https://bitcoinnews.com/storing-your-wealth-is-a-human-right/

It is your human right to be able to store your wealth, and with bitcoin, you can exercise it for the first time.

When someone pays you, it’s because you’ve done something valuable for them. The money is a measure of this value. If you make hamburgers and someone is willing to give you $5 for one, then that’s how valuable the hamburger is to that person. If you become rich selling those $5 hamburgers, it means society really appreciated your ability to provide hamburgers and were willing to reward you with more money so you can do whatever you want with it, hopefully make more hamburgers. In short, unless you’re stealing or lying to people, the money you earn is a measure of how much value you’ve provided to the world. Shouldn’t you be allowed to store that value over time? Shouldn’t it be as potent today as it is tomorrow, a week, ten years, or for your grandchildren?

To be clear, there are lots of ways to provide value to the world that don’t result in money — helping a friend move, taking care of children, mothering in general, watching your neighbors dog, charity work, introducing someone to Pink Floyd, and so on. I’m not trying to knock these things. They’re all good and important. They’re just not relevant to a conversation about money.

Related reading : Without Bitcoin You Could End Up Working Longer and For Less Money

If you work hard, provide value to people, and they give you money, the value of your money is constantly being robbed by corrupt governments and central banks. This is why you can’t just put your money under a mattress for 50 years and preserve its value. If you could, I wouldn’t be writing this article and there wouldn’t be any point for bitcoin to exist. We don’t notice it because the theft is slow and the process is too complicated for most people to understand, but it doesn’t make it any less immoral and wrong. Storing your wealth is a human right just like speech, owning property, having children, and so on. People in power aren’t going to just walk away from free money, though. You can’t just expect them to stop being corrupt. In the past, the only way to acquire freedom was to fight for it, but bitcoin gives us a bloodless alternative: simply trade your broken money for good money. For the first time, there’s an unstoppable competitor to your government-issued fake money.

Related reading : The US Dollar Is A Ponzi You Shouldn’t Invest In

The Argument Against Storing Wealth

Believe it or not, the argument I just put forward goes against most mainstream thinking which believes the government should be in control of the money supply and without the wise stewardship of the central bankers printing money, we dirty, ignorant savages would ruin the economy by hoarding all of our money and not spending it. We’d rather starve to death in holes in the ground then spend money, apparently. Without someone slowly burning away the money and forcing us to spend it, we’d go into a deflationary death spiral. In my opinion, this is blatantly absurd and transparently convenient for those in power, and the mental gymnastics needed to believe it are vastly complex.

What if you disagree? Where do you vote for central bankers? Where is the people’s voice reflected in the central bank’s policies? No where! You don’t vote for central bankers, silly! This isn’t a democracy or a republic. You’re too dumb to be trusted with the magical workings of money. Pay no attention to the man behind the curtain!

Bitcoin changes this. Now, if you disagree with the premise that we shouldn’t be allowed to save our wealth, you can just buy bitcoin and hold it.

How Does Bitcoin Let You Store Your Wealth?

The price of bitcoin is unstable, but that’s a temporary result of how small and young it is. A large fraction of the bitcoin price is from people treating it like a speculative tech stock. When the markets are fearful, like they are now, the price of bitcoin and other speculative assets drop, like tech stocks. These investors don’t really understand the long term value of bitcoin or else they wouldn’t be selling. Everyone gets the price they deserve. So if you understand the technology, the value of sound money, and have a low time preference, you’re going to get a great price no matter what the price is. If your time preference is high and you need money now, don’t put much of your wealth in bitcoin. It’ll be there later when you want to store any extra you have. It may go up or down a lot in the short term, but in the long term, it’s going up.

