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Misconceptions about Blockchain & Bitcoin – CoinGeek

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This submit initially appeared on ZeMing M. Gao’s website, and we republished with permission from the writer. Learn the complete piece here.

Blockchain and Bitcoin contain plenty of ideas that aren’t simple to understand. A number of schooling is required on these topics, not just for builders and traders, but additionally the general public, legislators and authorities officers, or we’ll see wasteful and even harmful actions dedicated by all components of the society. In actual fact, we have already got, witnessing the ICOs, DeFi, and NFT frenzies on the one hand, and the lack of awareness and management from the federal government on the opposite.

The next are examples of the widespread misunderstanding:

1. “Bitcoin can not scale as a result of trilemma.”

The real Bitcoin blockchain (BSV) is scalable. It has unbounded scalability. “Bitcoin Trilemma” is a fallacy. For an in depth remark, see “The Bitcoin Trilemma is a fallacy“.

The doctrine of the “Bitcoin trilemma” dictates {that a} triangular constraint exists amongst decentralizationscalability and safety. The doctrine has strongly dominated the mindset of digital foreign money group. Folks have a tendency to not query the validity of the trilemma as a precept basically in any respect. Not solely that, individuals additionally merely settle for every part the BTC Core and different Bitcoin lords say a few sure alternative of design and assume that the selection has been made in keeping with a sound doctrine that’s the Bitcoin trilemma.

However the actual Bitcoin is an financial system primarily based on guidelines designed in keeping with human actuality, not an summary anarchic machine system. It’s subsequently of foremost significance to investigate the Bitcoin community as such.

When the so-called trilemma is utilized to Bitcoin, it loses the actual triangular nature, as a result of Bitcoin’s breakthrough in each expertise and financial system design has modified the character of competing elements.

Total, you will need to understand that Bitcoin isn’t a techno system, however an financial system. With a correct financial design, the actual Bitcoin blockchain (BSV) achieves unbounded scalability with out dropping decentralization or safety, a minimum of to not a level which may outweigh the advantage of scalability. Considering the complete impact of human conduct within the context of collaboration and competitors (copetition), an argument may even be made that the scalable skilled Small-World Community (SWN) structure of Bitcoin SV has efficient decentralization that’s superior to that of a nonscalable community of nonperforming members whose existence is just for the aim of exhibiting an look of decentralization.

The actual Bitcoin blockchain (BSV) is scalable. It has unbounded scalability, all with out enjoying methods on layer-2 which defeat the aim of blockchain by inflicting re-centralization

There isn’t a justification to say that Bitcoin isn’t scalable.

And there’s no justification to nonetheless maintain the “Bitcoin Trilemma” as a sound doctrine.

2. “Bitcoin Blockchain doesn’t have good contract capabilities.”

Bitcoin has good contract from the very starting.

“Good contract” is a deceptive time period (see beneath part 3), but when “good contract” merely refers to machine-readable and machine-executable agreements between two or extra human entities, with out implying machine sovereignty, the actual Bitcoin has all the time had such capabilities primarily based on the unique scripts. Saying that Bitcoin doesn’t have such capabilities is an outright incorrect assertion. It was this intentional false data that ultimately led to the catastrophe of Ethereum and subsequent ICOs, DeFi, and NFT frenzies.

The Bitcoin blockchain has such good contract capabilities from the very starting. However these capabilities have been deliberately eliminated by the BTC Core builders in an effort to promote the “digital gold” narrative. Nonetheless, all these capabilities have been restored in the actual Bitcoin blockchain (BSV) and are being additional developed. See BTC and BSV, what is the real difference?

3. “The code is law,” and “good contract is the way forward for contract.”

The code isn’t regulation. The regulation is regulation. The so-called “smart contract” will solely be a lesser a part of the way forward for contract.

The time period “good contract” is deceptive, as a result of it implies “contracts” which might be fashioned and executed between machines utterly outdoors of human controls, and are so clever that they offer sovereignty to machines. Widespread definitions explicitly name good contracts “self-executing” and “unstoppable.”

That is the kind of misconceptions which have fashioned a foundation for “the code is regulation” mentality, which began from the very early days of Bitcoin when the early members similar to Erik Voorhees, James Donald and later Zooko Wilcox-O’Hearn began to advertise the concept. They believed Bitcoin wanted to be one thing completely different from what Satoshi had invented, and that the system wanted to be anarchic and out of doors all guidelines and management.

That is utterly the other of the aim of Bitcoin.

