Olga Zeveleva
December 2017.

What are the most common myths about blockchain?

1 answer

Myths we hear often are that blockchains are immutable, that they are unchanging and unchangeable, permanent. This is simply not true; certainly, they are tamper-resistant, but they are not tamper-proof.

For example, there are ways in which a blockchain can be reorganised so the transactions that previously occurred were reversed. A good example of that was the Ethereum hard fork last year following the DAO hack, when roughly $60 million in funds were siphoned out of it by hackers, and after that a significant portion of the community decided to basically rewrite history. That is a good example of how blockchains are not permanent; they can be changed.

There is also an idea that blockchains are fully decentralised, and this is something that is not discussed enough. In fact, there are actually clear concentrations of power in the blockchain ecosystem that can influence the types of events I mentioned above. The best way to to characterize a blockchain on this point would be to say that it may be more decentralised as compared with traditional financial structures, systems, databases, but the idea that it is somehow completely decentralised is misleading.

There is also the view that somehow blockchains are immune to censorship, that they are “censorship proof,” meaning that if you want to send say a bitcoin transaction nothing can stop that transaction from being completed. In practice, that is basically true. In reality, however, there are ways for the censorship of blockchain transactions to occur. For example, if there were a sufficient concentration of mining hash power within a group of people, or a single entity, that wanted to block a particular address on the blockchain from transacting, then that address could be blocked. In other words, a powerful enough miner (or group of miners) could censor certain addresses on the network from actually sending coins to other addresses. So while blockchains may be more censorship-resistant than other networks, they are not 100% censorship-proof.

Garrick Hileman and Michel Rauchs released the 2017 Global Blockchain Benchmarking Study, which can be downloaded as a PDF here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3040224.
You can read the brief summary of their study here: https://insight.jbs.cam.ac.uk/2017/central-banks-are-trialling-blockchain/
The above interview was conducted on 12 December, 2017.

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