The blockchain, or distributed ledger technology as it’s sometimes called, has been the subject of intense curiosity, scrutiny and speculation. Some have said the blockchain will change the world, signaling a new era of decentralized payments without the need for banks or financial institutions. While others are more skeptical, as this technology is experimental and has been slow to be adopted by the public.

Whatever the future is of the blockchain exactly is, no one knows. But we do have a few concrete facts about the blockchain that challenges the myths and uncertainty that surrounds this new technology.

1. Cryptocurrencies Have No Value

Rather than being a myth, saying that cryptocurrencies have no value is largely a misunderstanding. While cryptocurrencies are not backed by assets like gold or silver, neither is the US dollar. The gold standard for the US dollar was weaned out in 1933 by President Roosevelt, but that hasn’t stopped the American economy from being the dominant force we know today.

What gives any form of currency its value is the trust and faith people have in it – even when a currency is backed by nothing. So provided there are enough people who believe in a currency’s ability to be used as a form of payment or store of value, these tokens will continue their rise.

2. Cryptocurrencies Are Untraceable

Although currencies including Bitcoin and other tokens are more private and secure than cash, they do leave footprints behind. These clues have been used in the past by law enforcement to catch international criminals, like the former operator of the Silk Road[1], which was an online marketplace to buy and sell drugs and other contraband.

A major weakness in Bitcoin’s privacy is that each transaction is recorded on its blockchain, which is the equivalent to a public ledger for all to see. Every time someone sends or receives Bitcoin, this is recorded against a wallet address. Although these addresses are random and not linked to people’s real world identities, they can be traced.[2] This is why it’s not recommended to store large amounts of Bitcoin in a single address, as this could lead hackers on a scavenger hunt to uncover the owner’s details, and lead to an attack.

So while Bitcoin and other currencies do provide a layer of anonymity that cash transactions do not, it would be unwise to depend on the security of these tokens if that is your number 1 priority.

3. The Blockchain is Invincible

One of the key benefits of the blockchain is that each record stored is permanently and is transparent for all to see. However, when people learn about this feature of the blockchain it’s assumed that the network could be somehow be immune to outside attacks or tampering with its data integrity. No system or database can be said to be 100% secure, regardless of how well it is coded or the controls used to preserve its security.

The weakness of the blockchain’s security is that it’s only as strong as the encryption and algorithms protecting it are. A breach in any of these protocols for verifying data could collapse the whole system, and has shown to be possible with cryptographic keys in the past such as MD5.[3] and even WPA wireless networking[4].

4. Crypto Exchanges are Bulletproof

One of the most notable crypto disasters to have ever occurred is what happened at the Mt. Gox exchange, which is where more than $473m million was stolen.[5]

Prior to this heist, the Mt Gox exchange was one of the largest in operation, and accounted for more than 70% of all Bitcoin transactions across the globe. But rather than being a breach of security, what happened at Mt Gox was the result of various contributing factors: poor management, dysfunctional engineering, and sloppy code. This let hackers siphon Bitcoin away from the site for years without detection.

Most of the blame for this breach was attributed to Mark Karpeles, who was the CEO of Mt Gox. Critics have pointed out that he was more of an idealistic programmer than a business person. For example, one former employee said that Mt Gox did not employ version control software, and the only person who could approve changes to the code was Karpeles himself.[6]

A lack of version control software was the key reason for a breach in Mt Gox. This made it impossible for the developers working on the platform to keep track of who was doing what, compounded by the millions of dollars worth of transactions that Gox handled per day. The result was a highly insecure platform with vulnerabilities left by a team of scatterbrained engineers.

So what happened at Mt Gox was due to a number of problems of its organizational management style, and not a fundamental weakness of exchanges as a whole.

5. Cryptocurrencies Can Be Hacked Effortlessly

On the other hand, the counter-argument that cryptocurrencies can be hacked without effort doesn’t make a lot of sense either. While certain wallets and exchanges have been breached, those were due to flaws in the programming of these services and not the underlying security that protects virtually all digital assets.

Two of the most popular algorithms used today are SHA256[7] and Scrypt[8]. Scrypt is the proof of work algorithm that is used by currencies such as Litecoin and Dogecoin. Scrypt uses sophisticated hashing to prevent fraudulent transactions on its blockchain. It also verifies the integrity of each block mined. SHA256 is used as part of the SSL certificate that most exchanges and other secure websites use.

