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Author Henry Miller once said"Confusion is a word that we have invented for an order that is not understood". And the confusion seems to be rampant in many articles that are critical about the blockchain, while the real problem is with Bitcoin and cryptocurrencies.
There are key differences between Bitcoin and blockchain. Blockchain is a digitized, distributed and safe ledger which guarantees immutable transactions and resolves the problem of trust when two parts exchange value. Cryptocurrencies like Bitcoin are based on blockchain to conduct transactions. However, the blockchain transcends cryptocurrencies and offers many solutions that could upset many industries with some deep implications.
In a simple metaphorical comparison, blockchain is like a motor that can be used on planes, vehicles, elevators, escalators, washing machines and dryers. Bitcoin, meanwhile, is like the first one Ford Model T& nbsp; car produced in 1908. This fundamental difference helps to understand the polymorphic value of the blockchain and the problems with bitcoin and most of the cryptocurrencies.
An area of confusion on the blockchain is the perceived negative environmental impact, but this is a specific problem of bitcoin and some other cryptocurrencies. It is caused by the limits of the ten-year bitcoin design and the Bitcoin mining process that requires a "proof of work"To validate transactions: Labor proofing is a mathematical algorithm that is essential to validate transactions in the Bitcoin blockchain and consumes tremendous power and computational power close to what Denmark consumes every year. Other cryptocurrencies operate differently. Ether, for example, uses & nbsp;game testing concept, which is energy efficient, while cryptocurrency ripples it does not require mining.
Another misunderstood problem is the slow performance of the blockchain, which is, once again, a Bitcoin problem. The Bitcoin network requires an average of 10 minutes to create a block, and it is valued& nbsp; which can handle only seven transactions per second (TPS). Ethereum works better (20 TPS) and the IBM blockchain (1,000 TPS) and Ripple (1,500 TPS) are even more impressive.
There is also discussion on the inability of financial institutions to adopt blockchain technology, which is a problem with financial institutions, not with technology.
But what is interesting is that there are additional and more important problems in particular regarding Bitcoin.
First of all, Bitcoin has a limited number of "coins" which amounts to 21 million BTC when all coins are extracted within the year 2140. It's probably like that before then The extraction of Bitcoin will not be profitable because of the high energy cost and expensive hardware needed for the extraction. Bitcoin transaction fees it will not be enough to keep the network going. There are many theories in terms of what could happen when mining is interrupted, but the probable scenario might be that Bitcoin will not have the computing power needed to secure transactions, disrupting the network. The question then is: what will happen to the value of Bitcoin?
Secondly, Bitcoin's promise was to circumvent the centralized economic system and allow the exchange of peer-to-peer values using the digital currency. But with the fluctuating price of Bitcoin, it's very difficult to buy a cup of coffee or an online album. It is also impractical given the delay required to complete time sensitive transactions. In fact, since the astronomical rise of Bitcoin in December 2017, the number of Bitcoin transactions has & nbsp;dramatically immersed.
Apparently, Bitcoin may not be useful as a currency for the exchange of value, so what's the use?
It seems that Bitcoin probably ceases to have significant value, defeating the whole point and the philosophy imagined by Satoshi Nakamoto, the alleged inventor of Bitcoin. Its present value seems to be purely psychological, and the uproar seems to be driven by irrational exuberance, greed and speculation. Modern human history has seen many bubbles, including the dot-com bubble, the real estate bubble& nbsp; and also & nbsp;the bubble of the tulip. However, when these bubbles explode, many excellent dot-com companies have survived, most of the houses have regained their value and the tulips still have meaning and value in today's life. But what will happen when the Bitcoin bubble burst? Which utility or residual value will have bitcoins for consumers and businesses? Most likely none. And this is the real problem with Bitcoin and cryptocurrencies.
Bitcoin will probably go down in history as a great technological invention that has made popular blockchain but has failed due to its design limitations. Just as the industrial revolution was fueled by the combustion engine, Nakamoto's most valuable contribution is the blockchain polymorphic engine that will further accelerate innovation in post-IT and will immensely affect our lives.
If blockchain is really like the Ford Model T engine, which used to 20 horsepower engineso it is possible that this technology can evolve in the type of engine used in & nbsp;Koenigsegg (1,341 horses)? If so, the possibilities of blockchain seem endless.
As Henry Miller implies, understanding removes the confusion and understanding the difference between Bitcoin (the car) and blockchain (the engine) will shed light on the real problems and the likely future of Bitcoin, cryptocurrency and blockchain.
