The Three Most Common Myths About Blockchain
In J.K.Rowling’s Harry Potter series, the wizarding world considers dangerous to speak the name of You Know Who. As the story unravels, readers learn that Lord Voldemort was a bright young wizard before he turned evil. He unwittingly leaves a part of him to reside in Harry Potter, who eventually defeats him.
The story of blockchain, the technology powering bitcoin, is equally magical. From a feared name, restricted to water-cooler gossips, to boardroom conversations, blockchain has come a long way.
Bitcoin started in 2008 in response to the subprime crisis. In 2011, it gained notoriety for the association with Silk Road, the dark web marketplace for drugs and guns. A few years later, bitcoin is a household name and, more importantly, it has kindled interest in blockchain. Enterprises no longer fear the technology.
Despite the triumphant march, many leaders and executives are still in a conundrum on adopting blockchain. The leaders are confounded with the three common myths.
Bitcoin and blockchain are the same
Blockchain technology powers bitcoin. Bitcoin popularized Blockchain. The comparison ends there. Blockchain applications are far and wide.
Prior to bitcoin, there were attempts at digital currencies. The problem of double-spending (digitally duplicating and spending the same money multiple times) prevented the success of digital currencies. Bitcoin solved the problem of double-spending by elegantly combining the existing technologies—cryptography, peer-to-peer networks and decentralization. The success of bitcoin has spawned over 2,000 variants.
The success of bitcoin rekindled the idea of digitizing assets, beyond currencies. At its core, blockchain (a variant of DLT) empowers a democratic, open, and irreversible system of ledger. Imagine a spreadsheet that maintains records of land ownership. In the current world order, one entity owns and controls the spreadsheet. This leads to relinquishing trust to one entity—potentially prone to mistakes or breaches.
In blockchain, the spreadsheet is shared with multiple entities (open and distributed). The entities participating in the network, through a pre-agreed consensus mechanism (democratic), add new transaction to the ledger. Once a transaction enters the ledger, it cannot be changed (immutable and irreversible).
Furthermore, platforms like Ethereum, leverage the blockchain capabilities and extend it further into programming and deploying software codes (smart contracts for example) on blockchain.
Blockchain is a hype
As it happens to any emerging technology, a certain amount of hype is inevitable. The hype may have, in fact, helped blockchain adoption. Investors, enterprises and individuals are now actively exploring it to solve real-world problems.
Gartner forecasts blockchain to generate an annual business value of US$3 trillion, by 2030. In its 2018 Hype Cycle for Blockchain Business, Gartner identifies new uses of blockchain beyond the cryptocurrency hype.
The true power of open source projects lies in the communities. In a way, the hype is good because it helps organizations and individual commit resources and experiment with ideas. As the saying goes, “The lotus flower blooms beautifully in the thickest mud.”
Blockchain is not for enterprises
Enterprises are quirky entities, wanting to get on to blockchain bandwagon, but hesitant. The enterprises see the potential benefits of blockchain—eliminating middlemen and redundancy, gaining real-time view of their business and avoiding costly disputes and resolution, but wary of the scalability and security issues plaguing bitcoin.
Blockchain has separated from bitcoin. Private flavours of blockchain, offering higher scalability and security, have started rolling off the block, to address the needs of the enterprises.
Hyperledger (led by Linux forum with a consortium of over 100 companies), Corda (another large consortium led by R3) and Quorum (from JP Morgan) are leading the way for the business houses.
Competitors are collaborating, cross-industries are learning and organizations are maturing. While bitcoin has been around for 10 years, the enterprise blockchain journey is about a year old. But, it is happening with the enterprises.
In a survey by PWC in 2018, 84 per cent of organizations have at least some involvement with the technology, with 52 per cent of projects in R&D, and 25 per cent in pilot and live.
So, let the games begin.
The game of Quidditch has just begun. Players are ready. Rules are being formulated. The blockchain wizards are marching with the Nimbus 2000 broomstick. It’s not long before a leader, like Harry Potter, will emerge with his “Firebolt”. The leader will soar into the blue sky and emerge victorious with the Golden Snitch in hand.