Blockchain, cryptocurrency and other concepts in this new side of the internet are still hard to understand for the general public. A lot of people get to know about the blockchain technology and industry mostly through listening to their tech-savvy friends and crypto “gurus”. Everything about the blockchain sounds technical and foreign to them unless broken down in simple words by the people they trust.
But in an attempt to simplify for the greater audience, information spreaders most of the time miss or lose the point, which breeds misinformation and confusion in the industry. And of course, some “gurus” are just plain wrong. Let’s discuss some of the common misconceptions about the industry, and try to provide the correct information about the world of blockchain and explain it in an understandable way for the general masses.
Misconception #1: Crypto wallets store cryptocurrency and NFTs
Crypto wallets do not actually “store” or hold anything. It is just a typical ledger which shows what a user has on a particular blockchain that are under their address. Cryptocurrencies and non-fungible tokens (NFTs) are digital information or data stored on the blockchain. A crypto wallet acts as a means to access the data and enables users to do transactions on the blockchain.The language of “storing” crypto and NFTs in wallets is widely used within the industry to relate it to real world applications of a physical wallet holding money and other important articles. Check out this blog with more information about the basics of a crypto wallet
– which even some of the seasoned crypto traders do not know.
Misconception #2: Blockchain is private
It is the opposite – anything on the blockchain is public and fully transparent. People confuse this as the system does not ask for the user’s real name to do a transaction. Each and every transaction is visible and accessible to the public, but wallets (also known as public addresses) are a string of 30 to 40 characters. By masking it in codes, the public would not know who is the person or organization owning the wallet and doing the trades.
It provides pseudoanonymity – we might not know who owns the public address, but we know everything that has ever happened with that address within the blockchain. Blockchain in itself does not reveal the identity of the wallet owner, but it is still possible to trace the owner through their transactions. A wallet owner can also unknowingly reveal their identity when they ask or receive donations in the form of crypto, or make a purchase on an online store that accepts crypto and where personal information has been left. There are also government organizations that have established relationships with major exchanges which can help them to track or map public addresses to its owners.
These transactions are recorded and visible to the public forever as blockchain is immutable or unchangeable. And this can be used to track the personal information of wallet owners.
There are also what you call private blockchains, but these are only blockchains controlled by major centralized organizations such as banks.
Misconception #3: Cryptocurrency is a bubble
This statement is false. The bubble concept was only conceived through the public’s fear of the unknown. Crypto and NFTs are new and the initial demand took off in a frenzy, but the technology can be useful in different ways and in different sectors. Now, the crypto and NFT markets are cooling down after the hype
. Instead of a bubble burst, crypto and NFTs are just starting to make real-world impact in our everyday lives.
We see more and more establishments accepting cryptocurrencies as payment, such as Bitcoins. Digital economy expands as online shopping and selling proliferates, and some online purchases are made through crypto payments. People can donate crypto to support their favorite artists or organizations with a cause. People are also steadily buying and holding crypto, seeing their value as investments – albeit still risky – for longer term.
As the blockchain technology matures over time, we can only imagine the other real world uses of cryptocurrency to evolve in the next few years.
Misconception #4: Blockchain is the ideal tool for everything
Many companies and blockchain experts may treat blockchain as an ideal tool or solution for everything, but this isn’t the case. At its core, it provides decentralization. Things that will benefit from decentralization can benefit from blockchain. There are certain applications of blockchain technology that will be helpful in specific problems, projects, or goals.
Before lazily thinking of blockchain as the tool for all of our needs, a person or an organization has to first determine what are the qualities or value that they hold dear. Is it decentralization? Is it just to not be left behind? Is it just to take advantage of the hype? We have to evaluate, educate ourselves, and talk to someone in the industry who can help before we decide on adopting blockchain for our needs.
It is understandable how blockchain can be seen as the solution for all things. One can look at cryptocurrency to adopt a new payment method. NFTs may be useful
for advertising and marketing, complementing intellectual property rights, or tracking and authenticating luxury goods, among others. Metaverse are more likely for games, tech companies and enterprises wanting to put up online stores. Industries might need to carefully assess if they want to make use of Decentralized Autonomous Organization (DAO) – a decentralized type of organization operating in the blockchain – for a specific need. Businesses must also look at the benefits and risks of smart contracts first and if they are applicable to the way they do business.
Being decentralized, every transaction in the blockchain also costs money as it takes up computing power around the world to run the blockchain systems. For example, if you want to store health records or supply chain data, you need to pay gas or transaction fees in the system. The digital ledger is immutable. So everytime you change the data, you need to pay. Blockchain also has an issue when it comes to scalability because blocks are continuously recorded, not revised. This would demand more storage and would create limitations for the system. This means that if you need to store a lot of data, blockchain is not your best option as it will be expensive and you can meet a lot of challenges with scaling.
Blockchain and all it has to offer brings a wide range of benefits, but one needs to fully believe and understand the technology first, and determine what specific need or problem they have that the blockchain technology can solve.
Gigster has been guiding and educating major enterprises on Web3, blockchain, crypto and other ventures in this space. Through our pool of managed talent skilled in blockchain technologies, Gigster helps companies with blockchain-based projects fit for their organization and their needs, set up their project, do away with the trial-and-error, and educate teams on how Web3 and blockchain operates. If your company is also curious in Web3 and blockchain and how it would benefit you, tap Gigster and learn about the inner workings and possibilities in the world of blockchain.