Bitcoin/Blockchain Borderline: 50 Shades Of Grey
Bitcoin and the Blockchain have looked interwoven at times, and at other times they have appeared to be mutually exclusive entities. Whether Bitcoin can be absolutely separated from the Blockchain is yet to be seen.
Bitcoin and the Blockchain have looked interwoven at times, and at other times they have appeared to be mutually exclusive entities. Cointelegraph asked experts whether Bitcoin can be absolutely separated from the Blockchain.
Through Blockchain, to Bitcoin
“Is Blockchain without Bitcoin possible? Definitely. But the crucial point that many miss is that without the decentralization offered by Bitcoin, a private Blockchain is not much different than simply another database. This is especially important if you rely on long-term public availability of the data in that Blockchain, because a Bitcoin-based blockchain is not dependent on a host company remaining in business.
I think we also see a tendency for large organizations to "dip their toes" into the Bitcoin world by first experimenting with Blockchain. This is ok, and I think it's often because it's easier to convince a boardroom of executives to try out a standalone Blockchain initiative, simply because the term "Blockchain" carries less baggage than "Bitcoin". Although ultimately I think once organizations understand the power of the Blockchain, they will have even more appreciation for what Bitcoin offers”.
“Of course, yes! Each altcoin has its own blockchain, independent from Bitcoin. There are over six hundred different altcoins available”.
“One need for blockchains is that of a public witness. Bitcoin can serve as a public witness to prove you are;
- Only running a particular chain for a particular purpose, and
- The chain you present is the one and only valid one for that purpose.
Factom is using Bitcoin for this public witness, but is otherwise enabling blockchain kinds of tech without inserting unnecessary transactions into Bitcoin.
Running blockchains without a public witness prevents new players from knowing for sure that a history (a blockchain) presented to them is either the correct one or the only one.
Any new and previously uninvolved parties coming to a blockchain then have to trust the parties already involved that they have not messed up at best, or committed fraud at worst”.
Possible but risky
Toni Lane Casserly is an advisor in Bitcoin and Blockchain technologies. She says:
“This is best answered by side chains. Usually but not always, saying you are going to create an external blockchain (in the same way people built, pumped and dumped altcoins) is essentially exposing anyone who buys into you to a huge security risk”.
“I don’t even think it is the right question.
“Can the blockchain be absolutely separated from Bitcoin?”
In my mind, obviously the answer is yes.
I define a blockchain as a ledger, where participants have full transparency with decisions are based on some consensus mechanism. Once it is defined, the transaction or block of transactions are then cryptographically chained to the previous transaction or block of transactions. Hence “Blockchain”.
So if this is the definition, the answer is a resounding yes.
But really, then, the question is, what are you trying to accomplish with this blockchain? Will it be more useful to the current technology? Why do you need blocks instead of just a distributed ledger?
For payment settlement, separating bitcoin from the blockchain seems nearly impossible”.
“With bitcoin, the token itself has value, dictated by the market, people are willing to buy and sell it for value, and thus, the movement of the token is settlement.
But what if the token does not have value? It just represents value.
Then all you have done is created a new credit or clearing mechanism.
Because you do not move actual value, just the representation of it.
How would you then go from clearing to settlement through a token on a private blockchain? Well, the new market participants in this situation are banks. Unlike the general population who have the freedom to hop onto new trends and lead the way for new laws to be built around new technologies (e.g. Uber), banks work in a highly regulated environment. In order to adopt new technologies, it must be accepted by the government (e.g. banks inability to use bitcoin themselves). So in order to use a private blockchain as a settlement mechanism, this requires the government rubber stamp of approval. Perhaps, this is possible within a single country, to agree on a new settlement mechanism in a fairly short time period. But imagine a global effort to agree on having the same regulation on a new settlement mechanism. This seems a little bit more daunting of a task. Not impossible, but also not probable anytime soon. For instance, just for european regulation, it takes about 18 months from proposals to turn into directives or regulations. Once a directive is created, states have 2 years to implement the directive, many of which will delay the implementation until the european commission, the european regulatory authority, threatens the states with fees. Now imagine how long it would take to implement something like this globally and needing to enforce it. How would tokens get issued? Do the tokens get settled in local currency or in the currency of the send? These are all issues that are not easily solvable.
But you see, with bitcoin, the coin is actually the settlement. And there are companies that are currently live, such as Bitwage for paying international workers and contractors, that have actual use cases leveraging bitcoin as a payment rail. Payment settlement with private blockchains are just a pie in the sky idea with huge political barriers to get over.
That is not to say that there is NO value to blockchain separated from bitcoin. This is just the use case where we are talking about settlement.
Blockchain also has value from a transparency perspective and an automating perspective via smart contracts.
In situations where value can be derived from greater transparency (proof of ownership, e.g. house deeds, car deeds, original media content, original clothing, real diamonds & jewelry) or by having the flow of information and tokens between separate entities based on data input with requiring intermediaries (such as identification for IOT devices), bitcoin is not necessarily needed as settlement is not the issue.
The main advantage bitcoin has in this example is that it has a massively secure network and it is public, making it much easier for startups and SMBs to take advantage of the technology. However, if the security of the network can be achieved through trust over proof of work or some hybrid of the two, a token with actual value is not necessarily required and thus a non-bitcoin blockchain could be applied.”