Bitcoin: how it supposed to be, and what it turned out to be

in #bitcoin6 years ago

I believe Satoshi Nakamoto had a Vision. Internet is great for transferring data, but it could never before be used for transferring things that could not be copied. Internet desperately needed an update which would extended it's distributed nature with possibility to transfer value instead of data. Such system would bring network to the new level, allowing viewing value transactions as "first class citizens", as easy and practical as data transactions.

Arrival of bitcoin was inevitable in this respect. Distributed design of internet could not be integrated properly with clunky traditional banking systems.

Photo from Pixabay

Being a cryptography expert, or IT security expert in general, teaches your brain to think certain way. Trust in anything besides rigorously proven mathematical theories is forbidden. Banking systems are unbelievably vulnerable from such point of view. No matter how many regulations and countermeasures are introduced, in the end trust in any financial institution relies on trust in individuals: people working for bank itself, corporations and governments. For a long time this seemed to be the only possible way of managing value, however centralized and insecure it might be.

I can only imagine what Satoshi thought, when he understood that it is possible to create value transfer system without unproven trust. I'm sure it was obvious to him, that his creation would be a gamechanger for the internet as a whole. And it wasn't hard to predict that people who monopolized value management today will not be happy about his invention. Hence the need for anonymity, which was provided by internet.

But I don't think Satoshi ever imagined Bitcoin breaking out of its digital boundaries and spilling out into the real world. Something that was supposed to be a technical tool, a prototype, is now an instrument in the hands of traders and permanent topic on every news station.

Bitcoin became a victim of its own success. It is indirectly controlled by the very people whom it was created to oppose. Governments of large countries, corporations and banks can, in limited manner, control Bitcoin price on a market with their decisions and regulations. They control and regulate "edge nodes" - points of exchange of fiat to crypto. It's a surprisingly smart way to minimize a threat of Bitcoin on established financial institutions.

What would happen if governments were strictly opposed to cryptocurrency? First of all, bitcoin enthusiasts would be forced to support independent "edge nodes", like localbitcoin for example. This approach of converting fiat to crypto fits much better into bitcoin's distributed philosophy, and financial institutions would not be able to control it in any meaningful way.

Secondly, cryptocurrency market capitalization would be much lower. Only technical enthusiasts and people who support the idea behind bitcoin would invest in it. Traditional investors would have no trust in essentially illegal technology. Even if one of them decided to invest, for example to gain profits from manipulating the market, it would be very hard to convert large sums of fiat into crypto because of the previous point.

Thirdly, with lower interest from the general community, low market cap and no simple way for fiat into crypto, would mean lower volatility. No need to explain how important that would be for enabling Bitcoin to be used in practice for value transfer.

And point number four: having smaller userbase of mostly tech enthusiasts would mean there is very small potential for fraud. Of course it would still be present, just not at the crazy scale it is present now.

Bitcoin has lost it's fight for independence by being too successful. Many individuals have profited from that, but I'm not sure Internet and community did.

What do you think?


Don't forget that bitcoin is still an evolving technology, and it's still on its way to become something. we as a society need to figure out what that is going to be

Yes, it's very young. Just like with internet, it might be unrecognisable in 10 years or so.

The Blockchain technology behind Bitcoin and all the other Cryptocurrencies has enormous potential in regards to many different markets and not just the monetary amount that is associated with it. I think that we continue to see difficulty with the masses actually accepting Crypto as a currency/asset, but little by little business of all sizes are beginning to adopt Crypto as payment and payout. Additionally, Blockchain most likely will be the technology that enormous companies (perhaps Amazon) may utilize in order to speed up the transmitting and sharing of data and information.

Certainly a very interesting theory. And as you said it probably lost a bit of independence, but overall I think that it also forced central banks to adapt a little. And with the future development in blochcain will traditional financial institutions be forced to adapt even further. Just look how much easier can someone who wants to start a business raise money with ICOs. In the end I think that with broader user base positive change will happen for everyone if only we continue to with future developments and do not become frustrated with setbacks or satisfied with small change.
Please reply if anyone would like to share their thoughts on my comment.
Great article you got my upvote and I will follow you in the future.

I agree it's fulfilling the role of creating competition for banking system. We'll see how much regulation is going to appear in ICO space. Hopefully ICO's will become safer through technical means i.e. there should appear ICO platforms based on smart contracts that will make it harder for con man to operate.

I'm disappointed a bit about how segmented blockchain technology is. We have hundreds of coins implementing one small feature each, instead of having few state-of-the art technologies. Hopefully it will be resolved naturally in evolution-like process.

Well, isn't involvment of bigger companies in blockchain technology an improvment? I am laughing at CNBC or other news peeps that are saying "blockchain is good technology, but stay away from Bitcoin", like whaaaat? Bitcoin is first thing built on that technology guys...

For sure companies, some persons can control BTC but... still transactions there are anonymous, they do not know how much money you own. And what they are trying to do is to force ppl to make payments with wire transfers - why? They can exactly know how much money You own, that is somehow frustrating for a lot of people.

As I think FIAT and crypto will co-exist, and with future, where we will see bigger adoption of cryptos we also will se lower volatility of them. Bitcoin is first but not the last, inventions will come and I am sure will make a lot of lives simplier and I hope whole world better place. :)

They know exactly how much money you own if they control your fiat-to-btc exchange.

i think in all of this if it eventually brings us to a place of conversation around GREED, TRUST and RESPECT then we will have moved the human condition on a little. if not then we just have another way of playing the game of fucking things up -- so let's see hey? let's see if we can DELEGATE to each other rather then just be life CONSUMERS ;)

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