Noah asks, "Debunking the 'blockchain not Bitcoin' point of view.
How do we persuade average Joes that the 'blockchain not Bitcoin' line of thinking is incorrect?"
Well, first of all, why waste your time?
If they want to go and play the 'blockchain not Bitcoin' game, let them go and play [it].
I don't think it's our job to persuade other people about the merits of this technology,
if what they can understand about this technology is a slogan that has really played itself out since 2014.
I don't think there's any point in trying to persuade people about the 'blockchain not Bitcoin' trope.
I think it's a cliche.
When somebody says, "I believe in blockchain but I'm not interested in Bitcoin," they're
basically saying, "I don't understand blockchains, but I've heard enough to think that I can
sound cool by dismissing Bitcoin and praising blockchains."
I've heard a lot of people say that, it's just repeating a cliche.
Why do blockchains not work without bitcoin, or rather why do blockchains not work without
an intrinsic, valuable asset that is the basis for a game theoretical model of security?
The reason is simple.
A blockchain, as a data structure, is a fairly inefficient data structure.
The reason we use a blockchain is to achieve decentralisation.
In order to achieve decentralisation, you have to be able to validate transactions without
giving anyone the power of veto, or the power to control the network.
You have to decentralise the process of validation.
The best mechanism we've found so far for decentralising the process of validation is
by having a consensus algorithm that depends on competition -- whether that's proof-of-work,
proof-of-stake, or something like that.
In order to have competition, you need risk and reward.
In order to have a reward that is meaningful, you need an intrinsic token.
You need something of value that people are trying to get, which keeps them playing fair.
If you don't have something of value, you don't have a basis for that competition.
Without a basis for that competition, you don't have security.
Without security, you have to control validation centrally.
Without decentralisation, there's no point in doing a blockchain.
You might as well use a replicated database.
It's going to be far more efficient.
The purpose of blockchain technology and a consensus algorithm is to decentralise control,
to provide censorship resistance and neutrality in a global open platform; in order to do
those things, you need some mechanism to decentralise validation.
"Debt and credit."
"Given that most of the global economy relies heavily on the extension of credit from major
financial institutions (for example: borrowing money to start a business or buy a home),
how do you see the blockchain playing a role in this space?
I know companies like Bloom use the blockchain to anonymise credit borrowers.
But the concept still relies on institutional lending.
Is there a way to build in the concept of debt, or negative balances, into blockchain addresses?
Assuming that lending can take place on the blockchain, what mechanisms are there to enforce loan defaults?
Off-chain, banks and the government can issue liens on income or seize collateral,
which wouldn't be possible on-chain."
Great questions.
I honestly don't know how the area of credit is going to be [handled].
I think the idea that everything has to be done on the blockchain, or that all currencies
will be cryptocurrencies, isn't really where we're going.
Just because we have a cryptocurrency that is an asset-based instrument, that is not
a debt-based instrument, where you can't have loans or negative balances.
There is no fractional lending or any of the other tricks used to create a greater supply
or liquidity of credit in an economy.
That doesn't mean you can't still do those things with fiat.
Maybe the role of cryptocurrencies is to offer a form of sound money, for people to be able
to save their wealth and accumulate capital for future generations.
Maybe other types of instruments such as fiat or cryptocurrencies heavily modeled after
fiat (fully centralised, confiscatable, fractional reserve) would be built.
In fact, I think we're going to see that kind of cryptocurrency being built.
Don't worry!
When it comes to issuing credit out of thin air, creating money that doesn't exist, and
inflating bubbles by spreading liquidity through centralised decision-making, all of those shenanigans...
Governments are full of innovation.
They will soon develop cryptocurrencies (or what they will call "cryptocurrencies") and
blockchains, essentially highly centralised databases, that allow them to continue business-as-usual
with not even a pause in their standard practices.
They will create the next giant financial bubble of out-of-control predatory lending,
now brought to you on a "cryptographically secured blockchain," which is of course just a database.
FedCoin is coming.
It will come to many different countries.
It will pretend to be a cryptocurrency and a blockchain.
It will offer fractional reserve lending, full surveillance, controls, confiscation,
and all of the other wonderful things that we have with fiat.
Only now on a "blockchain."
Don't worry, debt is not going away just because of cryptocurrencies.
The only difference is, you now have an option; that option is, you actually have some currency
to store wealth for yourself and future generations that cannot be inflated to shit, or easily
confiscated, or used to create fractional reserves.
Let them have their fiat.
Maybe you can choose your cryptocurrency instead.