Common mistakes when talking about blockchain

1. Blockchain, is only Bitcoin

In essence, this technology is a distributed ledger, designed to operate in an open and extremely hostile environment. Its value derives from the security of its tamper-proof records through full network collaboration and cryptography. It was born with Bitcoin as a pioneer, but today it has expanded its usefulness with other programmable networks.

2. Hacking to exchanges = Digital assets are not secure

Centralized digital asset exchanges are known ways to trade digital assets for currencies, such as the US dollar or other digital assets.

The security of the exchange is confused with that of the technology behind the digital assets. Hacking the bank is not counterfeiting the money, just as hacking an exchange is not counterfeiting the token.

3. The blockchain has a low TPS rate, therefore it will never compete with or replace the traditional financial infrastructure

Traditional financial systems process a large number of transactions each day. This transaction processing capacity is called performance, and is measured by a metric called transactions per second (TPS). Payment networks like Visa’s process up to 56,000 TPS, while traditional exchanges are likely to have much greater transaction processing capacity to accommodate high frequency trading.

Today, the Bitcoin network processes about 4–5 transactions per second, while the second largest digital asset network — Ethereum — processes about 15. If we compare the current state of blockchain technology with the demands of the global financial industry, it’s easy to see why those demands might be justified.

The digital asset space is evolving rapidly. The latest generation networks, operating under the consensus mechanism of Proof of Participation achieve Proof of Work security, but eliminate its limitations. A notable example of this is Cardano. These new networks also represent a shift in the global economic paradigm that many do not seem to notice.

4. Digital assets have no intrinsic value

The concept of intrinsic value, or lack thereof, is often used to describe digital assets as a purely speculative asset class. Such claims do not capture the broader nature of platform-based digital assets that derive their value from the direct use of their networks.

Digital asset platforms such as Cardano can support thousands of decentralized applications with real-world utilities, and digital tokens can derive their value from economic activity taking value from the utility they provide to the world.

5. Developed economies do not need blockchain technology because they have well established financial/commercial solutions

While it is easy to see how blockchain technology could unlock much value in emerging markets, the idea that developed economies do not benefit from this technology is short-sighted.

It’s like saying that cell phones are a great technology for emerging markets, but developed markets already have land lines, so they don’t need them.

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