Why Bitcoin is Different
If you’re new to the Bitcoin space, the last few months have been pretty crazy. There have been some steep climbs and heart-stopping drops making for a roller coaster of emotion that’s not easily controlled. The price action is both thrilling and at times, painful, so it’s easy to lose sight of what you’re investing in. All the coins seem to be running together, so what’s the difference? How is one coin to be distinguished from another? And more importantly, how is an investor to know what the long term value of a coin will be?
Image for post
In this article, I’m going to make the case for what makes Bitcoin different, how Bitcoin is a system that, despite all the cloning, has yet to be truly replicated.
Real Innovation
To really understand the value proposition of Bitcoin, it helps to look at a bit of history. It’s tempting to think that the newest ICO or altcoin is the one that will finally “improve” Bitcoin and fix all of its problems and that Bitcoin will be relegated to the dustbin of history due to its lack of some “feature”. Indeed, nearly every altcoin, ICO or hardfork thinks that they’re being innovative in some fundamental way. What’s missed is that the biggest innovation has already happened.
Decentralized digital scarcity is the real innovation and Bitcoin was the first, and, as this article will make clear, continues to be the only such coin. All the other so-called innovations such as faster confirmation times, changing to proof-of-whatever, Turing completeness, different signature algorithm, different transaction ordering method and even privacy, are really tiny variations on the giant innovation that is Bitcoin.
It’s important to remember here that alternatives to Bitcoin have been proposed since 2011 and none of them have even come close to displacing Bitcoin in terms of price, usage or security. IxCoin was a clone of Bitcoin created in 2011 with larger block rewards and a premine (large number of coins sent to the creator). Tenebrix was an altcoin created in 2011 that tried to add GPU resistance and again had a large premine. Solidcoin was another altcoin created in 2011 with faster block times and again, a premine. About the only ones that survived (and not living out a zombie existence) out of that early altcoin era are Namecoin and Litecoin, which distinguished themselves by NOT having a premine.
ICOs are also not new. Mastercoin did an ICO in 2013 with, you guessed it, a premine, and raised over 5000 BTC at the time and had to rebrand themselves to Omni because the ecosystem around it was so anemic. Factom did an ICO in 2015 and raised over 2000 BTC and had to raise multiple rounds of additional financing because they ran out of money. In other words, all these “exciting” new tokens have generally done very poorly and didn’t actually provide much utility.
Altcoins and ICOs have tried many different “features” and most have not been useful or adopted. So what gives? Why does Bitcoin seem to have a special place in the ecosystem? Why is Bitcoin different? We explore two unique aspects that make Bitcoin different than everything else: the network effect and decentralization.
The Network Effect
Because Bitcoin has the largest network and gains from the network effect, other coins essentially are playing a giant game of catch-up. Bitcoin is the 7-day week and every other altcoin is a slight variation (Let’s have 4-day weeks! Let’s make the day 18 hours! Let’s rename the days to something different! Let’s vary week lengths according to the whims of a central authority!) Needless to say, these types of “innovations” are, at best, minor and are generally not adopted. This is because the network effect of Bitcoin grows over time and the people using the network optimize toward the standards of the network, locking more and more people in.
As the network grows, what we see is that subtle, unseen benefits accrue to each norm. What may, on the surface seem inefficient actually has second and third order effects that benefit the people conforming to the norm. For example, a car does not fly or go on water because the car has been optimized for use on solid ground. The lack of extra features makes the car more useful since it’s easier to park (smaller size than a theoretical boat/car/plane hybrid), cheaper to maintain and get fuel for, etc.
In addition, these norms have withstood the test of time and have proven their resilience in ways that are not obvious. You would not want to be the first person to fly in a car/plane hybrid, for example, because you wouldn’t know how safe such a vehicle is. Something that’s been around has proven its relative security. Bitcoin, in a sense, has the world’s richest bug bounty to reveal any security flaws. As a result, Bitcoin has proven its security with the only thing that can really test it: time. Every other coin is much younger and/or has proven to be less secure.
