3 Reasons Bitcoin is More Important than Blockchain Technology
To fully understand why bitcoin is more important than blockchain technology, one has to remember the reason blockchain tech and the cryptocurrency was created in the first place. Bitcoin was created to disrupt and replace the current banking system, not complement it. In the most basic of terms, here is how a bank operates: they open an account for an individual/company and keep a ledger of their deposits and withdrawals. When this person transfers money to someone else, their ledgers—the sender and the recipient’s—are modified to reflect the transaction. So, in essence, all you do is pay banks to maintain and update your financial records.
Bitcoin V the Banking System
This banking system has many disadvantages. One, banks have a central point of failure; they can be hacked and your records, manipulated. Two, by entrusting your money to institutions that are regulated by the government, you are inadvertently at the mercy of the government. Your accounts can be restricted or worse, frozen. Additionally, your daily transactions are restricted to certain amounts determined by the bank/government. In a nutshell, by entrusting your accounts to a bank, you are giving then power over your finance and by extension, your life. Bitcoin’s goal was to seize power from the banks and the government, providing the public with a network to maintain their own ledgers. The blockchain is the framework on which this network was built.
When the reason they were initially created is put into consideration, Bitcoin—and other cryptocurrencies—matter more than the blockchain. Here are 3 reasons why this is so;
- The blockchain is more of the same
According to Wikipedia, a blockchain may be defined as “an open, distributed ledger that can record transactions between 2 parties…” (Wikipedia, 2018). Going by this definition, the blockchain sounds quite similar to the ledger kept by the banks. A major difference, however, is that this ledger is being kept by the public. There is a point to be made about this, but it will be discussed in reason number 2 just below.
If you ever wondered why the general narrative from Wall Street is that blockchain technology is revolutionary but Bitcoin is terrible, the answer can be found above. These institutions don’t feel uncomfortable about the blockchain because they know that it operates similarly to the current system and as a result, it cannot replace it. As a matter of fact, some of the biggest banks in the world—Unicredit, Deutsche Bank, HSBC, Barclays, and Credit Suisse to mention a few—are working on integrating blockchain tech into their infrastructure. None of them would touch Bitcoin with a ten-foot pole.
- Without cryptocurrencies, the Blockchain would be unusable
As mentioned above, the blockchain was designed to be maintained by the general public. Millions of people act as nodes to store the records and provide the computing power needed to update the network regularly. What induces these people to provide these services is the promise that they will be rewarded in Bitcoin. Without the cryptocurrency to serve as an incentive, nobody would buy expensive hardware to keep the network running. Therefore, if the blockchain were to operate without bitcoin (or cryptocurrencies), it would have to run on a centralized server, entirely defeating the purpose of its creation.
- Blockchain technology, not Bitcoin, is hard to understand
One of the biggest reasons many people stay away from bitcoin is its complexity. People struggle to understand the concept, and it makes them wary of investing in it. In truth, however, bitcoin is not so complex, it is the underlying technology that is difficult to grasp. Among other things, Bitcoin is a payment medium, simple as that. These “other things” may be complex, but that has more to do with blockchain technology than with Bitcoin.
In conclusion, the blockchain has some functionality as a standalone technology. However, it was designed to be public, distributed, and decentralized; to be all these things, it needs a cryptocurrency. In fairness, Bitcoin needs blockchain technology too, but the recent discovery of Tangle technology (a blockchain alternative) means that in the future, Bitcoin/cryptocurrencies may move on and exist away from the blockchain. To disrupt the current banking system, however, the blockchain has no alternative to Bitcoin.