Debunking Ten Blockchain Myths
High expectations are currently being placed on blockchain technology. In the process, numerous myths have formed.
Blockchain has become one of the central topics of the digital world within a very short time, although - or precisely because - there is often a lack of in-depth knowledge of the underlying processes (cf. also our Technical paper here). It is therefore no wonder that a number of myths have developed around blockchain. The experts from NTT Security debunk some of these myths below.
- Blockchain and Bitcoin are completely different things
This is only partly true. While Bitcoin can be understood as an implementation of a - more general - blockchain technology, the two are very closely connected: The validation of blocks in the blockchain is basically done, at least in open blockchains, by "mining," which only works with Bitcoins. Without Bitcoins, there is currently no reason for potential miners to take on the not inconsiderable validation effort. Without validation, however, the whole process does not work. Only in closed systems, for example between banks, can alternative methods of validation be used. Incidentally, for this reason, there is virtually no presentation of blockchain technology that does without the Bitcoin example.
- The blockchain is encrypted
Blockchain technology uses cryptographic methods to identify users and validate blocks; however, the contents of the blockchain are visible to every user in plain text.
- The blockchain is a database
Basically, a blockchain is not a database - in the sense of an engine - but merely a list in which transactions are documented in a forgery-proof manner. This list does not contain its own "logic"; algorithms are only used where the blockchain is accessed by software.
- Blockchain will replace "intermediaries"
Blockchain technology is a process of self-validating documentation in a peer-to-peer network; however, "intermediaries" such as notaries, bailiffs or registrars have more tasks than just documenting processes. Incidentally, blockchain users usually have to rely on blockchain experts; in this respect, new intermediaries are created in the blockchain world.
- Blockchain will do away with banks
This is already countered by the fact that banks are currently the most active in researching blockchain technology. In fact, there are numerous possible uses for - closed - blockchain systems in the banking environment in particular, for example in the transfer of securities between banks. It is therefore very unlikely that banks will lose their role as intermediaries; it seems more realistic that they will in turn assume the role of blockchain intermediaries in a blockchain world.
- Blockchain is about to revolutionize the world
Currently, there is only one broadly functioning implementation of blockchain technology: Bitcoin. Otherwise, there are only studies and declarations of intent; most of the application examples are not even pilot projects, but only thought experiments. The extent to which blockchain technology is capable of "revolutionizing" the world is not yet foreseeable.
- Blockchain is a technology for everyone
In fact, blockchain technology is quite complex and anything but trivial: without in-depth know-how, it is not yet possible to use this technology; user-friendly interfaces do not yet exist. Blockchain experts, in turn, are still very rare.
- Blockchain is secure
The cryptographic processes used provide a high level of security; however, it has also been shown that the software that accesses a blockchain, for example, is vulnerable to attack due to programming errors or through hacks. Blockchain technology naturally shares this fate with the rest of IT, and it is impossible to see why it in particular should be an exception here. It is even to be expected that with growing popularity, blockchain technology will also increasingly be targeted by cyber criminals.
- Blockchain is generally trustworthy
As soon as blockchain technology has to prove itself in hard business life outside of closed test systems, questions regarding the legal framework have to be answered. Who is liable for damages from faulty protocols and program codes? Can "smart" contracts (smart contracts) actually be implemented in a binding manner? What about cross-border issues that inevitably arise from the aspect of decentralization? Ultimately, the "how" of implementation determines the trustworthiness of a blockchain-based solution. While blockchain offers the basis for creating faster and more secure processes, it does not automatically provide a guarantee for an all-round worry-free package.
- Blockchain is just a short-lived hype
Despite all the myths, blockchain technology is an interesting approach - as long as the technology is used for what it was intended and designed for: self-validating documentation on a peer-to-peer network.
"Blockchain is undoubtedly a trending topic, and whoever can currently bring a project in connection with blockchain certainly has good cards when it comes to distributing budgets," explains René Bader, of NTT Security. "However, the overloading of the topic that can currently be observed and the exaggerated expectations of the new technology are not very helpful. Often, there is also an insufficient understanding of the underlying processes, for example, when the need for mining is simply forgotten in a specific application. Blockchain technology provides us with a kind of 'trust engine', nothing more, but also nothing less. After all, in many application scenarios, that's what's needed."