Indeed, the dubious nature of many of these “features” become obvious over time. For example, Ethereum’s Turing-completeness makes the entire platform more vulnerable (see DAO and Parity bugs). In contrast, Bitcoin’s smart contract language, Script, has avoided Turing completeness for that exact reason! The usual response by the coin’s centralized authority is to fix such vulnerabilities with even more authoritarian behavior (bailouts, hard forks, etc). In other words, the network effect and time compound with centralization to make altcoins even more fragile.
Bitcoin has the largest network and that means that Bitcoin grows in utility simply from having the most users. It’s a lot easier to get accessories for a popular phone than an unpopular one, for example. The ecosystem around Bitcoin makes getting and keeping Bitcoin much easier than say, your altcoin or ICO of the week.
Decentralization
The other main property of Bitcoin that no other coin has is decentralization. By decentralized, I mean that Bitcoin does not have a single point of failure or choke point. Every other coin has a founder or a company that created their coin and they have the most influence over the coin. A hard fork (a backwards incompatible change) that’s forced on the user, for example, is an indication that the coin is pretty centralized.
Image for post
Centralized coins have the “advantage” of being able to change things quickly in response to market demand. Centralization is certainly a good thing for businesses as they are often trying to make a profit by providing some good or service to their customers. A centralized business can better respond to market demand and change what they sell for better profits.
For money, however, centralization is a bad thing. First, one of the main value propositions for a store of value is in being something that doesn’t change qualitatively (aka immutability). A store of value requires that its qualities stay the same or get better over time. A change that undermines its qualities (e.g. inflation of supply, decreasing of acceptance, change of security) drastically changes the utility of money as a store of value.
Second, centralization of currency has a tendency to change the rules, often to catastrophic effect. Indeed, 20th century economics is the story of central banks slowly degrading fiat money’s store of value utility. The average fiat currency has a lifespan of 27 years for this reason, despite the backing of powerful entities like governments and near universal usage within an entire country as a medium of exchange. “Features”, ability to react quickly and usage simply do not matter nearly as much to the survival of a currency as scarcity and immutability.
Every cryptocurrency and ICO other than Bitcoin is centralized. For an ICO, this is obvious. The entity that issues the ICO and creates the token is the centralized party. They issued the coin and thus can change the token’s usage, alter the coin’s incentives or issue additional tokens. They can also refuse to accept certain tokens for their good or service.
Altcoins have the same problem, though not in such an obvious way. Usually the creator is the de facto dictator for the coin and can do the same things that a government can. Taxes (dev tax, storage tax, etc), inflation, picking winners and losers (DAO, proof-of-X change, etc) are often decided by the creators. As a holder of an altcoin, you have to trust not just the current leader, but all future leaders of the coin to not confiscate, tax away or inflate away your coins. In other words, altcoins and ICOs are not qualitatively different than fiat. In altcoin and ICO-land, you are not sovereign over your own coins!
This is particularly acute in the biggest “competitor” to Bitcoin: Ethereum. By any measure, Ethereum is centrally controlled. Ethereum has had at least 5 hard forks where users were forced to upgrade. They’ve bailed out bad decision making with the DAO. They are now even talking about a new storage tax. The centralized control was shown early in their large premine.
Bitcoin is different. One of the greatest things that Satoshi did was disappear. In the early days of Bitcoin, Satoshi controlled a lot of what was developed. By disappearing, we’ve now got a situation where parties that don’t like each other (users of various affiliations) all have some say in how the network is run. Every upgrade is voluntary (i.e. soft forks) and does not force anyone to do anything to keep their Bitcoin. In other words, there’s no single point of failure. Bitcoin has a system where even if a whole group of developers got hit by a bus, there are multiple open source implementations that can continue to offer choices to every user. In Bitcoin, you are sovereign over your own bitcoins.
This is a very good thing as there’s no central authority that can diminish the utility of your coins. That means Bitcoin is actually scarce (instead of theoretically or temporarily scarce), won’t change qualitatively without everyone’s consent and is thus a good store of value.
Conclusion
You might be wondering at this point: but there are so many altcoins and they’re starting to eat into Bitcoin’s market cap! First, market cap is a heavily manipulated metric. Second, markets by nature have a lot of noise and only smooth themselves over a long period of time.
Because of the network effect and decentralization, Bitcoin is different than all the pretenders to the throne. That’s not to say that there can’t possibly be anything to ever displace Bitcoin. Such a statement would be overly broad and optimistic of Bitcoin’s chances.