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The author Henry Miller once said: "Confusion is a word we have invented for an order that is not understood". And the confusion seems to be rampant in many articles that are critical to the blockchain, while the real problem is with Bitcoin and cryptocurrencies.
There are key differences between Bitcoin and Blockchain. Blockchain is a digitalized, distributed and secure ledger that guarantees immutable transactions and solves the problem of trust when two sides exchange value. Cryptocurrencies like Bitcoin are based on blockchain to conduct transactions. However, the blockchain transcends cryptocurrencies and offers many solutions that could upset many industries with some deep implications.
In a simple metaphorical comparison, blockchain is like a motor that can be used on planes, vehicles, elevators, escalators, washing machines and dryers. Bitcoin, meanwhile, is like the first Ford Model T car produced in 1908. This fundamental difference helps to understand the polymorphic value of the blockchain and the problems with bitcoin and most of the cryptocurrencies.
An area of confusion on the blockchain is the perceived negative environmental impact, but this is a specific problem of bitcoin and some other cryptocurrencies. It is caused by the limitations of the ten-year bitcoin design and the Bitcoin mining process that requires a "job test" to validate the transactions. The job test is a mathematical algorithm essential to validate transactions in the Bitcoin blockchain and consumes an enormous power and computational energy similar to that which Denmark consumes every year. Other cryptocurrencies operate differently. Ether, for example, uses the concept of game testing, which is energy efficient, while the cryptocurrency ripple does not require mining.
Another misunderstood problem is the slow performance of the blockchain, which is, once again, a Bitcoin problem. The Bitcoin network requires an average of 10 minutes to create a block, and it is estimated that it can handle only seven transactions per second (TPS). Ethereum works better (20 TPS) and IBM blockchain (1,000 TPS) and Ripple (1,500 TPS) are even more impressive.
There is also a discussion about the inability of financial institutions to adopt blockchain technology, which is a problem with financial institutions, not with technology.
But what is interesting is that there are additional and more important problems in particular regarding Bitcoin.
First of all, Bitcoin has a limited number of "coins" that amounts to 21 million BTC when all coins are drawn within the year 2140. It is likely that before then, the extraction of Bitcoin will not be profitable to because of the high energy cost and expensive hardware needed for the extraction. Bitcoin transaction fees will not be sufficient to keep the network going. There are many theories in terms of what could happen when mining is interrupted, but the probable scenario might be that Bitcoin will not have the computing power needed to secure transactions, disrupting the network. The question then is: what will happen to the value of Bitcoin?
Secondly, Bitcoin's promise was to circumvent the centralized economic system and allow the exchange of peer-to-peer values using the digital currency. But with the fluctuating price of Bitcoin, it's very difficult to buy a cup of coffee or an online album. It is also impractical given the delay required to complete time sensitive transactions. In fact, since the astronomical rise of Bitcoin in December 2017, the number of Bitcoin transactions has dramatically collapsed.
Apparently, Bitcoin may not be useful as a currency for the exchange of value, so what's the use?
It seems that Bitcoin probably ceases to have significant value, defeating the whole point and the philosophy imagined by Satoshi Nakamoto, the alleged inventor of Bitcoin. Its present value seems to be purely psychological, and the uproar seems to be driven by irrational exuberance, greed and speculation. Modern human history has seen many bubbles, including the dot-com bubble, the housing bubble and even the bubble of tulips. However, when these bubbles explode, many excellent dot-com companies have survived, most of the houses have regained their value and the tulips still have meaning and value in today's life. But what will happen when the Bitcoin bubble burst? Which utility or residual value will have bitcoins for consumers and businesses? Most likely none. And this is the real problem with Bitcoin and cryptocurrencies.
Bitcoin will probably go down in history as a great technological invention that has made popular blockchain but has failed due to its design limitations. Just as the industrial revolution was fueled by the combustion engine, Nakamoto's most valuable contribution is the blockchain polymorphic engine that will further accelerate innovation in post-IT and will immensely affect our lives.
If blockchain is really like the Ford Model T engine, which used a 20 horsepower engine, then is it possible that this technology could evolve into the type of engine used in a Koenigsegg (1,341 horsepower)? If so, the possibilities of blockchain seem endless.
As Henry Miller implies, understanding removes the confusion and understanding the difference between Bitcoin (the car) and blockchain (the engine) will shed light on the real problems and the likely future of Bitcoin, cryptocurrency and blockchain.
