Bitcoin (BTC) is one of the early cryptocurrencies and the first to pull it together in terms of the providing a solution to a use case that many tried to solve. Let’s look at why Bitcoin is the OG and why it’s development and adoption is still far superior to the many Bitcoin forks competing for user adoption.
The Bitcoin Use Case
The Bitcoin use case can be articulated as follows: I need a method that allows me to transfer Bitcoin currency securely and without need for intermediary approval or interference – be my own bank essentially. Let’s break that down a little more:
- censorship resistant – I don’t want someone (eg bank, financial advisor, government etc) to delay, advise, slow down how I want to use my money. I don’t want someone to assume my money has been obtained illegally and stop me from transferring my money at any time of the day to whatever Bitcoin address I choose
- immutability – I want the transactions to be securely recorded and unable to be changed
- single spend – I don’t want my transactions to be accidentally double or triple spent because of a technical issue or malicious act
- portability – I want to be able to transact with my money from anywhere in the world
How is the above achieved ?
- by making the Bitcoin core wallet available on many platforms and having a blockchain that can be downloaded on any computer with an internet connection, the Bitcoin wallets and decentralized throughout the world. This provides a high likelihood that the Bitcoin blockchain ledger will be available for download and growth through mining
- Proof of Work (POW) algorithm – allowed the accidental double spend problem to be solved and ensures the network transactions have been validated
Bitcoin Development and Maintenance
When Satoshi Nakamoto released the Bitcoin whitepaper (https://bitcoincore.org/bitcoin.pdf) they had already completed development of the initial Bitcoin wallet implementation. It had to be done that way not just to avoid an incorrect implementation of the Bitcoin protocol but to ensure that the network, blockchain growth and mining were working correctly. Satoshi was very careful to ensure the network and blockchain grew correctly and the proof of work algorithm was functioning correctly and that no race conditions were introduced into the network (https://en.wikipedia.org/wiki/Race_condition).
How Does the Blockchain Grow – What’s the Incentive ?
The other innovation that Satoshi created was incentivized rewards (Bitcoins) to miners for mining (validating) the blockchain transactions. The set Bitcoin reducing emission rates ensure that the Bitcoin currency is deflationary which creates scarcity. Bitcoin cryptocurrency value was not set by Satoshi and is driven by market forces. Miners provide their services to mine, secure and expand the blockchain in exchange for the Bitcoin rewards.
The emission rate is controlled not only by the halving, approximately each 4 years, but the difficulty feature of Bitcoin’s proof of work implementation. The difficulty aims to allow a block solution to be determined every 10 minutes. If the amount of hash-power increases the difficulty increases to maintain the 10 minute emission. If the hash power reduces the difficulty drops. Satoshi did envisage some more powerful nodes in the future of Bitcoin however probably not to the level of commercial investment by miners that is seen today. Fortunately the difficulty feature controls the cryptocurrency emission rate as another great innovation by Satoshi.
Bitcoin Forks
There have been numerous code forks of the Bitcoin code attempting to create a better Bitcoin. A number of the forks have accused the core implementation of stifling user adoption and refusing to accept enhancements such as bigger blocks. What the centralized forks don’t realize is have a solid, tight code base is what provides the Bitcoin protocol and network its strength is the fact that the changes are introduced carefully, methodically to ensure the stability and reliability of the network.
The Core developers are some of the smartest people involved in Bitcoin’s maintenance and development. They are driven by the integrity of the technology whereas many of the forks are commercially driven under the guise of ‘user adoption’. The adoption comes organically because of Bitcoin’s reliability and security.
Some of the commercial forks don’t realize if the network breaks, the user adoption will drop – who wants to keep their money on a broken network ? Let’s look at a commercial example. We have a commercial entity which has a successful software product. They want to introduce a new product that supersedes their current version. They reach out to all their customers, because they know who they are, and inform them of an upcoming upgrade. Cryptocurrencies don’t know who is running a node, so code-base modifications need to be done carefully to ensure network integrity and backwards compatibility.
Introducing features to support user adoption at the expense of developer technical consensus greatly increases the chance of a fractured network and a break in the protocol.
… more to come