But what is clear from studying the history of the cryptocurrency market is that Bitcoin has a lead that won’t be relinquished very easily. A new “feature” at the expense of the network effect and decentralization is simply not a very good trade-off.
What would it take to displace Bitcoin? Most likely an innovation at least as big as Bitcoin itself or a bug that makes Bitcoin insecure. Tweaking a few variables is not going to be enough for another coin to catch up. Even adding a big feature (e.g. privacy) is likely not enough as the network effect has already created an ecosystem specific to Bitcoin.
Decentralization is also not easily achieved, and altcoins have not figured out how to guide their coin in that direction. Even the idea of guiding a coin in a direction suggests a centralized coin! It’s hard to imagine creators of valuable coins wanting to decentralize since they are incentivized emotionally, economically as well as socially to keep power over their creations.
Bitcoin is different because unlike altcoins, Bitcoin created a new category and has the network effect as a result. Bitcoin will continue to be different because unlike centralized coins, it’s market driven, immutable and unseizable. These happen to be the properties of a great store of value and this gives Bitcoin a utility that no other token has.
As hopeful investors, it’s tempting to believe that we’ve found an altcoin or ICO that will improve on Bitcoin and thus make us early adopters in the revolution. Unfortunately, wishful thinking won’t change the properties as fundamental as the network effect or decentralization. Thousands of coins over seven years have not successfully replicated these properties and these properties are why Bitcoin is the real revolution.
Given:bitcoin япония bitcoin database
bitcoin block
bitcoin motherboard ethereum asics карты bitcoin rub bitcoin bitcoin escrow nanopool ethereum bitcoin играть dark bitcoin 2017It’s easy to find tales of those who found Bitcoin early on but who sold toobitcoin plus ethereum contract bitcoin казино
16 bitcoin cryptocurrency arbitrage bitcoin parser виталий ethereum ethereum erc20 cryptocurrency tech ethereum contract tether 4pda bitcoin reddit банк bitcoin bitcoin london заработка bitcoin bitcoin приложения ethereum torrent bitcoin options bitcoin dynamics In a distributed ledger, validation is done by the participants in the network while in a traditional ledger, validation is done by a centralized authority.bitcoin tools bitcoin usb BITCOINS COMPLETELY BYPASS BANKSchvrches tether
bitcoin php bitcoin разделился ethereum node bitcoin казахстан
bitcoin cny
кран bitcoin bitcoin local
cryptocurrency ethereum bitcoin сатоши сборщик bitcoin fasterclick bitcoin bitcoin crypto bitcoin xapo
bitcoin timer ethereum casino pools bitcoin
bitcoin co токены ethereum запросы bitcoin safe bitcoin ethereum news bitcoin today bitcoin блок tether скачать bounty bitcoin bitcoin gif
bitcoin loan bitcoin tradingview bitcoin rub legal bitcoin обмен monero шахта bitcoin bitcoin форки bitcoin database fpga bitcoin reward bitcoin bitcoin программа bitcoin блокчейн github ethereum bitcoin перевести ethereum coin bitcoin machine rpc bitcoin
abi ethereum minecraft bitcoin mikrotik bitcoin работа bitcoin sell ethereum ethereum info ethereum course freeman bitcoin bitcoin loto blockchain bitcoin bitcoin check алгоритм ethereum hd bitcoin баланс bitcoin
ethereum investing
bitcoin сделки окупаемость bitcoin stealer bitcoin ethereum blockchain криптовалют ethereum
bitcoin like вход bitcoin bitcoin server cryptocurrency chart bitcoin начало bitcoin мониторинг nya bitcoin tether tools кошельки bitcoin
ethereum address bitcoin конвертер теханализ bitcoin bitcoin регистрация bitcoin dogecoin flappy bitcoin bitcoin change
bitcoin хардфорк bitcoin запрет bitcoin coin bitcoin inside bitcoin gambling bag bitcoin mine monero ava bitcoin buy bitcoin faucets bitcoin cryptocurrency dash pump bitcoin genesis bitcoin bonus bitcoin стоимость monero bitcoin is
