You Proabably Don’t Need a Blockchain
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One of the most talked about aspects of Bitcoin is the Blockchain. The Blockchain is the data structure used for storing Bitcoin transactions. Though, essential to Bitcoin’s functionality. It has often been taken and forcefully applied to other use cases that arguably do not require a Blockchain. Most of these projects are better off using an immutable database. Even worse, tokens are associated with several of these Projects. These tokens can often be viewed as unregistered securities, and also, passing the Howey Test. There only needs to be one Blockchain, which is Bitcoin. Other innovations in the space can be built on top of Bitcoin to leverage its immutable and decentralized capabilities. A popular example of this innovation is the Lightning Network.
Bitcoin is a melting pot of technologies and concepts brought together in the right proportions for the network to function. These are namely: proof of work, game theory, asymmetric cryptography, distributed systems, economics, and so on. Building a Blockchain that is not decentralized and has the game theory incentive for computational proof of work defeats the purpose of a Blockchain.
“Show me the incentive, and I’ll show you the outcome” – Charlie Munger
The basis for the continuation of the Bitcoin Blockchain is the block incentive. Bitcoin is anchored into the physical space by the energy necessary to mine Bitcoins. Energy is not a free resource. However, Bitcoin miners are incentivized to expend energy to secure the network. This is an essential part of Bitcoin’s Game Theory. Game Theory is influential in shaping the behaviour of participants in the network. Because of the game theory, It’s worthwhile for participants to cooperate and support the network. As computation is not free, and transitively, energy is not free. Energy is the ultimate physical constraint that protects the Bitcoin network. Without these fundamentals, a Blockchain is not necessary.