Illia Otychenko

@iotychenko

Bitcoin vs blockchain: why it doesn’t matter who matters

Because of cavalry

What began as a bold idea of ​​creating an alternative to the current monetary system is now beginning to turn into an industry with its main players, basic ideas, rules, jokes, and debates about future development. Followers army gradually grows, mediocre actors and ideas start to take a step back, a community that takes this idea more seriously continues to form.

However, two main fronts have been formed — those who try to improve current reality with blockchain solutions; and those who see cryptocurrency victory and formation of a new reality. Among the latter, it is important to single out bitcoin maximalists, who are one of the most influential representatives of this category.

So, here is the point. Veterans and soldiers eyes are often distracted from creating tools and solutions for their chosen victory and look at their allies to criticize their approach and ideology. There are some soft articles which don’t try to denigrate the other side. There are more aggressive articles that are already trying to prove that their approach is more important and significant. And there are those that are trying to reveal another author’s slyness to convey a personal vision of the situation. I deliberately chose articles with almost identical titles to show how only one statement “who matters” can be presented in different ways.

I am not going to join any of these parties in this article, rather show the senselessness of this dispute. Okay, I’ve stopped these preludes. Let’s start with theses which for some reason many people forget.

Bitcoin is not a technology, it’s an economic idea

Yes, bitcoin has technological bases like blockchain, a large number of limits, embedded algorithms, cryptographic functions, and other things. Further bitcoin improvement is likely to be technological (second-layer solutions emergence, Schnorr signatures introduction), rather than economical (change in coins amount that can be produced, a strong difficulty change for adjusting the average block generation rate). That’s bitcoin network feature and the conditions in which it exists.

But bitcoin itself, as a cryptocurrency, is an economic category. The concept of bitcoin was originally created as an alternative electronic transactions system which doesn’t need centralized moderation. Bases were formed and implemented in accordance with this concept.

As a result, we have a system that should resolve the issue of trust to third parties. So, where we have the greatest dependence on middlemen and the requirement to trust them? In the financial markets and when we talk about government.

If the government pursues a non-efficient monetary policy which turned “money” into a useless paper, then such government loses users support, and they will start looking for other ways to save their funds.

Bitcoin challenges the established system and provides a partial alternative to those who are looking for it — that is why bitcoin is valuable. I don’t want to dive into this, because it’s not a theme of this text and you can find an enormous amount of articles about that. But it was important to say.

Blockchain is not a panacea

I think everyone read articles where “blockchain can change the X industry because it can make Y more… whatever”. How blockchain will change our life, world, transportation, science, medicine, accounting, content making, automobile industry, etc. This is the first thing I got by googling “how blockchain will…”.

Having read such articles, some people sometimes begin to imagine that blockchain is a marvel which is capable to redraw our life. Or they start thinking it’s bullshit that tries to look like magic.

In truth, many of the proposed blockchain solutions can be implemented using a centralized system; it can even be more efficient. There are projects that are a kind of blockchain analogue of an existing centralized solution. “Implementing blockchain only for the blockchain” looks like a silly idea. Nothing revolutionary.

Sometimes blockchain can become a problem and turn into Goldberg machine.

Traffic light on the blockchain

I’m not saying that blockchain is a useless technology. Just don’t need to make some aspirin out of it. At least, blockchain showed its viability by being a base to create bitcoin. That’s one type of applications that can be created thanks to the blockchain. And in this case, it’s necessary technology for bitcoin to work and ensure its concept, not implemented to see what will happen.

Blockchain is suitable not only to produce endless varieties of cryptocurrency. It can also be used to create other applications but only where it is really necessary.

Now let’s take a closer look at the comparisons between blockchain and bitcoin.

Car and gearbox

Blockchain and bitcoin are two different categories, so it makes no sense to compare between them who is more important. For example, can you tell which invention is more important — a car or a gearbox? Personally, I find it difficult to answer.

Bitcoin is not a technology, it’s a combination of technologies that forms a new category — an alternative monetary system. The car is also a combination of technologies that created alternative transport. Blockchain is a gearbox, as it is the technology that helps device (application) work according to a certain principle.

If you get the gearbox out of the car, there is no need to say that the car is a useless bucket of bolts and it won’t go anywhere without the gearbox. Gearbox outside the car also has no value. What is the use of having it on your balcony? Thus, they are valuable when working together, not separately.

But it doesn’t mean that they cannot exist without each other. You can create a car without a gearbox, like an electric car with only one gear. So, we just change the approach. If gearbox principle is not used in a car, this doesn’t mean that it is no longer a car. It is just another type of car.

No one bothers you to create a cryptocurrency without a blockchain. The first thing that comes to mind is a directed acyclic graph (DAG). Some developers try to create “IoT on blockchain”, but blockchain wasn’t designed to be IoT (although I don’t deny if someone succeeds). DAG is already more suitable for creating crypto IoT, but it may need some specific blockchain features.

At the same time, gearbox principle is used not only in cars or other vehicles. You can find it in various machines on the plants. I have never worked in a factory, so I cannot fully describe the importance of the gearbox for these machines and its impact on the quality of manufactured goods. I just think that it plays an important role for manufacturers in different industries, because you cannot go far at only one-speed level, and this greatly limits the capabilities of the machine.

So blockchain can be used not only for ​​cryptocurrencies. Blockchain activists are trying to shove it in the “machines” of some industries with motto: “Look at these possibilities — it increases the workflow transparency, it’s safer, it can reduce the costs of storing and processing information, you no longer need to have 5 “machines” with different speed, you can use one universal “machine”.

