A Criticism of "Blockchain, Not Bitcoin"

  • Bitcoin is the original and best application of the blockchain we've had so far because it accomplishes the original goals in a rather exemplary and admirable way.
  • The blockchain technology is promising, but slow and inefficient for most activities it's being promoted for. Not everything requires the same amount of trustlessness and immutability.

The blockchain, as implemented by Satoshi Nakamoto in order to support Bitcoin's purpose of uncensorable economic freedom is brilliant, groundbreaking, and unlike anything we've ever had.

It's a technological marvel that takes ideas from distributed systems, cryptography, game theory, and economic philosophy. When you have something as unique and great, it's only natural that other people and organizations seek to incorporate it in their affairs.

Having all transactions irreversibly stored in a system that is neutral and governed by code sounds like a brilliant idea in theory. You can take anything that needs to be indexed and saved, put it on the blockchain, and make sure that you will always be able to track every operation and transaction that ever takes place.

 If anything, this is all about security, transparency, and convenience. Just like Bitcoin allows anyone to see the ongoing transactions and keep track of the minted coins by checking out every individual wallet, blockchains can store official documents and contracts, organize fairer and more transparent elections, and host other applications.

Nevertheless, Bitcoin is by far the most efficient and stable application of the blockchain for (at least) two clear reasons: first of all, it fulfils the purpose that Satoshi intended and natively serves as a libertarian response to the policies of central banks; secondly, it stood the test of time, evolved and improved in ways that maintained the intended decentralization (and the more people get into the business, the more egalitarian the coin distribution will become).

Therefore, saying that you want to put data on the blockchain without needing to learn from Bitcoin is ignorant and short-sighted.

Most proponents of the "Blockchain, not Bitcoin" philosophy claim that the king of cryptos is old, rugged, inefficient, and too energy-intensive. It was the invention which started it all, but shouldn't be regarded as the only application of such an innovative technology. This line of thinking is half right due to the fact that it encourages innovation and invites enthusiasts to find alternatives: what can you actually do with a blockchain and which industries can benefit from its implementation?

However, in this day and age it's impossible to create a cryptocurrency that's just as decentralized and grass roots-backed as Bitcoin. You can fork the genesis block, create a coin of your own and add all the cool second-generation or third-generation features (smart contracts, advanced systems which allow a quick extension of the scope, et al), but you won't benefit from the enthusiasm and genuine interest that BTC has been receiving since day one. Nowadays the community members have ASICs for most mining algorithms, and are so well-endowed they can attack and obliterate crypto projects within hours. 

And if your goal is to create some kind of blockchain project which doesn't require a native currency and only stores information, you really have to think twice about the sustainability and efficiency of such a system. There are centralized alternatives to making sure that the data isn't deleted or forgotten from your databases, and all of them are less energy-intensive and easier to manage. The greatest quality of a blockchain is immutability, and we must seek to implement it in projects where it makes sense and the costs are justified. Bitcoin is the best of examples, as it's sound money which cannot be censored.

Then there are the innovators who think that Bitcoin is too old and obsolete to be taken into consideration. The people making these claims are usually busy promoting their ICOs which seek to more or less revolutionize the entire industry. It's really cool to bash that one invention which proved its long-time success and viability, but it's unlikely that any blockchain project will ever find a better application. This statement shouldn't discourage innovators, but rather encourage them to identify use cases where decentralization is kept and the entire ethos of Bitcoin remains a top priority.

You can't have blockchain without Bitcoin.

Let's put it this way: if you buy a film camera and want to become a movie director, you must research the works of the classics before you even start rolling - otherwise, you're doomed to an experience of mediocrity from which very few ever succeed. Similarly, anyone getting involved in the blockchain sector should study Bitcoin and identify its virtues and vices. Then you must ask yourself "Will my project really bring an improvement?", and proceed with your plans accordingly.

