​What is Blockchain and what are the myths around it?

future-of-payments

Nowadays it’s only slackers who aren’t talking about Blockchain. Yet the hype which is swirling around this technology has engendered a raft of myths and bogus expectations. Let’s take the chance to run through what Blockchain can do and what are the myths around it.

In a recent report from CNBC Blockchain was pictured as a panacea against poverty​​, an opportunity for poorly-developed nations to improve their standards of living, and much more too. Moreover, you can find a weblink to Forbes listing the benefits of Blockchain technology – which claimed that a public Blockchain ledger would render all transactions secure; the Blockchain can’t be compromised or altered; and that it eliminates the need for all kinds of middle-men.
The reality, however, is a little different. Part of the reason for the mismatch is that when different people say the word Blockchain, they all have different things in mind.

  • Bitcoin blockchain. People coming out of the Bitcoin world talk about things in terms of ‘Bitcoin-Blockchain’ (database and structures where bitcoins are stored).
  • Blockchain as a technology. People from the financial markets discuss Blockchain as a technology.
  • Private Blockchain. People from business and start-ups talk about the actualisation of Blockchain in their businesses and start-ups.

These are all completely different things. So the properties of Blockchain will alter, according to the idea you have in mind about it.

No-one today is talking about the solutions that Blockchain can leverage in mass-market products. The reason is that such products don’t exist. There are some real cases so far, but all of them remain mostly internal processes at different companies, which never escape their corporations. Some may claim that Nasdaq Linq enables the issuer to digitally represent a record of ownership, and provides issuers and investors an ability to complete and execute subscription documents online. Or that Microsoft has begun testing Blockchain technology… Even so, these are, particularly not onto the mass market. There is a raft of explanations why.

Specifically, the myths about Blockchain are that:

  1. Blockchain is capable of verifying any kind of data
  2. Blockchain permits any kinds of transaction
  3. Blockchain is immutable
  4. Blockchain is encrypted
  5. Blockchain can replace servers

Things just aren’t like that. To give one example, if there’s a company which is being managed with Blockchain, then it’s the company that sets up their own rules and business processes which affect the Blockchain ecosystem built. So I mean that Blockchain as just a programme can be altered and affected by the external forces.

Companies who want to implement Blockchain need to rethink their business logic, and adapt the system accordingly taking into account all the threats and opportunities. Even so, this doesn’t always guarantee success and security. All these are the reasons that Blockchain still isn’t on the mass-market, and there are no immediate prospects for that to happen either.

I would also like to deal with what Blockchain is in terms of technology. If we were to ask a specialist this question, they would probably reply that it’s a chain of blocks. Meanwhile the English edition of Wikipedia says, that “Blockchain (originally block chain) – is a distributed database that is used to maintain a continuously growing list of records, called blocks. Each block contains a timestamp and a link to a previous block.” That definition isn’t very clear, it seems to me.

I feel that a different explanation of Blockchain would be clearer – and this is my version. Blockchain is a mechanism for reaching consensus regarding the state of a shared ledger between parties that don’t trust each other. We could see it like a Land Register, or a Real Estate Register. It supports all Registrars at a technical level. They would be able to check out all the transactions that have been made in the systems. That’s what Blockchain can do for business, and the reason why it’s needed. Yet constructing such a system is a very complicated issue. Imagine that you’d have to force around one thousand lawyers to agree with each other… It would be a tougher task than devising a quantum computer. It supports my conclusion and idea why blockchain is still isn’t on the mass-market.

I believe that business protocols designing and modern law developments helping to set up particular rules on how to get consensus between different participants​.

​Aiming to build a Blockchain ecosystem will be much-in-demand next years.

Illustration by Katerina Krashtapuk

Pavel KravchenkoCryptographer, founder of Distributed Lab