Distinguishing Bitcoin from Blockchain, Which Has Economic Value?
Bitcoin purists have stated that Bitcoin and blockchain are inseparable. Let’s take a look at reality.
Wall Street built on Blockchain
Please consider As crypto declines, Goldman Sachs aims for a Wall Street built on Blockchain
Wall Street’s biggest banks have largely avoided investing directly in cryptocurrencies. But many are quietly working to integrate blockchain, the technology behind crypto, into commerce and other businesses.
Goldman Sachs already trades some bonds and other debt securities for clients on blockchain-based networks such as Ethereum, and the bank is building its own blockchain-based trading platform. JPMorgan Chase already has a platform in place, called Onyx.
Outside of banking, Walmart Inc. has used blockchain to track its supply chains. In real estate, some title companies have used it to record home ownership.
“Blockchain technology is going to rewire all financial services,” said Tom Farley, the former president of the New York Stock Exchange.
That said, Wall Street firms have been experimenting with blockchain projects for at least the past five years. Despite much hype, few have had a widespread impact on how financial transactions take place.
Others have thrown in the towel. A group of European insurance companies formed a consortium called B3i in 2016 to explore blockchain use in their industry. In July, the consortium shut down after failing to raise new capital.
Blockchain will come
Bitcoin is inseparable from blockchain, but it has already been proven that blockchain neither needs nor requires Bitcoin.
Importantly, Bitcoin is a public, distributed network that requires mining and massive amounts of electricity (proof of work) to operate. In contrast, the blockchain systems used by Goldman and Walmart require a permit.
The purported advantage of Bitcoin’s permissionless, distributed network melts under increasing energy costs to run it, massive ledgers, and conversion costs from Bitcoin to dollars, euros, etc., to act as money.
Permissioned blockchain will eventually be a big winner. And there will be a winner without Bitcoin. Bitcoin is too unstable, too costly for transactional use and too dependent on energy.
Fun facts
Save me the juice of being able to send Bitcoin anywhere instantly cheap. One still has to convert Bitcoin to dollars, euros, yen or whatever to use it.
Coming soon, central bank digital currencies will truly be 24×7 and cost-free, albeit with well-known flaws including the risk of confiscation.
It’s a page. Blockchain technology will succeed, standalone.
Finally, it is beyond idiotic to think that governments will embrace Bitcoin en masse, or that it will succeed as money if they don’t.
Bitcoin has been incredibly successful as a medium for speculation. But unlike blockchain, Bitcoin will never go beyond that.
Ironically, the more Bitcoin succeeds as a tool for speculation, the less use it has as money, its original stated purpose.
Why use Blockchain?
Perceived value of Bitcoin
Much of the perceived value of Bitcoin is no longer the speculative hype. The word “bezzle” is a good description.
Bezzle is a temporary gap between perceived wealth and long-term financial value.
For discussion, see The Stock Market, Bitcoin, and Housing Fake Wealth Bezzle Will Be Wiped Out.