Most importantly, there will only ever be 21 million bitcoin. There’s no CEO or company in charge of bitcoin that can change this. The government can’t just print more bitcoin when it wants to pay for something like stimulus checks or invading another country. The fixed supply of bitcoin is totally different than what we have right now in dollars and is a lot closer to how gold works. The problem with gold is that its supply is inflated by ~2% a year from gold mining. Although some of that 2% goes into industrial uses, there’s nothing preventing humanity from stumbling across a large gold deposit, discovering some means at creating it, mining it from space, and so on. In fact, a recent gold deposit was recently discovered in Uganda which is estimated to have ~320k tonnes of gold. Since the entire world only has ~170k tonnes right now, this represents a potentially large increase in the total amount. This will make gold worth less than it otherwise would have been worth unless it’s mined very slowly.

Related reading : Bitcoin Is Digital Scarcity

Not only is bitcoin not inflatable, but it’s also digital. You can store it in your head as a dozen “seed words”. Or you can have it on your phone. You could even have a normal wallet secured behind a password that you could give up if seized by the authorities and a second hidden wallet only revealed by a different password or derivation path. It’s just data and all the clever tricks and toys of hiding data can be used. You could store your bitcoin on a wallet that requires one or multiple trusted third parties to sign off on any large transactions.

Economic slavery isn’t binary, it’s a spectrum. If you get to keep 0% of your wealth, then you’re 100% a slave. If you can keep 50% of your wealth, you’re “only” 50% a slave. Consider that the middle class in the united states pay 30-35% in income taxes. Add to that all the other taxes like sales tax, state tax, property tax, inheritance tax, licenses and fees, etc. Then remember that everyone loses 10-20% of their wealth every year due to inflation. You have people who are 60-70% economic slaves who work January, February, March, April, May, June, and some of July just for the government. And this is just if everything goes as expected, but what happens over and over again throughout history is the government creates too much money, which leads to hyperinflation, and everyone is greatly impoverished, lives are ruined, babies starve, and society takes decades to recover.

Do you feel like you’re getting good value from your government? When I talk to people in smaller countries, even those with +50% tax rates, people often say they do. This is probably because their government is smaller, more homogeneous, and more beholden to the people. But in the united states, the federal government is huge and growing, meddling all over the world, giving out money to corrupt governments, and the politicians are completely out of touch. Do they treat you like a valued customer or as a slave? Does Apple have to use violence to force people to buy their products or do people pay for them voluntarily? Do charities have to threaten to freeze someone’s bank account if they don’t donate or do people give freely because they believe in the work the charity is doing?

The historian and economist Thomas Sowell once asked his history professor where slavery came from. His teacher quickly responded: “That’s the wrong question. Slavery has been around forever. The real question is where does freedom come from.” In the past, freedom has come from brave men and women sacrificing their time, reputations, labor, energy, and in some cases lives so they could wrest some meager measure of independence and liberty away from the sociopathic, narcissistic, domineering hands of those in power. The bitcoin revolution doesn’t need to be as brutal. As long as you have a means of communicating, like the internet, and as long as there’s someone who’s willing to trade bitcoin for pseudo money, there will be an escape to self sovereignty and there will be a way to signal to the central banks that you’re not going to play their rigged game.

Is Bitcoin Really The Answer?

You don’t think about something until it stops working and it becomes a problem. This is normal and even necessary because reality is infinitely complex and you need some filtration mechanism to filter out the 99% that doesn’t matter and focus on what’s important. Most people don’t fully understand their cars, computers, the internet, their own bodies, and so on. You know how to use these things but they don’t manifest themselves in their entirety until they break and you have to figure out what went wrong. As a species, our money is broken. Most currencies in history have failed just like most species have gone extinct. The effects of the broken dollar are just now starting to be felt.

If you’re not having problems or you don’t appreciate the value of sound money, then congratulations, you’re the beneficiary of vast financial privilege that most of the world doesn’t enjoy. As I’ve written about previously, the world is sick and dying from broken money, and the effects used to be limited to ascending countries, but with the developing economic crisis, a lot of the lower and middle classes in descending countries are starting to be rudely woken up. They’re looking around for scape goats and many are starting to point fingers at the broken money. You can tell from all the inflation memes on Twitter and Reddit. Kids growing up in this environment are going to instinctively understand the central banks are not their friends and are not the wise stewards that you’re indoctrinated into believing in university economics classes.