Most people promoting the blockchain nowadays are doing it just for the sake of cashing on the buzzword. There's a lot of money to be made when you claim to banks, trans-national corporations, and financial institutions that they will be left behind unless they put their transactions on a blockchain. Yet does their activity and economic model truly require a blockchain, or are they better off embracing one of the many existing projects? Why create a coin for a specific industry when you can simply allow Bitcoin be your currency? Mostly because you're greedy and want to make a lot of money from the institutional blockchain FOMO. 

Whether we like it or not, Bitcoin is still the best application of a blockchain, and the one which serves as the living ambassador of the technology. It works beause it's backed by years of mining and therefore benefits from a strong security layer which can't be broken without huge costs. Surpassing BTC's mainchain and causing the system to double spend is a really difficult and costly process that even governments have a hard time figuring out. On the other hand, we often see and hear about small coins (that are somehow worth hundreds of millions) which get hacked. That's a consequence of not learning from Bitcoin's lesson and not being able to attract a grass-roots crowd to increase decentralization.

In conclusion, software developers shouldn't get discouraged in terms of finding practical uses for the blockchain. It's endearing and hopeful to see young coders explore this new brave world, but they should know about the previous advancements and issues if they want to really succeed. Otherwise, we will have to watch projects crumble month after month, while Bitcoin somehow still stands tall as the absolute king. So you still think we don't need it?

Millennials Prefer to Invest in Bitcoin Over Netflix, Microsoft, or Alibaba: Report

Francisco Memoria

A report published by brokerage giant Charles Schwab has shown that millennials, currently aged 25-39, prefer to invest in products tied to bitcoin over equity in some of the world’s largest companies.

The report, published this week, showed that millennials have a higher holding in Grayscale’s Bitcoin Trust (GBTC) fund than in Netflix, Warren Buffet’s Berkshire Hathaway, Microsoft, and Alibaba. The report includes data collected from roughly 142,000 retirement plan participants with balances between $5,000 and $10 million. Data is extracted quarterly on all accounts.

Among the top 10 equity holdings of millennials, GBTC came in fourth place with 1.84%, falling behind only Amazon’s 7.87%, Apple’s 6.18%, Tesla’s 3.22%, and Facebook’s 3.03%.

Invesment preferences per gennerationSource: Charles Schwab

The GBTC is a product launched in 2013 by Grayscale, a Digital Currency Group subsidiary. It was initially only available as a private placement for accredited investors, but in 2015 it received approval to be offered as publicly traded shares. It lets investors gain exposure to BTC without having to manage private keys.

While GBTC is a popular holding among millennials, the report also showed it didn’t make it in the top 10 equity holdings of Gen X (aged 40-54) and baby boomers (aged 55-75), highlighting generational differences in investment preferences. These two generations’ top three holdings were Apple, Amazon, and Warren Buffet’s Berkshire Hathaway.

The average account balance for all participants in Q3 of this year was over $276,000. While baby boomers’ average balance was $394,000, the average balance of Gen X retirement plan holders was $213,000. Millennials’ average balance was $68,750.

Millennials also allocated a larger percentage of their portfolios to exchange-traded funds (ETFs) at 24%, than did Gen X at 20% and baby boomers at 17%.They also hold more cash than other generations’ investors.

Iso far, every attempt to list and trade shares of a Bitcoin ETF has been rejected by the U.S. Securities and Exchange Commission (SEC), with one of the latest rejections hitting the Bitwise Bitcoin ETF Trust.

The SEC’s disapproval order pointed out the disapproval shouldn’t be taken to mean that Bitcoin or blockchain technology have no merit as “an innovation or an investment.” It noted the SEC disapproved the Bitcoin ETF over concerns regarding fraudulent or manipulative acts in the cryptocurrency market.

It’s worth pointing out previous studies have shown millennials have been investing in cryptocurrencies. An eToro survey from earlier this year showed over 70% of millennials were looking to invest in crypto offered by institutions, while research from British legal firm Michelmores LLP showed 20% of wealthy millennials invested in cryptocurrencies like bitcoin.

Featured image via Unsplash.