• Blockchain potential has emerged for other industries as well, including healthcare and real estate
• Blockchain is more secure than centralised databases but that does not make it hacker-proof
• In the legal industry, smart contracts are an application of the blockchain technology
Blockchain, also known as distributed ledgers, virtually allows anyone with access to online devices to handle transactions or digital interactions that are designed to be secure, transparent, fast and efficient.
In 2009, the Bitcoin cryptocurrency introduced a peer-to-peer (P2P) electronic cash system. Enabled by underlying powerful blockchain technology, Bitcoin was designed as a decentralised and digital currency that is not owned or controlled by any central banks.
Despite being a technology buzzword for nine years now, has blockchain progressed enough to be among the potentially disruptive technologies, like AI or DeepTech, in today’s global economy?
While the Blockchain technology was initially developed for cryptocurrencies, its potential has since emerged for other industries as well, including real estate. Most industry experts predict that blockchain technology would revolutionise sectors and disrupt existing business models.
However, the blockchain technology is still very young and years away from widespread commercial use. Three out of four blockchain companies in 2018 are still not selling any solution but are simply looking to buy a business case. While investments in blockchain companies do have good long-term prospects, any venture capitalist (VC) must not fall for the industry hype about this emerging technology.
Blockchain technology investors must be aware of the top-5 myths or misconceptions surrounding this technology.
Myth 1: Blockchain Is Entirely Secure And Can Never Be Hacked
One of the most pre-conceived notions about blockchain technology is its completely safe system that is impervious to cyber attacks. Compared to other technologies, hacking a blockchain network would be more difficult as it involves thousands of distributed computers or nodes validating a blockchain transaction and manipulating the digital records on each of these computers.
Reality: No computer system or technology, including Blockchain, is 100% secure from hackers. Due to its distributed network, blockchain is more secure than centralised databases and systems, but that does not make it hacker-proof. Additionally, every blockchain implementer is responsible for ensuring the security of their solution, which may not always be the case.
Myth 2: Blockchain Can Only Be Used In The Financial Industry
Thanks to the initial development of this technology by Bitcoin, blockchain has made a more significant impact in the banking and financial industry. In recent years, major international financial institutions, such as the Commonwealth bank along with ANZ and Westpac, are investing in blockchain solutions.
Reality: Other industries including real estate and healthcare can also potentially benefit from this technology. Proof-of-existence of medical data on blockchain records can be used to provide better healthcare. Delaware-based Ubiquity has launched the first blockchain-based Software-as-a-Service (SaaS) platform for real estate industry to record and track property records.
Myth 3: Myths About Smart Contracts
Applicable for use in the legal industry, smart contracts are an application of the blockchain technology, which contains pieces of code that are triggered by the execution of particular actions. Much of the industry hype around blockchain is centred around smart contracts, which enable the encapsulation of business rules into software code.
Reality: While smart contracts are a reliable source of proof-of-execution of a task, it is still essentially a code, which cannot substitute written laws. For smart contracts to have legal relevance in the real world, they would still require regular legal contracts between participants in the blockchain network. Additionally, the June 2016 hacking of the Decentralized Autonomous Organization (DAO) smart contract, which resulted in the loss of millions of dollars for investors, is an indication of the vulnerability of smart contracts.
Myth 4: Blockchain is completely free
Due to its open source model of development and low costs of the transaction, the Blockchain technology is often perceived to be free or cost-effective.
Reality: Every block in a blockchain transaction involves a network of multiple computers, which analyse and arrive at a single version of truth (SVT). Blockchain implementation also requires a lot of computing power, which needs to be paid for. Additionally, the overall setup of distributed computers also requires high capital investments.
Myth 5: Blockchain Can Transform The Global Economy
Technology experts believe that the blockchain network with its capabilities can provide a trusted and encrypted currency system, which can make a global impact in the future. As any national government does not own blockchain, the Bitcoin Blockchain network is perceived to be huge and growing fast.
Reality: The overall blockchain network is currently as extensive as any financial network. Gartner even claimed that the size of blockchain is same in scale as the NASDAQ network. This myth can only come true if cryptocurrencies can grow exponentially and replace the current currency system.
Conclusion
The enormous market potential of blockchain-based solution offers a lucrative opportunity for VCs and other investors to earn good returns in the long run. This has been further accelerated by the interest shown by a growing number of startup entrepreneurs, innovators, and research academia.
However, despite its potential to disrupt various industries and business models, investors and decision makers must pay attention to the prevailing myths and misconceptions of this technology to avoid missing market opportunities and good investment returns.
