4 myths of blockchain - Veracity Consulting

4 myths of blockchain (and 4 reasons it works)

In Blog by Mike TalbotLeave a Comment

Let’s talk about the growing popularity of blockchain. Now considered disruptive, the latest technology is about to take the Supply Chain and Procurement industries by storm.

While seemingly a complex topic, blockchain can be boiled down to some basic concepts. Simply put, these networks allow transactions between two parties (individuals or businesses) to be made in a more seamless, transparent way, while eliminating the need for intermediaries and providing immutable data for investors and auditors.

This new technology is defined by four key characteristics:

  1. Consensus: All nodes (parties) must agree for a transaction to be valid. This is one of the reasons why blockchain has historically been associated with slow performance, but new algorithms (such as Proof of Stake versus Proof of Work) can significantly improve performance (even if they may introduce other unfavorable behaviors). In addition, permissioned networks may be the answer for using blockchain for business, and IOTA has introduced Tangle, which uses a random sampling algorithm for faster transaction processing.
  2. Immutability: The blockchain network is an append-only Transactions can never be deleted or updated. To correct a mistake with a transaction, a subsequent transaction must be added to the ledger.
  3. Auditable: All transactions are stored in the ledger and are immutable, creating a complete and ineradicable audit trail.
  4. Strength: There’s strength in numbers. Due the makeup of the network and the design where all nodes in the network hold all blocks of information, this makes attack less likely because there is no central control point.

Now that we know what it is, let’s look at some misconceptions. Here are four growing myths about blockchain:

  1. Blockchain and distributed ledger technology (DLT) cannot be hacked. FALSE: As any IT security expert will tell you, no system or device is immune to attack. With the right amount of money, the right set of conditions, and a significant dose of nefarious determination, any system can be hacked. However, blockchain makes potential attacks much harder to achieve. The established hashing algorithms coupled with consensus when combined with digital identification make these networks significantly more difficult to penetrate and corrupt.
  2. Blockchain should be used for relational data storage. MOSTLY FALSE: Although DLT/blockchains can be used to store relational data, the platform really doesn’t lend itself to this use case. It would make more sense for now to store key elements of a record in the blockchain that are part of a ledger and use Microservices to reference relational data elsewhere.
  3. Blockchain is the same as Bitcoin. FALSE: Bitcoin is a popular cryptocurrency or form of digital cash. It uses a blockchain network, like how an application uses a Windows operating system.
  4. Blockchain transactions are not legally binding. SOMEWHAT FALSE: For now, lawyers will argue that the ability to capture and digitize all the elements of a legal contract are not yet practical. However, the legal community does understand disruptive technology and how industry and business will force the legislation. With all the discussion around Blockchain Smart Contracts, this technology is poised to digitize all types of contracts, agreements and transactions. According to the Global Legal Blockchain Consortium, many states, including Delaware, Wyoming, Arizona and Nevada have already passed legislation regarding blockchain transactions.

In the upcoming months, I think we’ll see new industries move to blockchain or engage in POCs, and we’ll start to see several new terms we’ll all need to learn. For example, DLT or Distributed Ledger Technology is quickly replacing the term blockchain—in some cases to draw distinct focus on this technology as a peer-to-peer, distributed immutable network with one or more consensus algorithms that’s not Bitcoin or associated to cryptocurrency.

In the beginning, public networks, which used majority consensus and Proof of Work, were popular.  Now, in addition to public networks, private or permissioned networks are a way to use blockchain for business. These types of networks can be used to introduce functions to view some data and not all, based on roles. In addition, because nodes (users) are digitally verified, more flexibility can be obtained with the consensus algorithm.

As this technology continues to emerge and spread, my guidance to businesses is to obtain information from trusted, knowledgeable sources. When cloud computing took off, many companies were faced with the decision to move quickly or be left behind—in some cases learning costly lessons along the way. The concept of using blockchain for a myriad of use cases across almost every business sector might just be even more significant than cloud computing was decades ago. Yes, the technology is evolving at a rapid rate; however, it’s already proven. Trusted, available networks like IBM Hyperledger and Ripple, along with blockchain as a service being released by Amazon, Oracle and Microsoft, underscore the availability for firms to design and develop solutions now.

Blockchain is indeed disruptive, and I’m excited that Veracity is on the leading edge of helping our clients leverage it for greater success.

Mike Talbot is President of the Overland Park, Kan., chapter of the Government Blockchain Association, and also serves as vice president and chief technology officer at Veracity Consulting, a tech consulting team of problem-solvers and truth-tellers who deliver customized IT solutions for commercial and government clients across the U.S. Learn more at engageveracity.com, and share your thoughts on Facebook or Twitter @engageveracity.

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