Travis Patron is a digital money researcher and author of the 2015 Bitcoin
Investor's Report. Here he explains why the blockchain represents a snapshot of
the bitcoin digital economy at any given point in time. Over the course of the
last several months, one of the most consistent debates in the circles of
bitcoin enthusiasts has been whether a blockchain can function
successfully without the "inconvenience" of its underlying cryptocurrency. With
larger, more traditional firms stepping into the space, they hunger to create a
permissioned, proprietary blockchain that will allow them to harness the
power of this new ledger technology. In this post, I will explain not only why
separating the blockchain from bitcoin is a ludicrous endeavor — but why the
blockchain represents a snapshot image of the digital economy at any given point
in time due to the nature of peer-to-peer timestamp verification. If we are to
create an application with the blockchain, perhaps some groundbreaking new
innovation harnessing the invention of the bitcoin payment system, we must first
understand the core solution that the technology brings and how that applies to
our existing business model. Among other things, the solution blockchain
technology brings to the fold of information security is that of solving the
Byzantine Generals' Problem — a problem in computing science that
required relying on trusted third parties to relay information accurately.
Before bitcoin arrived on the scene, this computational problem was thought to
be unsolvable. The value of conjuring up an eloquent solution to this computing
problem cannot be understated. Not only does this innovation open up our society
to the prospect of digital scarcity, but it introduces a business framework
where the operational capacity of any application, which would otherwise have
inherent risks due to centralization, is able to be highly decentralized. With
centralization comes trust, and too much of it is often a liability. With
reliable decentralization, we are opening the frontier of the 21st century on a
promise of open-source, trustless, and non-exclusive commerce. Why are
businesses that require a good deal of trust interested in blockchain
technology? The shortcomings in a situation where companies desire to take
blockchain technology and make it their own, make it closed, make it
proprietary, does not represent an underlying inadequacy of cryptocurrency.
Rather, the shortcoming lies in the rashness of perceiving a transition
technology with a status-quo mindset. If you wish to consolidate and centralize
the operations of a business, why look to bitcoin (a technology
for, as we discussed, removing trust through decentralization) to amplify that
capacity? The companies and individuals who approach bitcoin technology with a
20th century mindset will find no success. They will desperately reach to
harness the innovation of Satoshi Nakamoto, and in doing so, will slowly realize
that the killer application of this technology is to render business models
based on trust obsolete. Bitcoin is an evolution in our concept of the
corporation, and a blueprint for decentralized, trustless, openly accessible
commerce in the 21st century. For the purposes of illustration, let us assume
there exist two users on a blockchain — User A and User B. User A controls 3.0
million bitcoin on the entire network. User B controls 3.6 million. There
also exists 14.4 million unmined bitcoin.
User A has used their private key to
authorize a transaction to User B worth 1.8 million bitcoin. User A sends this
amount to User B’s public key. At this point, the transaction has been
authorized by User A and is in the process of being confirmed by miners of the
network.
After the transaction has been confirmed, the bitcoin network now
reflects the change in hands (change in wallets) of the 1.8 million bitcoin User
A sent User B.
No currency has moved from point A to point B, but an
authorization on behalf of User A to alter the network in a way that increases
User B's control of the blockchain by 1.8 million bitcoin at the expense of User
A. In bitcoin, this ledgered payment system represents the money supply and it
is radically different from any type of money we have previously seen. When an
individual makes a transaction on the bitcoin network, no actual currency has
moved. That is, no file has moved. No commodity or asset has moved. No private
or public key has moved. Rather, the only thing that changes is the percentage
of the blockchain ledger that users A and B claim control over. When a
transaction occurs in the realm of bitcoin, the image of the blockchain is
altered. Nothing ever changes but the composition of the blockchain record.
Money is now an image, rather than something which can be separated from the
system itself. This image of money is constructed, altered, and verified by the
thousands of machines acting as miners across the globe, and it's a composition
on public display for all to see. The miners are the painters of this network
composition. The users, the brush and strokes. “Tangible money, old-fashioned
money … is a phantom from the past, an anachronism. In its place is an entirely
new form of money based not on metal or paper, but on technology, mathematics,
and science. This new ‘megabyte’ money is creating a new and different world
wherever it proceeds. Money now is an image.” —Joel Kurtzman, The Death of Money
Put simply, separating the blockchain from bitcoin is ludicrous because
there is nothing to separate! They are one in the same. Without the blockchain,
you have no bitcoin ecosystem. Without an accompanying cryptocurrency, you have
no measuring tool to determine the ownership of the blockchain. A payment
conducted with bitcoin represents a paradigm shift in our concept of money — one
where there is no division between currency and the system through which it
flows. With the intrinsically valuable property of decentralization (solving of
the Byzantine Generals' Problem), we have a monetary system that comprises a
snapshot of purchasing power at any point of time in its existence. The time-
stamping function of the blockchain allows anyone to go back and publicly
determine the holdings of any address (and perhaps soon any individual ). In the
bitcoin digital economy, money is an image continuously being constructed,
verified, and reattributed by way of cryptographic authorization.
