Blockchain is everywhere: keynote speeches at conferences, Google search, trending video, and even your favorite gym. But is this just hype, or investing in blockchain consulting and development still worth the effort?
Is blockchain overhyped?
The claims that blockchain is overrated are often met with skepticism, since even governments all over the world are jumping on the bandwagon and adopting the tech very fast.
But we should not dismiss these allegations, even if such criticism of blockchain seems to us just “hate” or a counterreaction to overhype. After all, we can see that even tech experts sometimes express a controversial attitude toward blockchain. For instance, in 2019, Gartner stated that after the “peak of inflated expectations,” blockchain had landed in a “trough of disappointment.” And later, in 2021, the same Gartner noted that “blockchain innovation is moving steadily forward” and that “the rewards are simply too high to ignore.”
So which opinion is more valid? When it comes to disruptive technologies like blockchain, separating the hype from reality is hard. Now let us look at blockchain misconceptions we have to be aware of.
4 blockchain misconceptions debunked
If you are not using blockchain, you are missing out.
Since its first introduction to the world as the technology behind Bitcoin, blockchain has never been out of the constant hype loop. This resulted in utter confusion about blockchain’s potential and limitations. In the last twelve years, public opinion on blockchain has varied, from it being a tool for cybercriminals to a global panacea.
The normal cycle of awareness was tarnished by news articles filled with buzzwords calling for action. From blockchain enthusiasts to C-level executives, everybody was trying not to miss the boat. In reality, though, there is simply no boat.
There is no doubt that blockchain can revolutionize the majority of industries. However, as with any other business opportunity, enterprises first need to decide on a strategy for blockchain implementation, find a use case, develop an MVP, etc. The reasonable business approach is a vital missing ingredient in blockchain adoption.
A proof of concept guarantees success.
Deloitte’s 2021 Global Blockchain Survey reveals that 80% of companies consider blockchain to enable new revenue streams, while 73% consider technology adoption a way to gain a competitive advantage. However, it may be challenging to confirm the aforementioned benefits in practice since only a few blockchain projects are able to move from the testing phase to deployment.
Why is that? Due to the infancy of the technology, there are multiple unpredictable factors that can hinder success. First, most proof-of-concept (PoC) projects are led by blockchain enthusiasts and R&D teams in controlled environments. While they can certainly prove that the technology works, they can’t guarantee that it will not fail.
Second, blockchain implies cooperation. Until now, PoCs were all about testing the technology, but when it comes to blockchain, a thought-out combination of legal architecture and operational construct is what defines success. Traditional PoCs can’t ensure project viability. The technology has to be tested at scale, which implies multiple companies working together. This leads us to the third major hurdle.
In many cases, direct competitors within a particular industry need to collaborate to realize the technology’s full potential. Forming such alliances that can involve up to twenty enterprises is a very complex task, to say the least. It will take a few more years until organizations find ways to build healthy relationships and establish collaborative ecosystems.
However, in this regard, we have seen some steps in the right in recent years. Most notably, the blockchain-based IBM Food Trust network managed to bring together food industry giants including Walmart, Nestle, Unilever, Kroger, Tyson Foods, Carrefour, and others.
Blockchains are secure.
In theory, blockchain is indeed a superior technology in terms of security. However, nothing is 100% secure. Let’s look at the most significant blockchain security issues.
Any blockchain network is based on code, which inherently makes it vulnerable to flaws. Any new code update might be the last if done poorly. For example, Ethereum, the world’s second most popular blockchain, was one step away from falling into oblivion several years ago. ChainSecurity, a smart contract audit firm, found a major security vulnerability in the code just two days prior to a large update release. The bug could enable hackers to reenter the function infinite times, allowing funds to be withdrawn forever.
● The 51% threat
The 51% threat is a potential attack on the blockchain network where miners can control more than half of the network’s mining hashrate. In this situation, hackers have the power to reverse transactions, thus allowing double spending.
At the beginning of the blockchain saga, the 51% attack was considered as a strong sign of blockchain immutability to cyberthreats. However, the cases of well-executed 51% attacks still hit the news. In January 2020, the Bitcoin Gold (BTG) blockchain lost $70 thousand to a group of hackers, which marks the second time BTG has been attacked in the last two years.
A few other blockchains have been targets of 51% of attacks in the past years, including Ethereum Classic, Verge, and Vertcoin. All of them have one feature in common — they use the proof-of-work consensus mechanism, which proved to be way more vulnerable to such attacks compared to blockchains based on proof-of-stake.
However, the larger the blockchain and the more distributed the network, the stricter the security a company gets as a result. Blockchains do allow catching unauthorized record changes to applications that are developed on top of them. But security principles will have to continuously evolve to counter the ever-changing threats and vulnerabilities.
Blockchain is immutable.
The immutability of blockchain is exaggerated. Even though the ‘write-once, append-only’ principle is its strong point that adds a level of assurance, blockchain data can still be rewritten through hard-forking of the chain. This is what happened in 2016, when the Decentralized Autonomous Organization, which was built as a fund for Ethereum-based projects, was hacked, resulting in $40 million stolen.
The DAO hack proved that blockchain can’t completely eliminate the human trust factor. In fact, there is no technology that can. Regardless of how fair the system is, there will always be the need for human interference as well as the need to make permanent changes to the rules. Again, mass media likes slapping a label on everything, so it portrayed blockchain as an immutable fortress, which proved wrong very soon.
However, blockchain continues to evolve and adjust to specific conditions. Continuous changes to modern blockchain blueprint are inevitable.
So has blockchain been overhyped in the past decade? No doubt. However, it doesn’t imply that blockchain provides no value. The hype era is mostly over, and blockchain is slowly transitioning from being a mere tech buzzword to a globally recognized technology with a transformative potential. And with more BaaS providers entering the market, blockchain will continue to expand its reach.