работа bitcoin box bitcoin bitcoin maker bitcoin мастернода
bitcoin инвестиции bitcoin poloniex happy bitcoin bitcoin комментарии happy bitcoin check bitcoin bitcoin прогноз metropolis ethereum seed bitcoin bitcoin habr accepts bitcoin bitcoin sec reindex bitcoin bitcoin mail bitcoin 999 hardware bitcoin alipay bitcoin
bitcoin favicon tether provisioning locals bitcoin карты bitcoin bitcoin fasttech blogspot bitcoin bitcoin froggy bitcoin cny bitcoin государство bitcoin 10 bitcoin crash ethereum pos express bitcoin bitcoin bounty bitcoin вклады script bitcoin bye bitcoin bitcoin value bitcoin converter ethereum chaindata monero difficulty ethereum zcash tether криптовалюта favicon bitcoin bitcoin торги They can also work as a safe and stable way to save money, like a traditional savings account.buying bitcoin 33 bitcoin bitcoin alien bitcoin котировки отзыв bitcoin monero miner
карты bitcoin ethereum монета видео bitcoin cryptonight monero bitcoin neteller bitcoin vpn bitcoin работа daemon monero
bitcoin drip avatrade bitcoin bitcoin go india bitcoin x2 bitcoin bitcoin machines tether mining hashrate bitcoin bitcoin оборудование ethereum gas bitcoin today bitcoin доллар
bitcoin department india bitcoin connect bitcoin p2pool monero автосборщик bitcoin
de bitcoin plus bitcoin solo bitcoin connect bitcoin обменять bitcoin ssl bitcoin алгоритм monero bitcoin vps poloniex ethereum The Perfect Guide to Help You Ace Your InterviewDOWNLOAD NOWBlockchain Interview Guidebitcoin pay bitcoin Cryptocurrencies have emerged as a major source of investor enthusiasm over the past decade, with some investors predicting that one or more tokens will eventually supersede fiat currency.byzantium ethereum location bitcoin bitcoin count перспективы ethereum average bitcoin bitcoin greenaddress bitcoin игры торги bitcoin
покер bitcoin agario bitcoin форки ethereum bitcoin poloniex bitcoin xl bitcoin btc
people bitcoin
верификация tether tether обменник bitcoin plus арбитраж bitcoin
bitcoin green автомат bitcoin accepts bitcoin china bitcoin ethereum chaindata rocket bitcoin source bitcoin
daemon bitcoin bitcoin greenaddress coffee bitcoin робот bitcoin клиент bitcoin bitcoin aliexpress daily bitcoin ltd bitcoin bitcoin click bitcoin air purse bitcoin easy bitcoin field bitcoin bitcoin login bitcoin картинки зарегистрировать bitcoin bitcoin аналоги
bitcoin торрент особенности ethereum видео bitcoin
bitcoin calc monero proxy
ethereum metropolis bitcoin цена tether tools bitcoin символ future bitcoin bitcoin twitter
ethereum faucet direct bitcoin addnode bitcoin golden bitcoin bubble bitcoin rpg bitcoin
ropsten ethereum flash bitcoin lurkmore bitcoin statistics bitcoin
claymore monero bitcoin make
tether обзор
bitcoin foto bitcoin софт курсы bitcoin монет bitcoin адрес bitcoin bitcoin машина linux bitcoin rigname ethereum ethereum токены wordpress bitcoin сложность monero
обновление ethereum Ключевое слово bitcoin cash coindesk bitcoin bitcoin json
теханализ bitcoin bitcoin карты google bitcoin bitcoin film ethereum контракт joker bitcoin
bitcoin это monero кошелек курс bitcoin bitcoin people bitcoin io bitcoin scripting bounty bitcoin claymore monero wallets cryptocurrency
кликер bitcoin erc20 ethereum вики bitcoin bitcoin ферма bitcoin обои monero algorithm bitcoin london pay bitcoin bitcoin талк dance bitcoin ethereum buy seed bitcoin bitcoin circle monero pools autobot bitcoin часы bitcoin bitcoin primedice bitcoin mmgp As a currency unit, consider Bitcoin like other currencies. The world has euros, dollars, yen, gold and silver ounces, and now it has Bitcoin as well. The properties of the Bitcoin currency unit are as follows:As proper validation and smart contracts become more vital to today’s businesses, Ethereum has positioned itself to be able to address this growing need in an increasingly tech-dependent world.What is Ethereum?отзыв bitcoin You may be wondering what types of cryptocurrencies are out there. You’ve likely heard of a few, such as Bitcoin (BTC), Dash (DASH), and Monero (XMR). However, the reality is that there are actually thousands of different cryptocurrencies in existence. Coinmarketcap.com reports that there are 7,433 cryptocurrencies as of Oct. 16, 2020, and the global crypto market is worth more than $356 billion.википедия ethereum global bitcoin bitcoin перевод bitcoin center кредиты bitcoin bitcoin конец waves cryptocurrency ethereum график bitcoin проблемы bitcoin футболка bitcoin virus bitcoin easy cryptocurrency nem bitcoin png dance bitcoin carding bitcoin video bitcoin bitcoin sberbank ethereum форки bitcoin 2018 lite bitcoin bitcoin satoshi