The creation of a contract is all the time between individuals and by no means machines…, I’ve not created Bitcoin for anarchism. I created it in opposition to anarchism so that folks couldn’t obtain it. – Dr. Craig S. Wright, personal communication

A contract is all the time fashioned between individuals and can be finally ruled by individuals. Folks will all the time have sovereignty with regard to contractual relationships fashioned between them.

Subsequently, creating a sensible contract, or a decentralized autonomous group (DAO) which is a assemble of good contracts, doesn’t imply the underlying human relationship has been reworked into a distinct world that’s indifferent from the actual world ruled by the rule of regulation. Whereas the customers might get pleasure from the advantage of automation led to by good contracts, one ought to all the time assume good contracts are nonetheless topic to the regulation and have to be open to authorized intervention when mandatory. The one factor that will forestall authorized intervention must be price, in case the price exceeds profit, making such intervention not worthwhile.

As well as, the real-world enterprise agreements and relationships can’t be merely all reworked into good contracts within the first place. In the event you rigorously learn an actual contract in right this moment’s enterprise world, you’ll clearly see that solely a small portion of the phrases might be ever made into the so-called good contracts. This limitation isn’t because of limitations within the coding potential, however extra essentially associated to human actuality.

On the bottom, actual contracts are all about contingencies and governance. Aside from funds primarily based on easy circumstances, most contingencies and governance in an actual contract can’t be coded in a strategy to be executed by a machine routinely. Forcefully doing that might trigger a divorce from human actuality and in addition a disregard of human sovereignty.

Alternatively, future authorized contracts is not going to have to stay within the present type during which every part is in prose contained in an inactive doc whose solely hyperlink to the actual world is thru the brains of the legal professionals. As an alternative, the formation, communication, and governance of contracts might be managed beneath a standardized “software program contract” framework which might make the method (and all of the administration that comes together with it) extra environment friendly.

On the similar time, contract phrases, to the extent they might be, shall be made into good contracts, and relationships similar to DAOs primarily based on such good contracts, to the extent that they make sense to and profit the human society, shall be created.

Subsequently, integration of software program contract and good contract is the way forward for contract.

On this respect, it’s the actual Bitcoin blockchain (BSV), not Ethereum, that has initiatives and groups which might be growing extremely subtle programs that combine good contracts with software program contracts to remodel the prevailing companies right into a smart-business paradigm. That is the case regardless of that Ethereum is meant to have been created for good contracts and have made DAOs widespread.

The code isn’t regulation. The regulation is regulation. The so-called “good contract” will solely be a lesser a part of the way forward for contract. However Bitcoin and blockchain will usher in a smart-business paradigm by integrating software program contract and good contract. See “The Smart-Business Paradigm.“

4. “Blockchain isn’t used for a storing something”

That is an outdated assertion. It’s true that in keeping with the unique white paper, Bitcoin blockchain was not used to retailer different information besides the little information that every outlined a satoshi token.

Nonetheless, the identical idea of storing these little information for satoshis might be prolonged, and have already been prolonged.

For instance, the STAS tokens developed utilizing Bitcoin scripts immediately on the unique Bitcoin blockchain are precisely that.

The STAS tokens are literally the unique satoshi tokens marked with a selected characterization (a lot akin to putting a particular autograph on a greenback invoice—quoting John Pitts) with extra particular token logic that defines the operate of the brand new STAS tokens, all immediately on-chain, set in with the native satoshi tokens.

The STAS tokens may also carry an arbitrary quantity of information, along with having new features (for instance, every token may even be a preprogrammed micro enterprise). And the information isn’t one thing that’s merely linked to a token, however is definitely an inherent a part of the brand new token.

STAS tokens are subsequently not tokens created one way or the other to only use among the advantages of the blockchain, however as a substitute are the modified unique satoshi tokens. A STAS token lives and dies with the underlying satoshi token(s).

The purpose is that, the Bitcoin blockchain can certainly retailer information.

This isn’t merely theoretical. A number of functions are being developed. One instance is SLictionary.com which permits every phrase definition to operate as a money flow-generating micro enterprise. NFT’s with actual on-chain digital rights administration are additionally being developed (See The real hope of NFT is in Bitcoin SV).

And there are various others popping out.

5. “Blockchain is a distributed ledger.”

The Bitcoin blockchain has a database that accommodates a ledger. Whether or not you possibly can name it a distributed ledger is determined by the definition.

A standard “distributed ledger” is a database that’s consensually shared and synchronized throughout a number of entities and accessible by a number of events.

