The word “blockchain” was long ago commercially adopted by large international conglomerates and used interchangeably with “distributed ledger.” In corporate offices, the notion of a “private blockchain” dominates the conversation.
But, is a private blockchain really a blockchain, in the sense of Bitcoin? No, not really. It is instead a distributed ledger. Anyone can join the Bitcoin blockchain. On a private blockchain, you need to be invited, and a few key stakeholders control the network.
Q3 2022 hedge fund letters, conferences and more
A Marketing Tool
The term blockchain has served as a marketing tool for CMOs: they adopt “blockchain” so as to look disruptive, cutting edge, and innovative. They aren’t. When corporate America discusses “blockchain,” they are merely discussing a database with signatures.
Bitcoin is decentralized. There is no need to trust anyone. Bitcoin allows anyone to use software without an authority - a world where you can verify the truth for yourself. You don’t trust the nodes, miners, the people creating transactions, etc. You only trust the outcome of your own verification and validation of the blockchain, and, ultimately, the network effect.
Bitcoin is the first technology to feature decentralized security managed by computation. Whereas past security models have been based around concentric circles of access and control, in the form of an institution, Bitcoin’s security model is open and accessible to everyone, based on market forces, and game theory.
In this first market-based security model, a series of incentives and punishments ensures the platform remains a neutral arbiter without the need for intermediaries.
The Open Blockchain
Bitcoin revolutionized trust. It introduced the “open blockchain,” in contrast to the private blockchains put forth by corporate America. In the bitcoin version of blockchain, you’re enabled to run a decentralized trustless system without relying on anyone as a trusted intermediary, which is the main disruption and essence of blockchain.
Smart contracts are an attempt at implementing trustless technology like Bitcoin, but only achieve this if you musn’t trust anyone to execute the smart contracts correctly, which can only happen if everyone participates in an open manner and verifies each other with access to the underlying consensus algorithm and mining is open to everyone.
Bitcoin, and by extension the underlying blockchain technology, is about network centric trust without third parties. The network is a trusted party and only if you verify everything neutral, because it isn’t serving the goal of any one organization or institution. It follows the consensus rules neutrally.
There is no such thing as a good transaction or a bad transaction, a valuable transaction or spam transaction, an authorized transaction or an unauthorized transaction, a legal transaction or an illegal transaction. True blockchain’s do not care about the sender, recipient, the value, asset or smart contract being executed.
The technology is radically neutral, and censorship resistant. The system must be and remain open, borderless, neutral, and defend the properties by making it impossible for any actor or colluding actors to censor, disrupt, blacklist, restrict or otherwise inhibit the network. Most importantly, these new, open, decentralized trust systems do not depend on institutions.