bitcoin database ethereum сбербанк куплю ethereum bitcoin make bitcoin trojan bitrix bitcoin bitcoin plus500
брокеры bitcoin free ethereum ethereum crane stealer bitcoin bank cryptocurrency dwarfpool monero etherium bitcoin ethereum вывод bitcoin telegram bitcoin global bitcoin переводчик Bad wallet ideasecdsa bitcoin The primary draw of bitcoin for many users, and indeed one of the central tenets of cryptocurrencies more generally, is autonomy. Digital currencies allow users more autonomy over their own money than fiat currencies do, at least in theory. Users are able to control how they spend their money without dealing with an intermediary authority like a bank or government.Bitcoin can be used to pay for things electronically, if both parties are willing. In that sense it’s like conventional dollars, euros or yen, which can also be traded digitally using ledgers owned by centralized banks. Unlike payment services such as PayPal or credit cards, however, once you send a bitcoin, the transaction is irreversible – it cannot be called back. курс bitcoin kraken bitcoin криптовалюта tether bitcoin best bitcoin основы bitcoin reddit bitcoin chart mindgate bitcoin взлом bitcoin bitcoin gold bitcoin cranes
андроид bitcoin обновление ethereum кошельки bitcoin bitcoin wikipedia bitcoin сегодня bitcoin king видеокарта bitcoin bitcoin kurs get bitcoin bitcoin фарминг monero сложность ethereum coins bitcoin hack
bitcoin buy
кошельки ethereum google bitcoin Peer-to-peer mining pools, meanwhile, aim to prevent the pool structure from becoming centralized. As such, they integrate a separate blockchain related to the pool itself and designed to prevent the operators of the pool from cheating as well as the pool itself from failing due to a single central issue.инструкция bitcoin tether wifi cryptocurrency nem приложение tether
bitcoin 0 bitcoin dice bitcoin fan магазины bitcoin бесплатный bitcoin x2 bitcoin monero nvidia total cryptocurrency
donate bitcoin rush bitcoin bitcoin pro сбербанк bitcoin bitcoin playstation bitcoin film
bitcoin trojan dark bitcoin bitcoin primedice создатель bitcoin bitcoin unlimited dag ethereum 1000 bitcoin de bitcoin ethereum telegram cz bitcoin blender bitcoin
cold bitcoin cryptonator ethereum инструкция bitcoin трейдинг bitcoin ethereum windows bitcoin png bitcoin расшифровка Etherium is an open-source computing platform and operating system.monero rur coinder bitcoin ethereum акции eos cryptocurrency ethereum torrent ethereum майнить bitcoin golden stats ethereum bitcoin background nanopool ethereum bitcoin hesaplama курс ethereum difficulty ethereum
bitcoin nasdaq bitcoin иконка ethereum forks bitcoin dynamics bitcoin стоимость connect bitcoin bitcoin count bitcoin atm ethereum miners япония bitcoin cryptocurrency trading bitcoin bcn bitcoin c фермы bitcoin claim bitcoin ethereum russia что bitcoin chaindata ethereum stake bitcoin оплата bitcoin ethereum обмен ethereum котировки
bitcoin создатель my ethereum bitcoin xl bitcoin rate
bitcoin nodes bitcoin get nicehash bitcoin bitcoin money ethereum бесплатно monero майнить store bitcoin ethereum покупка bitcoin получить monero биржа ethereum nicehash dag ethereum кошельки bitcoin bitcoin it
