Blockchain technology certainly has many positive aspects, but there is also much misunderstanding and confusion regarding its nature. Common myths and misconceptions persist, especially about the Bitcoin blockchain, but also to some degree, with alternative blockchain technologies too.  

We have already discussed about Blockchain technology in one of our previous articles. But it is also important to understand what blockchain is and what it is not. We discuss some of the common myths associated with blockchain technology.

The Myths

1. Blockchain is a general-purpose database.

It is certainly not a magical database in the cloud. It is conceptually a flat file, a linear list of simple transaction records. Moreover, the list can only be appended, hence, entries are never really deleted. The file grows indefinitely and has to be replaced in every node in the peer-to-peer network.

1. The integrity of the ledger is defined by the majority of nodes in the peer-to-peer network.

This statement, again, is untrue. It is the hashpower (computational resources used in data mining) that decides the integrity of the ledger and not the number of distinct nodes on the network. This basically means that a single entity on the network, which is sufficiently powerful, can potentially outvote the rest of the nodes.

1. The ledger represents an irrevocable record.

Although this is pragmatically correct in the current form, but it is possible in theory for a party to gather enough hashpower to rewrite the record all the way back to the Genesis block (the first block of a blockchain). But such an action would clash against the incentives of blockchain technology users. It would destroy all the confidence they have in the blockchain technology and the commercial economy it supports. However, a nation or any other organization who has an agenda outside the scope of economic transactions can invest a modest amount of money to gain enough hashpower to have the blockchain rewritten. However, they cannot create new transactions, just leave out or repeat certain transactions.

1. Blockchain technology is scalable to the level of a global economy.

This is now becoming less of a myth, and more a widespread perception. Users are becoming more and more aware of scalability issues relating to the current form bitcoin technology stack. The main limitation that the technology has, is that it can only support a relatively small number of transactions per second. This happens because the maximum block size is one megabyte, and also the confirmation delay per block is around 10 minutes. According to this, depending on the average transaction size, the maximum capacity is around 7 transactions per second (tps). This number has already been decreasing due to the increasing size of transaction records and now is estimated to be less than 3 tps. Visa network has a peak capacity of 47,000 tps and Nasdaq’s is 1 million tps.

Despite these issues and myths, major banks and financial services companies are in a frenzy of adoption analysis. The major reason why they are interested is that they want to control and thwart potential disrupters and extend the scope of business / market use cases. We hope that with their resources, they are able to bust the myths and work around the issues to give the world a revolutionary means of money transfer.

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