Incumbent businesses focus on blockchains because they see an opportunity to usurp Bitcoin without being disrupted. Meanwhile, Bitcoin remains years ahead as the most secure and immutable blockchain of them all.
Also read: ‘Monetary Xenophobia’: Norway’s Biggest Bank Pulls Bitcoin Account
Blockchain is Just One Component
Nearly everyone, from big banks to national governments, has experimented with blockchains in the past year or so. Microsoft, BoA, JP Morgan Chase and other legacy giants have all touted blockchain tech as the next best thing. We’ve heard how it can do everything but save humanity from a Trump presidency — or maybe it could?
In any case, the blockchain is just one cog making Bitcoin tick. It is a decentralized transaction ledger shared by a global network. These computers verify transactions and agree on the network’s current state.
“Yes, [Bitcoin] is a blockchain, but it is a very special blockchain,” Andreas Antonopoulos explained in one of his talks.
It is a blockchain that uses as its fundamental consensus mechanism proof-of-work; and proof-of-work gives it certain characteristics that are unattainable so far as we know without consensus mechanisms.
Bitcoin’s Eight-Year Head Start Matters
Proof-of-work (PoW) requires the miner of each block prove a significant amount computing power was invested to create it. This ensures that bad actors, who might wish to modify older transactions, would have to work harder than honest peers who just add new blocks to the blockchain.
Any alternative blockchain may use the same mechanism, of course. But the Bitcoin blockchain is “very special” because it enjoys the largest network effect and first-mover advantage.
It has an eight-year head start, while legacy incumbents are just starting to wake up. In this time, the Bitcoin blockchain went global, gaining users, miners, apps, and infrastructure. This has made it the most popular and secure blockchain in existence today.
Moreover, it is an ingenious solution to the Byzantine general’s problem. It rewards trustworthy peers while removing the incentive for untrustworthy peers, by design. This flips the script on today’s financial system, where regulators caught trusted banks acting dishonestly but handed out only slaps on the wrist.
Bitcoin: The Most Secure Blockchain
In the cryptocurrency world, immutability is synonymous with security. A blockchain is insecure if its past blocks can be modified, effectively wresting funds out of users’ control.
“Immutability is not a characteristic of blockchains. Immutability is an artifact of a proof-of-work consensus system,” Antonopoulos notes. “The blockchain—the open blockchain—has immutability because even if you control 100% of the mining power, you cannot recreate an alternative version of history by rewriting the blockchain without presenting valid proof of work that needs to be computed.”
So how will private chains be secured? Many proposals exist, though these have yet to prove they can match Bitcoin’s PoW in the real world. Meanwhile, Australia’s Stock Exchange (ASX) is already raising concerns its blockchain platform would make ASX “fair game” to “every hacker in the world.”
At the same time, the Bitcoin network remains as free from attacks as it has since day one. It has never been compromised or ‘hacked’, despite several exchanges getting their funds drained due to weak security.
So what will it take to successfully attack Bitcoin itself? “Unfathomable” computing power that doesn’t even currently exist, according to Antonopoulos, who explains:
You can affect with the most immense amounts of computation, hundreds of hexahashes per second, computation that doesn’t currently exist on the planet. Let’s say you did have that. You could now affect hundreds of blocks. You can rewrite the history of this afternoon but not yesterday and certainly not last week. And most certainly not last year.
“Even if you controlled all the hashing in the world it is impossible to recreate the proof of work on the Bitcoin blockchain even two days in the past,” he adds. “The amount of computation is unfathomable.”
A Blockchain vs. The (Bitcoin) Blockchain
Banks currently feel excited about blockchain technology, and rightfully so. However, Bitcoin is a disruptive force because it wrests the power of money creation from banks. Bitcoin has already proven this new “funny money” not only works, but is, in fact, superior to the legacy payment system, particularly on the internet.
But financial institutions must downplay this potential threat on one hand, while appearing innovative and forward-thinking on the other. Hence, they focus on blockchains because they see them as a way to absorb some of Bitcoin’s positive elements without disruption.
However, since it’s still too early to tell if banks will succeed in disrupting themselves from the inside out, we should take their ambitions with a grain of salt. This is why we should refer to the Bitcoin blockchain the blockchain, in contrast to one developed by a bank (bankchain?) or any other institution.
We do have the internet, for example. It is global, open and allows anyone to build applications on top without permission (like Bitcoin). However, the intranet does not exist. Instead, most intranets are not global, and remain closed and insulated from outsiders (like Utility Settlement Coin).
“The best thing you can do with an intranet is to connect it to other intranets and for that you need the internet,” Antonopoulos adds. “Bitcoin is the internet of money. Bitcoin is the de facto money of the internet.”
Of course, Bitcoin may not always be the internet’s de facto money in the future. But until then, The Blockchain remains the Bitcoin blockchain only.
For more about immutability and proof-of-work, you can check out Andreas Antonopoulos’ latest talk below:
Will other blockchains eventually catch up to Bitcoin in terms of security and immutability? Let us know in the comments below!
Images courtesy of shutterstock.
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