6 Most Common Blockchain & Crypto Misconceptions, According to ConsenSys

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The management and contributors at ConsenSys, a Brooklyn, New York-based Ethereum-related development studio, have published a blog post in which they’ve addressed several misconceptions about cryptocurrencies and blockchain technology.

According to ConsenSys’ recent post, there are many inaccurate reports about cryptocurrency mining being bad for the environment. As noted by the organization, the data compiled and the research methodology used to estimate the energy consumption of the proof-of-work (PoW)-based Bitcoin network and of other PoW blockchain, was “whittled up by an ethically suspect lone blogger.”

The ConsenSys team also stated the blogger(s) who claim that PoW networks are not eco-friendly have “overlooked fundamental aspects of the issue at hand.” ConsenSys’ blog further notes it should be fairly easy to understand why the arguments against using PoW may be flawed. The team also recommended reading carefully through Robert Sharratt’s article, “The Reports of Bitcoin Environmental Damage are Garbage.”

“Many Still Equate Blockchain With Cryptocurrency & Cryptocurrency With Bitcoin”

Moreover, the Ethereum development studio’s blog mentions that the World Economic Forum (WEF) released a report in 2018 which revealed there are at least 65 different legitimate use cases for blockchain that would actually help the environment. Additionally, it points out the Ethereum network will gradually transition from PoW to proof-of-stake (PoS)-based consensus, which will ensure the problems we may currently be facing will subside.

Another common misconception about the blockchain and crypto space (from the perspective of the mainstream user) is that “many people still equate blockchain with cryptocurrency and cryptocurrency with Bitcoin,” ConsenSys’ blog notes. However, things appear to be changing as the percentage of Bitcoin’s total share of the cryptocurrency market, has dropped from about 85% around 2 years back to currently at approximately 50%.

More Use Cases For Crypto Than That of Bitcoin

As mentioned in ConsenSys’ blog: 

Although the crypto craze of 2017 has clearly diminished, it has laid the foundation for a global ecosystem of tokens that proves that there’s a lot more to cryptocurrency than just Bitcoin.

Notably, there are arguably more use cases for distributed ledger technology (DLT) than just using it to implement a peer-to-peer (P2P) “electronic cash system,” which is what the Bitcoin whitepaper proposed a decade ago. As stated in ConsenSys blog post:

It’s also become evidently clear that Bitcoin and cryptocurrency are just phase one in the long arc of blockchain, and technologies like Ethereum’s programmable smart contracts and decentralized apps are the future.

There have also been reports published recently that have revealed Ethereum’s “global developer base” is “more than twice” that of Bitcoin (BTC).

Howey Test Has Become Outdated

Other misconceptions about cryptocurrencies is that they are all securities and their issuance process should be regulated according to the Howey Test. However, ConsenSys’ team suggests we should formulate new regulations because standards like the Howey Test were developed a long time ago and cryptocurrencies are based on much more advanced technologies.

Prominent crypto lawyer, Jake Chervinsky, also remarked via Twitter that:

Scaling Through Layer 1 And Layer 2 Technology Stacks

In addition to widespread confusion about how cryptoassets should be classified, various crypto community members reportedly believe Ethereum cannot scale. ConsenSys’ team appears to suggest this might not necessarily be the case because “some of the smartest minds in the world are currently working on solving scalability through Layer 1 (e.g. sharding) and Layer 2 (e.g. state channels, plasma) solutions.”

The contributors also claim that: 

Many of [the Ethereum scalability] solutions will launch into reality this year, and ConsenSys founder Joe Lubin stated at his SXSW Interactive keynote this year that the Ethereum network — with layered solutions in play — will be able to handle millions of transactions per second within two years.

Reports Show Cash Is Preferred For Illegal Activities, Not Crypto

While cryptos represent a revolutionary new concept and can potentially become paradigm-changing technologies, many still believe they are only used by criminals to secretly engage in illegal activities. Despite these claims, ConsenSys’ team has revealed that Chainalysis, a leading blockchain research firm, conducted a study which shows  “Bitcoin is no longer the predominant currency for darknet transactions.” Another separate study by the Global Drug Survey (GDS) has determined that “cash is still king when it comes to purchasing drugs or exchanging value for illegal services.” 

Finally, ConsenSys’ detailed blog notes that there are still many people who think that crypto-based tokens “are useless.” Although not all token projects have legitimate use cases, ConsenSys’ blog post states that MakerDAO’s stablecoin-based ecosystem, Brave Browser’s Basic Attention Token (BAT), and decentralized prediction market Augur’s REP are some good examples of viable token-based solutions.

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