Build Your House On The Rock
“Everyone then who hears these words of mine and does them will be like a wise man who built his house on the rock. And the rain fell, and the floods came, and the winds blew and beat on that house, but it did not fall, because it had been founded on the rock. And everyone who hears these words of mine and does not do them will be like a foolish man who built his house on the sand. And the rain fell, and the floods came, and the winds blew and beat against that house, and it fell, and great was the fall of it.” — The Holy Bible. Matthew 7:24–27
“Centralized systems create misaligned incentives and inefficiencies with slow growth and innovation while enriching those in power and screwing over the rest of us. Distributed systems create better outcomes, fairer interactions, and more robust systems.” — Join Dhruv Bansal and Ryan Gentry
Bitcoin is an unstoppable technology.
These are the features of Bitcoin that no altcoin project has:
- Fixed supply that is not dependent on demand: It´s super salable across time and space. The scarcity of Bitcoin is not a problem for making payments. One Bitcoin is exactly equal to 100,000,000 Satoshis. One Satoshi is 0.00000001 BTC. The conversion factor is 100 million in each case.
- Monetary policy enforced by a distributed network: This makes for the most secure network in the world. The Bitcoin blockchain is relatively small. Anyone can create a node for the blockchain for about $200 and thereby help to secure the network. On itnodes.io you can find about 10,000 nodes currently running on the Bitcoin network. They are globally distributed. In comparison, the internet has 340 “internet exchange points,” or IXPs.
- Predictable issuance: You can determine exactly how much bitcoin there is and how much more bitcoin will yet be created. Currently the inflation rate of the Bitcoin network is 1.73%, and moving towards 0% over time. The current stock-to-flow ratio of bitcoin is 57, making bitcoin one of the hardest assets in the world.
- Open, global, permissionless: It works the same everywhere and Bitcoin is for everybody. Bitcoin has no CEO or company. To use Bitcoin, you only need a smartphone and internet.
- Technological progress: You can immediately get to the same level of technological development and financial infrastructure as everyone else. Bitcoin’s blockchain is the first layer. Currently, the second and third layers are being developed. At the end of 2021, there will also be a new major software update with new functionalities. Bitcoin can never be duplicated again. Bitcoin has the largest market capitalization, highest liquidity/volume, best known brand, largest network effect, millions of investors and much more.
- Energy consumption: Bitcoin is difficult to mine and the only relevant proof-of-work network in the world to distribute trust amongst computational power (bitcoin mining). The hash rate increases over time. The energy required to maintain the Bitcoin network is not a bug, rather a feature. This makes Bitcoin the most secure network in the world and virtually impossible to be successfully attacked, especially for any meaningful duration of time. The current ban on bitcoin mining in China is the biggest attack on the Bitcoin network so far. The hash rate has fallen, but Bitcoin has not been destroyed or manipulated. Everything continues as it should.
“Bitcoin enables untrusted individuals to reach distributed consensus by solving the Byzantine General’s Problem with proof-of-work. It is resistant to inflation, seizure, and censorship.” — @Wiz
“Bitcoin is a system of software rules and no rulers. It is truly decentralized, because Satoshi took a step back and he put us, the community, and the value of Bitcoin first, and his ego second. You know that is not true with other cryptocurrencies.” — Alyse Killeen
Bitcoin is a monetary software on top of which you can build as much as you want.
“Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient.” — Hal Finney, 2010
“Base layer scalability is a tradeoff…” Arjun Balaj
Bitcoin’s block size is not too “small.” It is simply not optimized to secure many transactions. Bitcoin’s main layer (a.k.a., its “base layer,” or “blockchain,” or or ”Layer 1”) is perfectly optimized as a store of value.
This is the reason why Bitcoin is migrating to a multi-layer ecosystem. Many developments are now already running on the second or third layer. For example, another way to transact on the Bitcoin network is to use the Lightning Network. The Lightning Network is a second layer technology built on top of Bitcoin’s first layer, and everything is open-source. You can think of it like an onion. It has different layers that build on each other but they are ultimately secured by the base layer.
Bitcoin already has the best payment and trading ecosystem.
But what about smart contracts, DeFi (decentralized finance) or other further developments?
“Bitcoin has always had smart contracting capabilities. Bitcoin is programmable money and so you have always been able to require multiple signatures, for example, in a transaction or to require that a certain amount of time or a certain date passed before a transaction is triggered. In a Bitcoin development environment what is most important first and foremost is that the environment is secure and stable. The benefit of that is that Bitcoin has never seen a breach or hack at the core protocol level. We have also seen very limited downtime. And of course that is of critical importance when we are talking about a financial technology that holds billions of dollars of wealth.” — Alyse Killeen
“Lightning is a network that achieves things like identity within the network. It achieves a standard to send a payment, a standard to receive a payment, a standard of trust between two peers, a standard of final clearance, and what does finality look like. And when you think about that holistically and you think, “Well, how do other monetary networks operate?
Visa does the same thing within their network. Visa defines identity; how do I know that this is my Visa card and that’s Peter’s Visa card? There are certain numbers on it, right? And you have a certain account. And, how do I send and receive; how is credit, how is settlement done? We think that not only is Bitcoin better, cheaper, faster, and more global than any other monetary network, but most importantly, it’s open. And when it’s open, open networks, excluding money, just generally, always win. Open networks have defined economies of scale and network effects that are immensely powerful. And so, if you think a competitor were to come into a network — on an open network, every new participant is additive, it actually strengthens the network. So, competitors actually are ‘good for your business.’” — Jack Mallers
“Capable of millions to billions of transactions per second across the network. Capacity blows away legacy payment rails by many orders of magnitude. Attaching payment per action/click is now possible without custodians.” — https://lightning.network/
On the Lightning Network, one pays a fraction of a cent in transaction fees, and can send money in real time, and almost for free.
“That is why I am committed to Lightning, because this is going to be used by more and more people and my belief in Bitcoin is, it is an amazing asset but the internet needs a native currency. We need to be able to transact around the world with it. The only reason Square got into Bitcoin is to that end.” – Twitter and Square CEO Jack Dorsey
There are already many apps that use Bitcoin and the Lightning Network: Strike, BlueWallet, Wallet of Satoshi, Breez, Muun and many more! If you think Lightning is all about the future, you’re wrong. It’s all happening right now.
What will be possible in the future is incredible.
“Altcoins are testnets for future Bitcoin second layers.” — @BTCSupport21
You lock up some of your bitcoin on the base layer, using multisig (which in itself is already a smart…
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