The reason why both SHA256 and Scrypt are used in hashing is that these protocols cannot be breached in any reasonable amount of time.[9] Even if an attacker were to use a botnet or supercomputer to do so, it would take years, if not centuries for the algorithms to be compromised.

6. Bitcoin And Altcoins Are Only Used By Criminals

There is a perception held by the general public that Bitcoin and other coins are used exclusively by criminals to conduct shady business deals. Services such as drug trafficking, illegal pornography, and even terrorism have reportedly been acquired through the use of the virtual coins. It’s easy to see how cryptocurrencies could be popular for buying prohibited goods, owing to its anonymity. There have also been reports of illegal financial transactions being carried out through the use of the tokens, such as money laundering, tax evasion and more.

While it’s hard to deny that these coins are being used for illegal activity, it is impossible to keep the transactions completely anonymous, as well as the troubles of reselling these tokens once it’s time to pay out in fiat dollars.

However, certain types of currencies are being sought after by criminals due to their anonymous designs. Tokens such as Monero or ZCash were designed to be untraceable. A transaction on either network leaves no digital footprints behind, unlike Bitcoin that records each transfer on a public ledger that is accessible to everyone.

So while cryptocurrencies certainly makes it easier for criminals to conduct business, there are no reliable statistics to back up the claim that they are used, or are endorsed by the black market. Criminals could abuse cryptocurrencies for their own benefit, but this abuse is hardly limited to cryptocurrencies. Also, criminals are not the dominant user base of these coins either.

There was a time when Bitcoin was an obscure form of payment that was used exclusively in closed communities such as the darknet. This is no longer the case with its continuing adoption by the public. And the more popular Bitcoin becomes, the less it will be associated with illegal activity.

One can also see that the media has slowly changed its mind about Bitcoin. Not even a year ago, all you could read in newspapers about Bitcoin was that it was used by criminals. Now we’re seeing a frenzy of enthusiasm about its value and what this could mean for the future.

7. The Blockchain Has No Commercial Application

Despite the optimism that surrounds the blockchain, some people are adamant in their belief that this technology is useless from a commercial point of view. After all, the blockchain is new, and therefore unfamiliar in the corporate world. This makes blockchains difficult to design, build, and sell to other businesses. Another common perception is that the blockchain is only used when one wants to attempt the next Bitcoin, or to launch an ICO. The technology has been pegged with the transfer of value, although this is only one implementation of blockchain.

How coins and other digital assets are kept track of is through the verification of data, and ensuring those bits and bytes are permanently stored on a ledger. This then creates an opportunity for the blockchain to be used in a range of commercial environments that involves sensitive data. One example could be to verify patient records, as they are often sent from a provider to a range of other parties. The information contained could include one’s social security number, insurance details, and medical history. By creating a unique record with the blockchain, it could ensure that all parties are receiving the right information about the patient, as well as proof that the record is authentic.

8. Bitcoin is Bubble

The rise of Bitcoin has been compared to the .com bubble or the infamous tulip bubble. When the .com bubble burst, it cost more than than 5 trillion dollars to investors [10], while tulips were selling for 5 times the price of an average house their its peak.[11] Skeptics believe that the same fate will befall Bitcoin, with the perception that it is as an overvalued, speculative asset. But the reality is that Bitcoin is no different to any other store of value such as gold, art, or diamonds. What we’re seeing is supply and demand: when the supply of these assets is low, and demand is high, the price will rise in accordance to the market.

It is not just a small group of people putting all their money into Bitcoin either, which could legitimately lead to a bubble; the Coinbase trading platform is adding more than 1 million new [12] traders per month, and there are presently more than 1300 different currencies to choose from.

Some estimates have gauged that 20 million people own Bitcoin, with most of those investors putting in a few dollars each. Another figure is that less than 5% of customers own over 95% of the total Bitcoin supply, meaning there are less than 1 million people who are heavily invested in its future. [13] What this all means is that there’s a lot of room for Bitcoin to appreciate in price, especially as more users buy and trade with the asset.

To put it simply, the reason for why Bitcoin is not in a bubble is because it’s slowly being adopted as a store of value as well as means of exchange. There are only so many Bitcoins to be mined, and once those are gone, no more will enter in circulation. Its limited supply means that it could one day be more valuable than gold, and traded at a premium for various goods and services.

By busting the common myths that surround the blockchain and cryptocurrencies, we can see clearly that these tokens are becoming an important feature of how we will conduct business in the future. Although its adoption has been slow, 2018 could be the year that we see these tokens catapult themselves into our everyday lives and vanquish these misunderstandings forever.














Written by MyBitcoin Team Staff

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