blockchain Technology Is Used By Criminals
In some media circles, blockchain technologies like cryptocurrencies have been painted as malicious tools that are used by cybercriminals and shady organizations to perform criminal activities.
Truth: Illegal Activity Constitutes Less Than 0.7% of Blockchain Transactions
Although there is no centralization or global standard, there is a lot of scrutiny and self-monitoring occurring in industries powered by blockchains.
A recent report revealed that 0.62% of all cryptocurrency transactions involved illicit addresses. This is no coincidence; Bitcoin and other leading cryptocurrencies work to identify and take down accounts linked to criminal activity.
Myth #5: Blockchain Ensures a Fraud-Free System
Fraud is one of the biggest problems affecting the financial industry.
Blockchain solutions like cryptocurrencies work without a centralized system; in part, they can be set up to be transparent and difficult to tamper with.
Because of this, many believe that blockchain technology can completely eradicate fraud.
Truth: Other Areas, Like Human Intervention, May Still Lead to Fraud
Although blockchains can contain built-in verification mechanisms that could guarantee a fully transparent ecosystem, there are many other factors that can lead to fraud. For instance, fundamental trust issues between humans.
The truth is that blockchain doesn’t eliminate the motivations that people may have to commit fraud. Thus, it’s important to verify the information and performance of the overall system.
Tips to Use Blockchain Technology Properly
Whether you’re trading cryptocurrencies, transferring NFTs, or otherwise using blockchain technology, there are many steps you can take to boost your security levels.
- Avoid sharing your username and password with anyone;
- Keep your device software updated, both for smartphones and computers;
- And use a well-known browser like Chrome, Firefox, or Brave.
- You can also download a VPN Google Chrome extension (or your browser’s equivalent) and encrypt your connection whenever you go online.
Blockchain technology is, without a doubt, revolutionary. But, like other iconic innovations, there are many myths and misconceptions surrounding this wonderful resource.
In short, blockchains still need to be protected, the technology powering them is always evolving, and most transactions featuring this method are completely legal.
Blockchain systems are also extremely scalable and don’t necessarily guarantee the elimination of fraud, but they can be set up to have high transparency levels.
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