Don't Fall for These 7 Common Blockchain Myths
There’s plenty of bad information around the application of B2B blockchain. Several of the most common myths perpetuated in the blockchain environment include:
Myth 1: All blockchains are public and vulnerable
- Myth: Bitcoin or Ethereum-based blockchains are public and susceptible to attacks. This vulnerability is based on blockchain’s unrestricted access to anonymous actors.
- Truth: Almost all B2B implementations of blockchain are private and permissioned where all parties are known to each other.
Myth 2: Cryptocurrencies and tokens necessary
- Myth: Vendors who chose to build Ethereum-based blockchains often include a need for tokens as a feature, not a design limitation of the technology itself.
- Truth: Any solution built on a public blockchain inherits many of its least useful features (like tokens). Private B2B blockchain transactions in the industrial space have no need for this. That’s why blockchain protocols like Corda, Hyperledger and Data Gumbo use neither tokens nor mining.
Myth 3: Using open-source software prevents vendor lock-in
- Myth: Companies don’t want to get locked into yet another vendor contract. By using software written by the open-source community, companies can free themselves of downloading and installing third-party wares. As a result, open-source blockchains are preferable to proprietary offerings.
- Truth: Unless a company hires its own internal blockchain development and support team, it will still be reliant on a vendor to implement a blockchain solution. Even free blockchains come without user interfaces (UI), standardized data models, Internet of Things (IoT)) data connectivity or an ability to integrate with Enterprise Resource Planning (ERP) systems like SAP or Oracle.
Myth 4: Using open-source software guarantees interoperability
- Myth: Companies should standardize on one open-source blockchain since that will guarantee interoperability.
- Truth: This is a red herring – all companies running the same version of Hyperledger or enterprise Ethereum are no more interoperable than all companies running the latest version of SAP – each company has a different implementation of the same software.
Myth 5: Using open-source software improves security
- Myth: Companies using open-source blockchain reap a security dividend since a large community of developers continuously test and improve open-source code.
- Truth: Open-source software has no central authority to implement Quality Assurance (QA) and as a result, it struggles with bugs, vulnerabilities and licensing issues
Myth 6: Smart contracts are enforceable by default
- Myth: Since the advent of blockchain-backed smart contracts, many evangelists have argued that code = contract. Vendors often assure companies that anything they can implement technically will hold up in court.
- Truth: Many courts require a natural language contract signed by an authorized person in addition to the code of a smart contract. To be legally enforceable, the two must be clearly linked together with auditable outputs and conflict resolution mechanisms.
Myth 7: The blockchain is not the database
- Myth: Substantial amounts of data is stored off-chain since Ethereum can only handle 44kb of data per block.
- Truth: Many companies have use cases requiring a few hundred transactions per day rather than thousands per second. Storing transaction data on the blockchain itself means all relevant data can be located in a single place. This greatly enhances searchability and reduces cost.
The most important takeaway for any decision-maker regarding blockchain is that there are options available depending on a business’ needs. At Data Gumbo, our goal is to give you the tools necessary to sort the hype from reality.