The Bitcoin blockchain is a distinct sort of ledger. It’s a “decentralized ledger” recorded on decentralized nodes in keeping with the Bitcoin consensus. Every node shops an impartial ledger. So the nodes usually are not synchronizing the ledger in a traditional sense. However the ledger is assured to be constant throughout the nodes as a result of Bitcoin consensus, so on this sense, it has an identical impact to a distributed ledger.

Bitcoin’s decentralized ledger has many {qualifications} of a distributed ledger but additionally has many benefits. Along with the widespread blockchain benefits by advantage of decentralization, the Bitcoin blockchain has a lot better flexibility in comparison with a conventional distributed ledger.

For instance, whereas the Bitcoin blockchain retains a worldwide ledger with your entire 2.1 quadrillion satoshis, it additionally retains an impartial ledger with regard to every traceable UTXO, and additional retains artificial ledgers with any mixture units of those UTXO’s. Utilizing filtering at an software layer, the Bitcoin blockchain serves as a strong fractal database that maintains Single Supply of Reality (SSoT) whereas being utilized by limitless variety of customers and functions.

Moreover, with extra information connected to UTXO’s and prolonged features and contents constructed with on-chain tokens (as within the above described STAS tokens), the Bitcoin blockchain’s decentralized ledger has dimensions and powers which might be past the attain of the normal distributed ledgers.

With a worldwide decentralized ledger that may be sliced (or filtered) into limitless variety of sub ledgers for particular functions by completely different customers, safe enterprise information programs, triple entry accounting programs, and database with shared parts, and so on. can all be constructed utilizing Bitcoin SV’s prolonged blockchain expertise.

6. “Bitcoin is digital gold.”

Bitcoin as initially invented was meant to be a “peer-to-peer cash system.” The idea of bitcoin being digital gold was later developed by the BTC Core as a result of they didn’t need such a money system, however as a substitute wished it to assist a distinct goal and beliefs.

In a peer-to-peer money system, bitcoins (extra exactly the satoshi tokens) themselves function money, such that (1) they’re a bearer instrument; and (2) they’re counted like money utilizing UTXO (in distinction to an account-based system). To have these features, bitcoin’s simply possessing such functionality alone isn’t sufficient; it have to be truly adopted as a fee methodology to change into “money”. BTC by no means was adopted as such, and doesn’t actually have a bona fide intention to change into such (the Lightning Network L2 solution offering false hopes).

However Bitcoin SV (BSV) continues in keeping with the unique design of “peer-to-peer cash system” and is already seeing vital adoption.

The overall variety of transactions per day is already about 10 instances that of BTC, and a couple of instances that of Ethereum. Extra essential, over 95% of those transactions are NOT buying and selling of the tokens themselves however moderately precise person functions, in distinction to the reverse percentages on different chains. And people numbers will enhance one other 10 instances inside a 12 months primarily based on the present trajectory. The Bitcoin SV infrastructure already has the scalability to deal with a thousand instances the present numbers and might be horizontally scaled to deal with primarily limitless variety of transactions at a value decrease than one hundredths of a cent.

Subsequently, the actual bitcoin focuses on changing into a purposeful peer-to-peer money system that brings utility to everybody, particularly the a part of the world inhabitants that’s deprived within the present banking system. That is in excessive distinction with the “digital gold” narrative that’s meant to make an excessive minority fantastically wealthy.

Nonetheless, aiming to be money doesn’t imply it is not going to ultimately change into one thing like “digital gold” anyway, and likewise, aiming to change into digital gold doesn’t imply it is going to change into one. Quite the opposite, bitcoin’s path to digital gold is a pure one which begins from being an actual commodity first and ultimately turns into cash.

However it have to be an actual commodity that’s traded for its utility and its intrinsic worth, moderately than for a pure speculative object. When it does, it naturally serves as a greater foreign moneyto transmit any present types of cash that the society accepts, and can ultimately change into cash2 itself. By then, whether or not you name it “digital gold” or one thing else isn’t essential as a result of it is going to in actual fact do what the bodily gold does and solely do it higher.

The regulation of economics determines this, not individuals’s agreed-driven wishful considering.

This text was flippantly edited for readability.

***

NOTES:

[1], [2] See Money and currency. It is very important make a distinction between “cash” and “foreign money,” not for the sake of semantics however to have a transparent strategy to conceptualize the entire matter.

Watch: CoinGeek New York presentation, BSV Enterprise Investments: It’s Time to Scale Up

New to Bitcoin? Take a look at CoinGeek’s Bitcoin for Beginners part, the last word useful resource information to be taught extra about Bitcoin—as initially envisioned by Satoshi Nakamoto—and blockchain.

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