5 mistakes old Leeks make about blockchain

01

The assumption that all data on a blockchain is secure is the most common misconception.

Whisper Bibi: So Jun’s MetaMask has been stolen!

People mistakenly believe that the data in a blockchain is somehow encrypted before it can be stored, and therefore “safe.”

Data on the blockchain, no one can view or access the information without authorization. Therefore, it is safe to store your bank account number, password, social security number and so on. People also feel they don’t have to worry about hacking on blockchain. But in fact, this concept is dead wrong.

For the public chain, the stored data is actually visible to everyone on the network. Because each node in the public chain network has a local copy of the entire blockchain on its node, the data content in the block can be viewed.

Therefore, public links are not really suitable for storing any sensitive or private information.

So what do people often mean by “safe”?

When people say that data on a blockchain is “secure,” what they really mean is that data is “immutable.”

02

The truth is that blockchains are not good for storing large amounts of data.

The distributed nature of blockchain means that every node in the network has a copy of the entire blockchain. If blocks are used to store a large number of files, such as pictures and videos, the size of the blockchain would have to be enormous and each node would have to have a copy, which would make the whole operation very inefficient.

In practice, blockchain is used to record transaction data. Typically, some context-based location-based distributed file system “e.g., IPFS, Swarm, SAFE network, Perkeep, etc.” is used to store big data files outside the blockchain, and the hash addresses of data files are stored on the blockchain.

03

Smart contracts have nothing to do with real world contracts. It’s just a simple computer program, stored and run on a blockchain.

Just as Ethereum is written in Solidity or Serpent, smart contracts are written in programming languages.

In Ethereum, it runs in an Ethereum virtual machine, in a super ledger chain, and the chain code runs in Docker Containers.

Generally speaking, there are three steps for a smart contract to operate, with the first step being construction. A build is a developer writing the required logic in a specific programming language.

The second step is storage. That is, we write smart contracts to store on the Ethereum blockchain, and finally run.

04

To be clear, Bitcoin is not a collection of digital coins. Even this coin doesn’t exist, it only exists as part of the transaction record.

On the Bitcoin blockchain, a miner is rewarded with new bitcoins for spending his computing power mining new blocks. It’s not that you get new coins, it’s that you have a transaction record that says, “Transfer 12.5 Bitcoins to a miner,” and that record is retroactively recognized.

It’s important to note that these 12.5 bitcoins have never existed before and never will. The only thing that exists is a posthumously valid transaction record. In other words, bitcoins exist as transaction records rather than actual digital coins.

05

The only thing standing in the way of bitcoin becoming a mainstream currency is bitcoin itself!

In its current form, Bitcoin has unique scalability issues, handling only seven transactions per second. Ethereum, the second largest cryptocurrency platform, is currently only able to handle 20 transactions per second. That compares with Visa’s 1,667 transactions per second and PayPal’s 193 transactions per second.

Bitcoin has this inherent limitation because in a blockchain, it takes about ten minutes to create a new block, and each block has a size limit of 1MB. To get to thousands of transactions per second, all nodes would need to have high-speed broadband to keep up with all the new transactions in the local copy of the blockchain.

This feature makes blockchain suitable for real-world cases such as remittances, which do not require immediate confirmation of a transaction, but are not suitable for fast, real-time transactions.

Therefore, we can conclude that the main reason why Bitcoin has not become a mainstream transaction currency is not government, legislative or other regulatory obstacles, but its inherent scalability problems.