Everyone’s talking about the Bitcoin blockchain – a global, distributed ledger of transactions for the Bitcoin digital currency – allowing for peer-to-peer payments over the Internet.
According to a Gartner definition, the Bitcoin blockchain is “an authoritative record of Bitcoin transactions, and is not stored in, or controlled by, a central server.” Instead, transaction data is replaced as a whole across a peer-to-peer network of thousands of coins.
The Bitcoin blockchain is being applied across many industries in areas such as the Internet of Things, digital rights management, and global payments.
But among all the global noise, there is some confusion around what it can and can’t do. In a report published this month, Gartner analysts Ray Valdes, David Furlonger, and Fabio Chesini shared seven common myths about the Bitcoin blockchain.
Myth 1: The blockchain is a magical database in the cloud
The blockchain is not a “general purpose database” but rather it is conceptually a flat file – a linear list of simple transaction records, the analysts said in the report.
“This list is ‘append only so entries are never deleted, but instead, the file (currently about 50 gigabytes), grows indefinitely and must be replicated in every node in the peer-to-peer network (thereby introducing scalability and latency issues).”
Myth 2: The integrity of the ledger is defined by the majority of nodes in the peer-to-peer network
The reality is that its integrity is defined by the majority of “hashpower” (the computational resources used in data mining) not the number of distinct nodes in the network, the analysts said.
“This means that a single sufficiently powerful entity on the network can 'outvote' the rest of the nodes,” the report said.
Myth 3: The ledger represents an irrevocable record
This is pragmatically correct, the analysts said, but it is “theoretically possible for a party to accumulate enough hashpower to rewrite the record all the way back to the Genesis block (the first block of a blockchain).”
“Such an action would work against the incentives of the usual participants in the Bitcoin ecosystem because it would destroy all user confidence in the blockchain technology and the commercial economy it supports,” the report reads.
Myth 4: Blockchain technology is scalable to the level of a global economy
This is not just a myth, but more widespread perception today as people become aware of scalability issues relating to the current form of the Bitcoin technology stack, the analysts said.
Due to its design, the network can only handle a relatively small number of transactions per second.
“This number is due to the constraint of a maximum block size of one megabyte, combined with around a 10-minute confirmation delay per block which, depending on the average transaction size, results in a maximum capacity of seven transactions per second (tps),” the analysts said in the report.
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