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The following verbatim transcript has been compiled from Adam Levine s “Let’s Talk Bitcoin” Episode E 247. A link can be found at the end of the transcript.
Andreas talks about the current hot topic, which is the debate on whether you can have “a blockchain without bitcoin”. He explains why this belief is essentially flawed, and that without a token driven reward, that is globally tradeable, and runs on the protocol of a decentralised open-source system, security is inevitably compromised. What is left, if you remove the reward/Nakamoto consensus mechanism, is basically just a slow database needing central control and oversight to work. The bitcoin blockchain consists of four elements, all of which are interdependent and required to secure a globally scaling secure network.
Andreas starts speaking at 6min 41secs. ….. broadcast HERE
I’ve been accused of being a bitcoin maximalist because of some statements I’ve made specifically in the entire argument about bitcoin versus “The Blockchain”
Over the last, probably six months, we’ve seen this marketing pivot to rename the cool parts of bitcoin into “The Blockchain”, remove some of the negative connotations and produce a more technology driven, less ideology driven, more palatable set of technology for perhaps Banks to consume, and obviously Banks are far more interested in what they call “The Blockchain” than bitcoin at the moment. It’s an easier pill to swallow and I’ve been highly critical of that concept and kind of ridiculed the whole “Let’s take the revolutionary technology, strip out everything revolutionary, and then pretend we are doing something disruptive” approach.
But at the same time I think that the argument here is a bit more nuanced than what we’ve discussed so far.
Here’s the big issue; The big invention behind bitcoin is not the currency, but it’s also not the blockchain. The blockchain, as a hash-chain set of blocks, is really not that novel and not that interesting. What is really interesting is the combination of all four things together, and the important thing we haven’t mentioned is the Nakamoto Consensus. The Nakamoto Consensus being the ability to agree on a set of consensus validation rules for transactions and blocks that are then implemented through a competition using proof of work.
That is the decentralised part of the technology.
So part of the funny thing here is that when people try to pick and choose which parts of bitcoin they like and which parts they don’t like , and to rename it. What I’ve been critical of is the idea that you can take the blockchain technology, which is arguably the least interesting of the innovations, and not just strip it of the currency but more importantly strip it of the Nakamoto Consensus and proof of work. And go into an environment where you have a more centralised “signing” instead of mining, a centralised closed network blockchain technology, and pretend that somehow that is really disruptive or really interesting or really revolutionary, when it is none of those things.
So, to me I think the important realisation, and part of the reason that I get called a bitcoin maximalist, is the idea that a blockchain is really really interesting when it’s open and decentralised. And its only open and decentralised when its validation works on a Nakamoto consensus system. And the reason I say that is because there has only even been one consensus system that has scaled to this level and that is the Nakamoto consensus system.
We have no other examples that can deliver open decentralised blockchain consensus. And that Nakamoto Consensus system in turn requires a token that is used as a system of reward and if you don’t follow the rules – punishment. You lose money if you are paying for electricity for a Nakamoto proof of work and not gaining reward. So you need a system of reward and punishment that aligns incentives with consensus, and that reward – the token – needs to have value and that value needs to be globally tradeable. Meaning that you can’t have a useable open decentralised blockchain without, so far as we know now, a Nakamoto Consensus mechanism. And you can’t have a Nakamoto Consensus mechanism that works – and is secure – without a currency. And you need all of those things in order to deliver security without having to have trusted third parties on a globally scalable system. So, we only know one way of doing that, still, even after six years we still only know one way – and that is – Blockchain, plus Nakamoto Consensus, plus Proof of Work, plus Currency.
So if you try to strip any of those things out, then the question is, well, how do you boot-strap something that is able to achieve the same goals as the bitcoin blockchain – and is secure?
What we know about the bitcoin blockchain is that it can support an economy, at the moment, that ranges on the low end from anywhere from four billion dollars to, we’ve seen up to ten billion dollars. Arguably because of the cost of attacking that consensus mechanism, probably more than ten billion dollars. That means you can trust the bitcoin network to execute transactions in the millions or hundreds of millions of dollars.
Now if you have an alternative, and certainly Ethereum would be one example where this is an outstanding question, how big of a transaction in monetary value can it support with its security mechanism. How big can you boot-strap a security mechanism, and do you need to build an entire mining infrastructure all over again, and is it even possible to build an entire mining infrastructure all over again, when people can attack it in the early stages before its big enough to resist attack.
I think that’s the outstanding question. Which is why I think the entire idea of Blockchain as a technology without the currency, without the open decentralised Nakamoto Consensus, is really just a slow database and really of not much use other than some narrow cases that are interesting to Banks, and not really that revolutionary.
Link to “Let’s Talk Bitcoin” Broadcast HERE
Andreas starts speaking at 6min 41secs