Crypto Fundamentals

You Cannot Separate Blockchain from It’s Underlying Currency

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You Cannot Separate Blockchain from it’s Underlying Currency

There is an annoying trend among main stream media of so-called experts trashing a cryptocurrency but praising it’s underlying technology, blockchain. Here’s one such example: Ex Goldman Sachs President Says Global Cryptocurrency Will Come But it’s not Bitcoin

This shows a complete lack of understanding on how cryptocurrencies function, as outlined in the original bitcoin white paper by anonymous author Satoshi Nakamoto. Blockchain is a fancy word for decentralised distributed ledger, that’s it. The purpose of a decentralised ledger is amongst other things:

  • Trustless
  • Robustness

Trustless Exchange

History has repeatedly shown that central authorities like Governments and banks destroy the value of currencies through reckless money printing and unethical business practices such as fractional reserve banking. From the Chinese to the Romans to the French to the Americans and just about any country on Earth you can think of, society has had no say in the monetary policy rof their currency. We have, in a sense, been forced to trust that central authorities have our best interests at heart.

Bitcoin is the first trustless currency by design. The bitcoin blockchain is validated by computers (nodes) located around the world and not by a central issuing bank as we are used to. This means that if one bad node tries to attack or defraud the system, other nodes will deny it since the bad node has no central authority.

Bitcoin Nodes

Here is an interesting live map of bitcoin nodes around the world.

Robust Decentralised Design

The strength of the system is in decentralised nodes. It’s important to note that if a central bank or government starts putting pressure on bitcoin or somehow manages to physically destroy nodes there will be plenty of other nodes located in other countries to maintain the integrity of the system.

You Cannot Separate Blockchain from it’s Underlying Currency

And now to the meat of this article. For the bitcoin blockchain to function, all transactions need to be validated using computing power. This is not free and nodes who validate these transactions would like to be paid for their service to the network. Again, by design, the network rewards those with Bitcoin who provide this service. Distributed ledgers are not revolutionary by themselves. A large corporation or government has for years had the ability to create a ledger and store it in many locations around the world. The fundamental difference is, who has access to it? With bitcoin the ledger is available to the public.

That’s right, anyone can download and validate transactions on the bitcoin blockchain. We are no longer at the mercy of central authorities we are forced to trust will not defraud us of our hard earned wealth. The Cypriot Financial Crisis is a great example of this abuse of trust.

If for example a bank creates a distributed ledger and stores it say in the US, UK and Germany, but validates the transaction itself with it’s own capital; this is not a cryptocurrency or blockchain based ecosystem. This kind of grandstanding is a tactic currently being used by the elite to falsely show they too are evolving with the times. Nothing could be further from the truth. Central points of control ie. banks, corporations and governments are under serious threat. I’ll say it again, you cannot separate blockchain from it’s underlying currency!

 

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