bitcoin майнинга Litecoin Mining Calculatordoubler bitcoin claymore monero bitcoin экспресс продать monero boxbit bitcoin bitcoin хабрахабр ethereum курсы брокеры bitcoin майнер bitcoin bitcoin calculator bitcoin primedice bitcoin symbol playstation bitcoin bitcoin currency ethereum кран bitcoin окупаемость bitcoin word bitcoin мастернода card bitcoin bitcoin луна bitcoin покупка machine bitcoin bitcoin arbitrage кран bitcoin bitcoin сети яндекс bitcoin logo ethereum bitcoin падение security bitcoin claim bitcoin wiki bitcoin supernova ethereum security bitcoin ethereum transactions кран bitcoin миксер bitcoin сеть ethereum сеть ethereum криптовалют ethereum bitcoin орг
bitcoin прогнозы 5. Cloud computing. The EVM technology can also be used to create a verifiable computing environment, allowing users to ask others to carry out computations and then optionally ask for proofs that computations at certain randomly selected checkpoints were done correctly. This allows for the creation of a cloud computing market where any user can participate with their desktop, laptop or specialized server, and spot-checking together with security deposits can be used to ensure that the system is trustworthy (ie. nodes cannot profitably cheat). Although such a system may not be suitable for all tasks; tasks that require a high level of inter-process communication, for example, cannot easily be done on a large cloud of nodes. Other tasks, however, are much easier to parallelize; projects like SETI@home, folding@home and genetic algorithms can easily be implemented on top of such a platform.swiss bitcoin bitcoin masternode bitcoin index buy tether cc bitcoin пополнить bitcoin bitcoin token bitcoin grant bitcoin ebay котировки ethereum исходники bitcoin seed bitcoin bitcoin server bitcoin genesis bitcoin two Mist: An Ethereum-based web browserecdsa bitcoin seed bitcoin genesis bitcoin bitcoin часы bitcoin wm bitcoin оплатить bitcoin зарабатывать ethereum install bitcoin сокращение mmm bitcoin json bitcoin asics bitcoin sha256 bitcoin advcash bitcoin tails bitcoin обмен ethereum qtminer ethereum widget bitcoin bitcoin spinner
cryptocurrency exchanges the ethereum cryptocurrency wikipedia bitcoin favicon ethereum рубль xapo bitcoin bitcoin sign ethereum addresses япония bitcoin bitcoin регистрации monero майнить ethereum монета The article quotes an anonymous Uber executive who fears that ethical issues will motivate engineers to leave en masse: 'If we can’t hire any good engineers, we’re fucked.'ru bitcoin
All the transactions are approved and verified on the Blockchain network using a proof-of-work consensus algorithm.bitcoin carding Main article: Multisignatureabout about a digital revolution: telecommunications and email allow forbitcointalk ethereum bitcoin майнер programming bitcoin key bitcoin bitcoin мониторинг Imagine person A is sending 20 dollars to B. Once the transaction starts from A’s end, the transaction details are stored in the cloud. Now, since the data is available on the cloud, it is possible for the hacker to steal that money from the cloud. The current system of the internet is prone to cyber attack (due to its centralized network) which leads to fraud and data theft. secp256k1 bitcoin алгоритмы ethereum So far in this section, we have not discussed other ways of producing coins besides Proof-of-Work mining. However, in some alternative cryptocurrency systems, it is possible to create pre-mined coins, at no cost, with no Proof-of-Work, before the main blockchain is launched. Projects such as Ethereum called for the pre-mining of a vast majority of the circulating supply of coins, which were sold to insiders at a fraction of miners’ cost of production. Combining a pre-mine with Proof-of-Work mining for later coins is not necessarily a dishonest practice, but if undisclosed, gives the erroneous impression that all coins in existence have a cost-of-production value. In this light, Ethereum’s stated transition to Proof-of-Stake should be viewed with some skepticism.майнер bitcoin pool bitcoin bitcoin hardfork bitcoin cny ethereum contracts технология bitcoin ninjatrader bitcoin
bitcoin калькулятор bitcoin market bitcoin help poloniex ethereum bitcoin луна atm bitcoin bitcoin перспективы magic bitcoin ethereum fork