What is [Blockchain] how does it relate to Bitcoin


You may have heard this other term Blockchain. So let talk about What is a Blockchain? How does it relate to Bitcoin?

Bitcoin is the foundational technology that started it all. Bitcoin is the parent and has spawned many children.

As a successful technology, it has created a number of opportunities.

When people use the term "Blockchain," they are referring to one technology that is part of Bitcoin, perhaps the most visible aspect which is the database that stores transactions; The public ledger is a list of all transactions that have happened.

It is a decentralized, replicated database for those of you who are interested in the technical terms.

That is what a Blockchain is, but people don't use the word Blockchain correctly People use the term Blockchain to mean things that are kind of like Bitcoin or do what Bitcoin does and then some other applications that have nothing to do with money.

The banks say that Blockchains do some of the things we do, so we would like to call it a Blockchain...

To make it appear as if we are doing something innovative."

The consultants go to the banks and say "You can use a Blockchain by doing exactly what you used to do, business-as-usual without being disrupted at all. We are sure that we can make it work for you, if you pay us enough."

As a result, nobody knows what Blockchain means. Blockchain is now an industry.

That is true, I have seen it...

Blockchain in itself is meaningless. Blockchain is what we use to say the technology behind Bitcoin.

That is a bit like saying, "Network is the technology behind Internet."

Of course, if you are in one of the industries being massively disrupted by the internet maybe you want to say, "Hey, we can do Network too!"

We don't want to do the open, public, messy, unprofitable, freedom-bringing internet. We could do Network all day, as long as it is privately controlled and profitable charging by the minute.

If you think that is just fiction, it is exactly what happened with the internet in the '90s.

The phone companies tried to create private internet. An internet without any of the interesting things. It was an internet where you needed a license and registration, an account. Now a lot of companies are trying to do that with the Bitcoin space.

So Blockchain means some interesting things but it also means some not so interesting things. It also means some things that are just attempts by consultants to confuse people and make some money.

I will focus on the interesting things.
How do you tell what a Blockchain is and what a Blockchain isn't?
What are things that are interesting about Bitcoin?
What are things that are interesting about the internet?
Is the internet interesting because it offers "Network"?
Is Bitcoin interesting because it does payments?

To me, the interesting things are certain characteristics.

What is Bitcoin?
Bitcoin is a system of payments that is open, meaning anyone can access it and participate. Anyone could innovate on this system without asking for permission. That is what "open" means.
  • It is borderless. There are no borders on the internet, there are no borders in Bitcoin. The protocol simply does not see distinctions between countries Borders are meaningless.
  • It is neutral. It doesn't care if a participant is male or female, Christian or Muslim, old or young; rich or poor, brown or black or white The protocol doesn't care. It is neutral. It validates transactions, not characteristics of people using it.
  • It is decentralized. There is no central point of control.
  • It is censorship-resistant. You cannot freeze accounts, cancel or reverse other people's transactions.
Those are the things that make Bitcoin interesting. Arguably also what makes the internet interesting. Right, That is why it is powerful.

Other Blockchains that also share some of those characteristics. People took the recipe of Bitcoin and created two or three alternative coins "Altcoins" within the first year. Since then, every year, more and more alternative coins are created.

Today there are more than 2,500 Blockchain based systems that use the basic recipe of Bitcoin, variations of those design principles to create platforms for currency, trade, and various other things.

These are Blockchain which share the interesting characteristics of Bitcoin. They are open, borderless, neutral, censorship-resistant. Of the 2,500 Blockchain-based systems, most do not.

I would say more than 90% are worthless. Of those, more than 90% are probably scams with their primary purpose being to enrich the creators. They see something successful like Bitcoin and they try to recreate it. We have seen the emergence of a very large number of scams that are in essence, Ponzi schemes.

Who is familiar with the term "Ponzi"?
Did you know that is the name of a guy?

Mr. Charles Ponzi inadvertently became famous. Multi-layer marketing systems pyramid schemes...

If you try to sell Bitcoin to someone, I don't. I talk about it as an experimental technology.

You should only invest if you really understand how it works. You should primarily invest in education, learning the technical skills that can turn into an innovative industry, a startup, or career Some long-term opportunity for you as an individual.

It is not a stock investment. If you hear someone tell you that "this is a safe, risk-free investment" or even worse "guaranteed to make you rich quickly," run away as fast as you can. Those characteristics are shared by only one category of investments: 'scams'.
Nothing in life is easy or risk-free.
Beware, especially in Southeast Asia, where you have very large numbers of newly middle-class people entering investment markets for the first time. Scam coins, ponzi schemes and multi-level marketing schemes are extremely popular.

When you hear, "This is like Bitcoin, only it will make you rich," run away. Bitcoin may not make you rich. It can make you poor, quickly. It is a volatile, experimental system that comes with risks.

I am advocating the understanding of this technology which is enormously powerful.

I am not advocating the use of it as a speculative investment, unless you need & know how to use it.

Let's talk about some of the other systems out there. There are probably about a dozen cryptocurrencies.

"Cryptocurrency" is another term we use for these open Blockchains, these public ledgers, systems of trust. Some of them are very explicitly currencies. I will mention just a few that you may have heard of: Dash, Monero, Ethereum, Zcash, and Litecoin are cryptocurrencies based on open public ledgers.

They represent interesting developments alongside Bitcoin. Many others are growing.

I do not recommend that you use those as speculative investments either, but understand what they do and how they are different. To get a better picture of this whole industry as it emerges.

How many are familiar with Ethereum?
I think a very large number of people are familiar. For those of you who have not heard about Ethereum, it started with a paper published in 2013 by then 19-year-old Vitalik Buterin.

