Blockchain and Bitcoin – Facts and Fictions

How many of you out there still think that Bitcoin is blockchain technology? And that it is applicable only for cryptocurrency? Blockchain has become much more than just that. The most common misconception is that Bitcoin is blockchain. When Bitcoin was the only blockchain, there was not much to distinguish it. However, as this technology evolved, blockchain differed from being a monetary aspect. Another myth about blockchain is that it is only relevant to the FinTech industry. In reality, blockchain is a technology that can apply to many different industries.

There are many more misconceptions about blockchain, because it is still a new technology. People have asked the following questions when it comes to understanding blockchain:

Is an advanced degree required to work with blockchain?

Definitely not. For you to build on or to use blockchain technology, you do not need a degree in cryptography. There are many tools in the market that help in leveraging the technology. Many blockchains allow you to develop applications in almost any coding language.

Is blockchain a database?

Every blockchain is considered a database; however, every database is not considered a blockchain. Blockchain is a database because it is a digital record book that stores information in structures called blocks. A single user can easily modify a database; however, a blockchain is shared with many users and is immutable in a transaction. Each block of information has a hash code to provide cryptographic security.

Facts about Blockchain:

1. Satoshi Nakamoto is the person who launched bitcoin in 2009. He passed the majority of the control to Gavin Anderson in 2010. Bitcoin supply is only 21,000,000 BTC, and the production rate halves every 210,000 blocks. Miners solve complex puzzles and get rewarded in bitcoins. This is how bitcoin was introduced.
2. Three of the most common consensus mechanisms are proof of work, practical byzantine fault tolerant (PBFT), and proof of stake. Proof of work Blockchains are exposed to 51% attacks. Proof of stake blockchains are vulnerable to “nothing at stake” attacks and PBFT blockchains are open to “cartel attacks.”
3. As per blockchain.info, the miners who extracted Bitcoins would produce 450 thousand trillion calculations per second. Bitcoin takes about 2 terawatt-hours p/y to 40 terawatt-hours p/y. In the United States, every Bitcoin transaction costs around $6.
4. Smart contracts are neither smart nor contracts. A smart contract is a computer protocol to facilitate, verify, or enforce the negotiation or the performance of a contract. The goal with smart contracts is to provide security that is stronger than contract law. It also reduces the other costs that are associated with contracting.
5. Bitcoin itself has never been “hacked.” However, many major websites that use the currency have been hacked. This has led to high-profile bitcoin thefts. These thefts have been misreported as hacks on Bitcoins.

Fictions about Blockchain:

1. Bitcoins can be printed and minted by anyone, which is why they are totally worthless. The truth is, bitcoins are not printed or minted. Miners compute blocks, and for their efforts, they get a reward with a specific number of bitcoins and a transaction fee paid by others.
2. Twenty-one million coins are not enough. One bitcoin is divisible to eight decimal places. There are over two quadrillion possible atomic units in the Bitcoin system. The value of 1 BTC represents 100,000,000 of these. Simply put, one bitcoin is divisible up to 108.
3. Lost coins cannot be replaced. Bitcoins are divisible to 0.00000001, therefore having few bitcoins remaining is not really a problem. If you lose your coins, all other coins are worth more due to the reduced supply. Consider it to be a donation to other bitcoin users.
4. Bitcoin is a pyramid scheme. The pyramid scheme is based on the fact that there is one leading company that promises a guaranteed profit. However, bitcoin has no authoritative body to make such promises. Therefore, there is no basis to claim that it is some pyramid scheme.
5. The government can or will shut down bitcoin. Governments around the world are still trying to approach digital currencies, which is why people believe that statement.

In conclusion, the journey of blockchain technology has been one of innovation and expansion beyond its origins with Bitcoin. It is a common fallacy to equate Bitcoin with blockchain; however, the technology has evolved to offer a multitude of applications across various industries, not limited to financial services. The versatility of blockchain is evident in its ability to be utilized without advanced degrees, its unique characteristics as a database, and its potential in smart contract implementation. Despite the myths and misconceptions surrounding both Bitcoin and blockchain, the reality is that they represent a significant shift in how we approach currency, data integrity, and transactional security. As the technology continues to mature, it is likely that we will see even more creative and practical uses for blockchain, further distancing it from the misconception that it is synonymous with Bitcoin and limited to the realm of cryptocurrency.