Bitcoins greatest feature is also its existential threat

 Bitcoins greatest feature is also its existential threat

Cryptocurrency depends on the integrity of the blockchain. But China's censors, the FBI, or powerful corporations could have consigned him to oblivion.

It is best to avoid explaining the math of the Bitcoin blockchain, but to understand the colossal implications here, you need to understand one concept. Blockchain is a type of "distributed ledger": a record of all transactions from the very beginning, and everyone who uses the blockchain must have access to and reference to a copy of it. What if someone puts illegal material on the blockchain? Either everyone has a copy of it, or the security of the blockchain fails.

To be honest, not absolutely everyone who uses blockchain has a copy of their entire ledger. Many who buy cryptocurrencies like Bitcoin and Ethereum don't bother using a ledger to validate their purchase. Many do not actually store currency directly, but instead trust exchange transactions and coin storage. But people need to constantly check the history of the blockchain in the ledger for the system to be secure. If they stopped, it would be trivial to counterfeit the coins. This is how the system works.

Botnet developers use this idea to create non-blocking coordination tools, but the implications are much broader. Imagine someone is using this idea to avoid government censorship. Most of the bitcoin mining takes place in China. What if someone adds a bunch of Chinese censored Falun Gong texts to the blockchain?

What if someone added a political speech that Singapore regularly censors? Or cartoons that are copyrighted by Disney?

There are no central trusted authorities in Bitcoin and most other public blockchains. Anyone in the world can perform transactions or become a miner. All are equal in that they have the equipment and electricity to perform cryptographic computations.

This openness is also a vulnerability that opens the door to asymmetric threats and petty attackers. Anyone can put information on a single Bitcoin blockchain. Again, this is how the system works.

Over the past three decades, the world has witnessed the power of open networks: blockchains, social networks, and the network itself. What makes them so powerful is that their value is related not only to the number of users, but also to the number of potential connections between users. This is Metcalfe's Law - the value of the network is quadratic, not linear in the number of users, and every open network has followed his prophecy since then.

As Bitcoin has grown, its monetary value has skyrocketed, even if its use remains unclear. With no barriers to entry, the blockchain space was the Wild West of innovation and lawlessness. But today, many prominent proponents are proposing Bitcoin to become a global universal currency. In this context, asymmetric threats such as embedded illegal data become a serious problem.

 Bitcoins greatest feature is also its existential threat

Previous Post Next Post