Investor's Report. Here he explains why the blockchain represents a snapshot of
the bitcoin digital economy at any given point in time. Over the course of the
last several months, one of the most consistent debates in the circles of
bitcoin enthusiasts has been whether a blockchain can function
successfully without the "inconvenience" of its underlying cryptocurrency. With
larger, more traditional firms stepping into the space, they hunger to create a
permissioned, proprietary blockchain that will allow them to harness the
power of this new ledger technology. In this post, I will explain not only why
separating the blockchain from bitcoin is a ludicrous endeavor — but why the
blockchain represents a snapshot image of the digital economy at any given point
in time due to the nature of peer-to-peer timestamp verification. If we are to
create an application with the blockchain, perhaps some groundbreaking new
innovation harnessing the invention of the bitcoin payment system, we must first
understand the core solution that the technology brings and how that applies to
our existing business model. Among other things, the solution blockchain
technology brings to the fold of information security is that of solving the
Byzantine Generals' Problem — a problem in computing science that
required relying on trusted third parties to relay information accurately.
Before bitcoin arrived on the scene, this computational problem was thought to
be unsolvable. The value of conjuring up an eloquent solution to this computing
problem cannot be understated. Not only does this innovation open up our society
to the prospect of digital scarcity, but it introduces a business framework
where the operational capacity of any application, which would otherwise have
inherent risks due to centralization, is able to be highly decentralized. With
centralization comes trust, and too much of it is often a liability. With
reliable decentralization, we are opening the frontier of the 21st century on a
promise of open-source, trustless, and non-exclusive commerce. Why are
businesses that require a good deal of trust interested in blockchain
technology? The shortcomings in a situation where companies desire to take
blockchain technology and make it their own, make it closed, make it
proprietary, does not represent an underlying inadequacy of cryptocurrency.
Rather, the shortcoming lies in the rashness of perceiving a transition
technology with a status-quo mindset. If you wish to consolidate and centralize
the operations of a business, why look to bitcoin (a technology
for, as we discussed, removing trust through decentralization) to amplify that
capacity? The companies and individuals who approach bitcoin technology with a
20th century mindset will find no success. They will desperately reach to
harness the innovation of Satoshi Nakamoto, and in doing so, will slowly realize
that the killer application of this technology is to render business models
based on trust obsolete. Bitcoin is an evolution in our concept of the
corporation, and a blueprint for decentralized, trustless, openly accessible
commerce in the 21st century. For the purposes of illustration, let us assume
there exist two users on a blockchain — User A and User B. User A controls 3.0
million bitcoin on the entire network. User B controls 3.6 million. There
also exists 14.4 million unmined bitcoin.
User A has used their private key to
authorize a transaction to User B worth 1.8 million bitcoin. User A sends this
amount to User B’s public key. At this point, the transaction has been
authorized by User A and is in the process of being confirmed by miners of the
network.
After the transaction has been confirmed, the bitcoin network now
reflects the change in hands (change in wallets) of the 1.8 million bitcoin User
A sent User B.
No currency has moved from point A to point B, but an
authorization on behalf of User A to alter the network in a way that increases
User B's control of the blockchain by 1.8 million bitcoin at the expense of User
A. In bitcoin, this ledgered payment system represents the money supply and it
is radically different from any type of money we have previously seen. When an
individual makes a transaction on the bitcoin network, no actual currency has
moved. That is, no file has moved. No commodity or asset has moved. No private
or public key has moved. Rather, the only thing that changes is the percentage
of the blockchain ledger that users A and B claim control over. When a
transaction occurs in the realm of bitcoin, the image of the blockchain is
altered. Nothing ever changes but the composition of the blockchain record.
Money is now an image, rather than something which can be separated from the
system itself. This image of money is constructed, altered, and verified by the
thousands of machines acting as miners across the globe, and it's a composition
on public display for all to see. The miners are the painters of this network
composition. The users, the brush and strokes. “Tangible money, old-fashioned
money … is a phantom from the past, an anachronism. In its place is an entirely
new form of money based not on metal or paper, but on technology, mathematics,
and science. This new ‘megabyte’ money is creating a new and different world
wherever it proceeds. Money now is an image.” —Joel Kurtzman, The Death of Money
Put simply, separating the blockchain from bitcoin is ludicrous because
there is nothing to separate! They are one in the same. Without the blockchain,
you have no bitcoin ecosystem. Without an accompanying cryptocurrency, you have
no measuring tool to determine the ownership of the blockchain. A payment
conducted with bitcoin represents a paradigm shift in our concept of money — one
where there is no division between currency and the system through which it
flows. With the intrinsically valuable property of decentralization (solving of
the Byzantine Generals' Problem), we have a monetary system that comprises a
snapshot of purchasing power at any point of time in its existence. The time-
stamping function of the blockchain allows anyone to go back and publicly
determine the holdings of any address (and perhaps soon any individual ). In the
bitcoin digital economy, money is an image continuously being constructed,
verified, and reattributed by way of cryptographic authorization.