The idea behind Ethereum is, if we have this public ledger that allows for trustless computation at scale.

how about instead of using it for money, we use it to run decentralized applications(Dapp) and their results are recorded in a way that is immutable and trustworthy by all participants. Global, secure, decentralized computation.

It has a coin called 'Ether', but what Ether really allows you to do is run 'Smart Contracts,' taking contractual arrangements in commercial or transaction law, encode relationships and obligations in software programs.

Taking a contract written in a human language, encoding it in software and then executing that legal program on a global platform.

Not money, but it is part of this trustless system based on the same Blockchain phenomenon. Blockchains aren't just about money.

People have suggested using them for a number of non-financial applications where trust is a problem. One very common application is registration of assets, the ownership of tangible or non tangible things.

This is a big problem in developing nations an area where Blockchains can have an impact.

The registration of title over land, the ownership of assets like homes.

Using a Secure, Decentralized Blockchain, it is possible that if you record something, it cannot be modified. It can be immutable This trustless system prevents anyone from reversing, overwriting, changing the past. It creates permanence, an immutable record of history.

In a real-estate transaction, that is important. That allows you to independently pass title of a piece of land from person to person, with no one being able to falsify that record and steal your land on paper.

One of the most common forms of land theft is the falsification of paper. You don't have to go into someone's land with guns and take it from them. if you can show up at the local land registry office, bribe someone to change it into your name and send the police into their land with guns to take it from them, on your behalf. That kind of theft can be prevented by a Blockchain.

Other things are the registration and access to assets. For example, you can have the title of a car, a boat, or an aircraft registered on the Blockchain. one of the interesting applications is the ability to record maintenance records... and parts in a Blockchain, so that they cannot be modified If a plane crashes...

One of the first things you want to do is look back at the maintenance records, ask "was the jet engine actually inspected after a thousand hours of operation, like it should be?" How can you tell?

In the traditional forms, we have that information written down on paper Someone could put a date one month before the crash, say it was inspected and falsify the record afterwards. You can also falsify a database entry after the fact Witnesses may be unreliable.

How do you know what actually happened?

A Blockchain could allow you to record that an inspection happened; it cannot be modified... or falsified after the fact, cannot be inserted in the future and pretend to be from the past.

The same mechanism that is used to create trustless systems for money can be used to record the truth... in a permanent immutable record.

These are applications most companies are fascinated by beyond money using the general term Blockchain.

That is the good. Now, let's talk about the bad and the ugly.

Blockchain is also used for a lot of things that do not have any basis in fact and don't actually work.

An idea that has become very fashionable lately is that you can do a Blockchain without bitcoin.

As in Blockchains are good but bitcoin is bad.It is used by criminals, gamblers, degenerates... "It is just money."

One of the fundamental mechanisms behind the Bitcoin Blockchain is 'Proof-of-work' for security.
Bitcoin is a decentralized system without a central point of control by creating a competition... in which those who provide for the network's security are rewarded in bitcoin, the currency.
The bitcoin currency is not just a vehicle for transferring value; it is the basis for the security mechanism, which allows you to have a Blockchain operated and secured by anonymous participants... whose claim to providing security is the submission and risking of energy. In return, they may gain a reward in bitcoin; unless they try to cheat, in which case they lose everything.

That competition, that game theory, is the basis of Bitcoin's security. That system of security allows you to have a ledger managed by everyone, where no one is in charge.

Here is the problem with some many Blockchain projects. if you take away the system of reward, then there is no incentive mechanism for honesty and hence no mechanism for punishment.

If you take away the incentive system to prevent cheating, there is no security.

Blockchains use a currency because their system of security is based on market forces, on game theory.

To use a Blockchain without a currency, you must find another way of incentivising security.

This is where the traditional institutions come in and say, "I know! How about we assign five trusted institutions, and they validate every block on the Blockchain?"
"Make it a private Blockchain, where we control and assign who has access."

"If you trust those five institutions, you can trust the Blockchain." That is business-as usual.

That is a Blockchain being used to perpetuate the system of institutional trust that has failed to scale. Only worse. If you use a Blockchain as a closed system, where trusted is centrally assigned to institutions if one of those few institutions are compromised...

For example, their keys are stolen. you have concentrated power in the system and it is not secure. These are the same companies we read about in the news, when they get hacked.

This is who we're supposed to trust to run these Blockchains?

The whole point of Bitcoin's system of currency is that it incentivises security, that does not depend on any one individual or institution.

If you take the currency away, the security model disappears. You are left with a ledger controlled... by a single entity or a few entities. We have a name for that, it is called a database.

Ths is the real question you should ask:

How do you evaluate the difference between a Blockchain and bullshit?

They both start with a 'B.'
One of them is real the other one isn't.
One of them is used as the basis for a $12 billion global, secure, and decentralized economy; the other thing is what consultants are trying to sell.

How can you tell the difference between real and not real? Ask the following questions:

Is it open? Is it public? Is it borderless?
Is it censorship-resistant? Is it neutral?
Can anyone access and use it without permission?
Can anyone innovate on it without permission?

If the answer to all of those questions is "yes," then it has the values we find so interesting in Bitcoin's Blockchain.

For a small number of other cryptocurrencies and Blockchains, you can say "yes" about those things, But if you can take the entire brochure that describes a Blockchain, search-and-replace Blockchain with... the word 'database,' and it still makes sense, you are not being sold a Blockchain You are being sold a database, probably by a scam artist. That is the difference between Blockchains and bullshit.

Thank You!

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