Misconceptions about blockchains, digital assets and cryptocurrencies can be costly for organizations. Thankfully, there are some resources that can help clear up any confusion around them.
One of the greatest misconceptions of blockchain is that it only pertains to cryptocurrency solutions such as bitcoin. But in reality, blockchain can offer much more.
1. It’s a Cryptocurrency
Blockchain technology has long been misrepresented as synonymous with cryptocurrency like Bitcoin, however it serves more purposes than just that.
Blockchain is an immutable database that facilitates recording transactions and tracking assets in business networks without needing a central authority to oversee transactions or monitor assets. Blockchain also plays an important role in protecting sensitive data.
However, despite blockchain’s increasing popularity and wide use, there remain numerous misconceptions regarding its workings that could potentially prevent businesses from adopting and reaping the benefits of using it. These misconceptions may prevent firms from reaping its full potential.
One common misunderstanding about blockchain is that it’s insecure. However, this is untrue as its cryptographic design makes it highly resistant to attacks; unlike traditional wallets which rely on password access for accessing your funds, blockchain wallets use private cryptographic keys only known by their owners – thus rendering theft virtually impossible.
One common misunderstanding about blockchains is that they require an immense amount of computing power for operation. However, this assumption is untrue as blockchains use only a fraction of your computer’s resources when operating properly and are designed to grow as more computers join their network and become part of it. With increased participation, transactions become even faster!
No doubt the cryptocurrency market has generated plenty of excitement since hitting record price highs in 2021, yet we must remember this is only scratching the surface when it comes to blockchain’s potential; soon we may witness applications across industries for supply chain management and digital payments, for example.
Another key application of blockchain is providing people in unstable nations or with weak financial systems with stable money that can be used more widely than conventional currencies. This can be accomplished by enabling them to store and transfer wealth securely using blockchain-enabled mobile wallets – instead of saving in cash which could be stolen by criminals, or risk inflation and interest rate risk.
2. It’s a Database
Bitcoin and other cryptocurrencies have led many people to mistake blockchain for just being about money transactions and purchases, when in reality it’s used for more than that. Blockchain acts like any database but differs significantly by being decentralized, secure and immutable — unlike cloud databases which may need costly maintenance efforts for changes.
These three characteristics distinguish blockchain from existing databases and technologies.
3. It’s a Technology
Blockchain is an exciting technology with tremendous potential to revolutionize industries from the ground up, but it cannot solve every problem by itself. Like any emerging technology, misunderstandings and misinterpretations often arise; that is why having an accurate understanding of what exactly blockchain is and its workings is so essential.
Blockchain became known for its role in Bitcoin and other cryptocurrencies, but it can do much more. Blockchain serves as a record-keeping system which makes transactions transparent, secure, and trustless among other things; its unique characteristics have opened the way to numerous applications that are revolutionizing our world today.
Blockchain technology democratized records of transactions held within financial institutions, giving privileged people access to them. Now this ledger system provides transparency and security to everyone, being used for tracking assets, recording contracts, managing data on an enormous scale – or anything in between!
Blockchain can also serve as an invaluable way of developing trust among entities that may not yet know each other, making it particularly helpful in regions with outdated and corrupt financial institutions. For instance, in property transactions using the technology can eliminate intermediaries while providing a trusted record of transaction details.
Blockchains are distributed ledgers containing records known as “blocks” linked together by cryptographic hashing in chronological order. Each block in a chain includes timestamp and transaction details that cannot be erased or changed, making each record immutable and verifiable – made possible because every computer network node involved with a blockchain owns an identical copy of each record; additionally, nodes participate in validating new blocks by verifying their cryptographic hash values.
Importantly, blockchain can be applied across any industry – and not only cryptocurrency transactions. Although blockchain has revolutionised how we handle money, its applications in other areas of business such as providing transparency for food supply chains, protecting healthcare data and revolutionising gaming are just as significant. Therefore, it is vital that we dispel any misperception that blockchain is solely related to financial transactions and cryptocurrency.