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7 myths about the Bitcoin blockchain

Byron Connolly | April 18, 2016
There's some confusion around what the Bitcoin blockchain can and can't do. Gartner analysts list 7 common myths about the technology.

“Actually, due to the increasing size of transaction records, this number has been decreasing and is now estimated at less than three tps, a small number compared to the peak capacity of, say, the Visa network at 47,000 tps or Nasdaq’s potential of 1 million tps,” the analysts said.

Myth 5: The blockchain can be decoupled from the currency or digital token

Some financial institutions considering using blockchain are saying they don’t care about the currency, only the blockchain. But in its present form, bitcoin is a key part of the blockchain, the analysts said.

“The blockchain is simply a list of bitcoin-dominated transactions. Also, the design of the consensus mechanism relies on the currency providing the incentive for miners to confirm transactions.

“Therefore (as some members of the bitcoin community have said), anyone who states that the currency is not important and can be ignored in favour of the blockchain, does not understand the technology and how it works,” the analysts said.

Myth 6: Bitcoin transactions are anonymous, instantaneous and absolute.

“In the bitcoin technology stack, participants in transactions are pseudonymous,” the analysts said.

“Regarding transaction speed there is, by design, a minimum 10-minute latency in confirming transactions, and pragmatically, one could wait for an hour for confirmation.

“Transactions on the blockchain are probabilistic rather than absolute, in that it is theoretically possible for an attacker to build an alternative chain (a data fork) that would allow double spending. Unless the attacker has a majority of hashing power, this will not succeed.”

Myth 7: The blockchain is a decentralised system.

The original design was a decentralised peer-to-peer network, but in practice the blockchain has become more centralised, the analysts said.

“The number of peer-to-peer nodes on the network has dropped steadily at about 15 per cent per year,” they said. “Mining is conducted in large part (about 80 per cent) by only four mining pools, which are all based in China.

“Any two of these four could theoretically collude and would together constitute a majority of the computational resources (hashpower) needed for mining, and could then control the updating of the distributed ledger.”

 

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