The global blockchain technology market size was valued at $17.26 billion last year. This number is expected to grow at a compound annual growth rate of 87.7% over the next six years.
While notable, understanding how blockchain works is complex. Additionally, a number of myths are often associated with the technology, which may hamper adoption in the future.
Forrester Report Highlights Enterprise Blockchain Myths
Forrester Research released a new report detailing the most common blockchain myths from 2014 until present day.
Martha Bennett, VP and Principal Analyst at Forrester, told Cryptonews that she compiled the list. She explained that the findings were based on insights and observations gained from research and work with clients on the topic of enterprise blockchain over the years.
Bennett shared that she started her research in mid-2014 and hasn’t stopped since.
“Over the years key themes associated with blockchain technology have emerged that were frequently taken at surface value by IT and business teams in enterprises,” she said. “I spent lots of time explaining to clients (and non-clients, for that matter) what was myth and what was reality.”
Although blockchain has matured greatly over the years, Bennett believes that the myths listed below continue to persist – here’s why:
The Blockchain Exists
The Forrester report notes that phrases such as “the blockchain will address that” or “putting something on the blockchain” create confusion. This is why it’s worth stressing that the blockchain doesn’t actually “exist.”
The report states that “blockchain is an architectural principle that features certain characteristics.” It also states that the underlying concept of blockchain can be realized differently.
For instance, there are dozens of public, permissionless blockchain networks, like Bitcoin and Ethereum. A wide variety of open-source and proprietary protocols are also available to build permissioned networks.
In addition, there are semi-public and hybrid networks whose governance models offer a blend of permissioned and permissionless functions.
“Many software offerings aren’t blockchains by any stretch of the imagination because they don’t use blocks,” the report notes. “However, these offerings label themselves as such.”
Blockchains Disintermediate And Trusted Third Parties Are No Longer Needed
The second myth is that blockchain networks won’t ever fully disintermediate.
While blockchain networks support the direct transfer of value between two parties, third parties are still needed for enterprise blockchain use cases.
“The only way to cut out third parties altogether is for consumers or businesses to self-custody their wallets and interact with a blockchain directly, which is not a realistic proposition for mainstream business relationships,” the report states. “Even in scenarios where ecosystem partners deal directly with each other at the expense of existing third parties, it doesn’t mean third parties are no longer part of the mix.”
The document adds that cryptocurrency use cases rely on third parties, such as wallet providers, exchanges, and custody services.
Blockchains Are Decentralized
Third on the list of myths is that blockchains are decentralized. However, decentralization is more complex than it may seem.
“Even the public Bitcoin and Ethereum networks aren’t completely decentralized,” the report states. “On the contrary, miners and core developers in effect exercise a form of central control, and those small groups aren’t accountable to anybody.”
Findings also state that elements of centralization are present in cryptocurrencies and decentralized applications (Dapps). As a result, it’s noted that the term “decentralization
theater” has become popular for describing networks or applications that claim to be decentralized but aren’t.
Blockchains Are Trustless
While a blockchain network can facilitate the exchange of information between people or entities that do not know or trust each other, that doesn’t mean the technology is entirely trustless.
According to the report, participants still trust the functioning of these networks. For example, participants need to trust the mathematics and cryptography, along with the network’s code.
Users also need to trust those who effectively control the respective networks, such as those with the resources to add blocks to the chain and the developers who can modify the core code.
Blockchains Are Immutable
A key characteristic of a blockchain network is immutability, yet the report explains that this isn’t always the case and notes that for enterprises, immutability isn’t always desirable.
According to the report, changes can be made to the blockchain.
“One is to recompute the chain, either in its entirety or to the point before an undesirable event occurred; this erases and recreates history,” the report states. “The other is to fork the chain, which preserves historical code and transactions but means the software now works differently, and ownership may have been reassigned.”
Blockchains Are Inherently More Secure
The report also points out that blockchains may not be more secure unless these features are designed into the network.
For instance, in some cases, participants will have access to credentials to access a network. This creates a security vulnerability. Even networks with multiple nodes are susceptible to attacks.
“The more nodes there are in the network, the more choices there are for somebody with evil intent to find one that’s less well protected,” the report states.
Blockchains Are “Truth Machines”
While blockchains may be viewed as single sources of truth, malicious actors can still take over.
The report points out that if somebody registers property ownership, the system can’t tell whether this is really the rightful owner.
“Similarly, it can’t tell whether the consent for data usage has been obtained legitimately,” the report states. “Sensor data can be manipulated, either by tampering with the sensor itself or by intercepting the data stream.”
Blockchains Automatically Improve Data Quality
Although blockchain networks work well for ensuring data integrity, the report highlights that data quality issues must be addressed before information is written on the blockchain. The same applies to data that triggers a smart contract.
“If nobody establishes and ensures the required data quality standards before the network launches or data is written to a blockchain-supported back end in a centrally controlled service, the shortcoming will be obvious very soon,” the report notes.
Transparency Can Only Be Good
All transactions on the blockchain are transparent, but this isn’t always beneficial for enterprises.
Given this, the report notes that confidentiality is the biggest technical challenge developers need to resolve. Although progress has been made around confidentiality-preserving mechanisms, these remain complex.
“Algorithmic zero-knowledge proofs (ZKPs) — aren’t ready for enterprise prime time,” the report states.
Smart Contracts Will Make Lawyers Redundant
The myth that smart contracts will replace lawyers is addressed as myth number 10. While smart contracts are able to automate certain processes, the report notes that “code is not law.”
“Even if participants in a network wish to abide by the results of smart contract execution, they still need a separate legal agreement that states as much and captures other standard contractual principles,” the report states.
Build It, And They Will Come
As blockchain technology matures, enterprises are thought to be more likely to adopt solutions. This may not be the case, though.
The report notes that between June 2022 and January 2024, many enterprise blockchain initiatives ended in failure.
Fortunately, decision-makers who want to avoid a similar fate are now realizing key lessons.
According to the report, enterprises must consider ecosystem partners’ and customers’ needs and wants. Businesses using blockchain solutions should not expect a commercial model to develop organically.
Finally, enterprises should conduct in-depth research on blockchain software before implementing a solution. The report warns that large businesses must proceed carefully when using blockchain technology.
“A key contributor to the failure of TradeLens was Maersk’s dominant position in the market. Even if everything else had been just so (which it wasn’t), Maersk’s sheer size concerned smaller ecosystem participants, which feared Maersk would learn too much about them, while Maersk’s major competitors weren’t that interested in becoming part of a Maersk-led network, despite IBM’s participation,” the report states.
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