The National Institute of Standards and Technology – a non-regulatory agency of the U.S. Department of Commerce – has released an overview of blockchain technology, aimed to clarify the central characteristics of the technology, its limitations and common misconceptions.
The document targets beginners to blockchain, specifically organizations considering adopting the technology, and those trying to move beyond the "hype" surrounding blockchain. The authors remind readers that businesses are often tempted by new technology, but that they should be sure that the blockchain is appropriate for their operations before diving in.
"A company's IT managers need to be able to say, we understand this, and then be able to argue whether or not the company needs to use it based on that clear understanding", said Dylan Yaga, computer scientist and one author of the report.
The report identifies the most common misconceptions about the blockchain as relating to control, identity management and trust, explaining that, although the blockchain is decentralized and no central institution controls it, developers, as the creators and maintainers of the system, do exercise some level of control over the blockchain.
Likewise, blockchain lacks control over users' conduct, and only has the authority to execute "transaction rules and specifications". People, the paper says, are often mistaken in thinking that the blockchain provides a means of attributing real-world identities to those associated with private keys.
The authors also point out that there is a misconception that blockchains are a trustless systems, and say that, in fact, a great deal of trust in the technology, developers and user cooperation is necessary for the blockchain to function.
As for limitations of the system, NIST states that the immense amount of energy and bandwidth required to power the blockchain is problematic. Further, because users must manage their own private keys, losing the key comes with higher risks than losing a username or a password on centralized platforms.