Time will tell where this “machines” really come useful, and for what purposes.

Bitcoin kids

Do you remember the gearbox on the balcony? Оne of the main current arguments of its utility is that it can be used and implemented in other, similar cars. I mean, many of today’s blockchains are very similar to bitcoin blockchain, as it is used as a template.

What does bitcoin do well? Decentralized block generation approximately every 10 minutes and conduction of unchanged transactions, ignoring international borders and regulators. And in a sense, that’s all it does.

Someone says that it’s not enough to be called a revolutionary technology or idea. This is quite enough for others because almost nothing can provide the same thing.

Here we need a hammer and nailing example. Bitcoin will be a standard hammer and hammering nails into the wall — conduction of unchanged transactions.

Someone can say that bitcoin is too simple, has “poor” functionality, or irregularly shaped. And what do they do? They produce different hammers for all tastes: someone changes “head” or handle size (hello, Bitcoin… with the second word); someone makes specialized hammers for certain jobs; someone attaches an ax or a nail puller to the hammer on the other side, trying to make it more functional; someone just adds rhinestones, because hammer seems to him a little bit sullen. And everyone says that his hammer is the best and most progressive.

What you can see when you on Coinmarketcap

Sometimes it’s become ridiculous, especially when nails are hammered with a shovel (hello, Ether) and shovel knights claimed that their tool still can do many other things.

Um, guys, no one bothers you to hammer nails with a shovel, but it wasn’t created for that.

It can really be useful when you need to build something new, but, please, don’t declare that standard hammer is flawed because of its simplicity. Let every tool do what it was created for. I think everyone will choose what is more convenient and important to him.

Some developers just look at bitcoin as a unique principle, not a solution. And I think that it’s some kind of dilemma.

Bitcoin is a specific idea and a specific way to achieve it. And some developers just make their “own bitcoin” instead of creating own ideas and own ways. It’s great when you have a choice, but do we really need so many “own bitcoin” solutions?

As for me, an approach “take the best from bitcoin” limits the view to cryptocurrency and blockchain technology itself. Although maybe I’m wrong.

Why bitcoin is a Model T

But if crypto community is more or less determined with the basic concept of how the cryptocurrency should look like, then it can be said that bitcoin is a kind of Ford Model T. Although it can’t be called the first car, it was one which first solved the main problem that prevented the initial mass adoption — price.

I came to free horses!

The idea of ​​cryptocurrency existed in the 90s. There were such attempts as Bit Gold, B-Money, and Hashcash, but they all had one problem — centralization. Bitcoin solved this problem and received initial support among people who find it important.

Has anyone seen a Model T driving around the streets? I think not many of us have seen at least one of these machines live. I know what you thinking but that’s not a statement that bitcoin will be irrelevant with time.

Those concepts and principles that we lay in modern cars are the evolution of Model T idea and design. Bitcoin, as we know it, can step aside. Many basics may be modified or replaced, future bitcoin may differ significantly from the current bitcoin. It may lose some modern flaws but it may get new ones, which we don’t think about so far. Even today’s bitcoin is not the same as it was 10 years ago.

We don’t know what evolution of bitcoin will be. Maybe the base will remain almost unchanged, and its second- and third-layer networks will already be subject to change and development. Or, it will remain the same ancient Model T which will be collected and used as a store of value.

That is why it is not necessary to predict bitcoin oblivion or success. It’s easy to criticize bitcoin and blockchain, and if you are one of these persons who like to write bitcoin obituaries, here is a guide on how to do it right. I hope it will help you and simplify your work.

The main thing is that the criticism of bitcoin and its idea should not be reduced to a simple thought: “This brougham has no horse”.

Yay!

How can we be sure that it will take us in the right direction, and how will we control it? Why invent a complicated and incomprehensible mechanism to move if we can just ride a horse? What makes you think that we will drive this if we ride horses for thousands of years? And what if it breaks? These are all important questions.

Perhaps someone will be able to partially respond to them if not just look under the hood, but try to understand how “it” works and what it gives in the end.

Yes, the horse is an excellent and convenient centralized solution but it doesn’t mean that we will exploit it forever.

A bit about prospects

Since the blockchain is a technology, it is easier for it to take over the world. It can be implemented, and then you would understand what results it gives. You can constantly try and recheck until you find the best option, or you can throw it out as unnecessary. No need to create a new reality and change people’s perception drastically, you can simply modify something that already exists. Blockchain seems more real and promising because of this.

That’s more complicated with ideas such as bitcoin. If technology is objective, then the idea is intersubjective. Idea’s influence and credibility grow with the number of supporters who see a sense in it. Money, nation, religion, human rights — these are all intersubjective ideas and myths, and systems that were built around them are much more powerful than any technology.

Ideas are always stronger than technologies but not always more promising. The idea can be realized by various technologies, we just choose the approach. It reminds Nassim Taleb’s phrase:

“Bitcoin will go through hick-ups (hiccups). It may fail; but then it will be easily reinvented as we now know how it works”.

Yes, bitcoin can become a kind of insurance policy for now but I don’t think that someone would like to get into a situation where a person will be forced to use bitcoin, as in Venezuela. It’s much better when a person wants to use it. And you need to strive for this, dear bitcoin anarchists.

Although the blockchain and bitcoin have one starting point, they have different paths of development. Please, don’t argue with allies who are better and more important. It is better to direct this energy to the development of solutions that will allow everyone to win not in words but in deeds.

Peace for everyone and don’t hurt horses. Don’t blame them for the way cavalry uses them.

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