If you evaluate money as a technology, bitcoin is clearly superior. It’s programmable internet money completely immune to corruption. It’s a fair playing ground for everyone. Even if you believe central banks should inflate the money supply, you can’t deny the temptation to over-inflate is irresistible and historically almost all monies have failed because of this. You also have to admit that monopolies are generally a bad thing. Why not have some currency competition? If government issued paper money is superior, it’ll win in the long run and you can ignore me. But do you really think people will choose to have their money inflated when there’s an alternative? May the best money win.

The post Storing Your Wealth is a Human Right appeared first on Bitcoin News.

https://bitcoinnews.com/bitcoin-fixes-everything-broken-money-ruins/

“Bitcoin fixes this.” — it’s a meme you’ll see if you spend any time talking with Bitcoiners. Dog pooped in the living room? Bitcoin fixes this. Late for work? Bitcoin fixes that too. Ok, maybe it doesn’t fix everything, although I could make a straight faced argument how Bitcoin could possibly fix those. In truth, an absolutely monstrous number of problems are created by broken money and it’s completely not obvious that it’s because of the broken money. In this article, I want to explore this a bit and think though why inflation, the primary reason our money is broken, is the cause of so many woes and why Bitcoin fixes this.

Related reading : The Tragedy of Fiat Money

What is Inflation?

When I’m talking about inflation, I specifically mean the increase in the money supply. If the number of dollars goes up but the number of goods and services stays the same, then prices go up. How this all happens exactly is quite technical, varies from country to country, and other people have written about it better than me. Most people I talk to about inflation are so immediately put off by how abstract it all seems with the numbers and jargon. I want to avoid all that and focus on what almost everyone agrees on:

• Central banks create money
• Prices go up
• Wages don’t go up as fast as prices

These aren’t in dispute. Indeed, the stated goal of the Federal Reserve (aka FED), the central bank of the united states, is to inflate the money supply by 2% every year to encourage spending. The dispute comes from whether or not inflation is a good thing. To briefly summarize the argument in favor of inflation: you have to encourage people to spend or they’ll hoard their money, businesses will collapse because no one is spending, people will lose their jobs because businesses are collapsing, and so on forever until we all die poor and lonely.

Personally, I think it takes a great deal of education to believe an argument so obviously garbage. People won’t hoard their money — we all need to eat, and we all want nice things. Economists are a little too incentivized to come up with a theory for why the state should be allowed to get something for nothing. Regardless of any technical faults with the argument for inflation, it’s completely immoral because it requires violence to enforce. I’ll leave it to others to explain in detail why the argument for inflation is bunk. In this article, I just want to focus on how the stated goal of inflation ruins everything.

Inflation Ruins Products and Services

Let’s say you sell hamburgers. If you want to stay in business, you have to sell your hamburgers for more than they cost to make. Let’s say you can make high-quality, deluxe hamburgers for $4 and sell them for $5.

Now comes along inflation and beef prices have gone way up, the gourmet buns you use are more expensive, and so on. Your costs are driven up to $5. What are you going to do about the sale price of your hamburgers?

1. Keep price the same; go out of business
2. Raises the price
3. Lower quality

Option #1 is clearly out of the picture. You either have to raise the price or lower the quality or some combination.

Raising prices could have a very negative effect. There’s competition who’s willing to sacrifice quality to keep prices as low as possible. Maybe they can leverage their brand recognition, better marketing research, adding sugar and fat, and other psychological tricks. There’s a big difference between having 0 hamburgers and having 1 hamburger, but there’s not much of a difference between having 1 hamburger and having 1 expensive, gourmet hamburger. Lower prices will win for most people. Your choice is to compete by slashing quality or go after the much smaller, more affluent market willing to pay a premium for a top-notch hamburger.

Let’s say you want to maximize your profits so you decide to reduce quality. You don’t want to tell your customers quality has gone down. You try and hide it. You buy cheaper beef which isn’t as nutritious and takes more work to make it taste as good. You have to cover up the flavor with salt, flavored oils, and other spices. You have to switch to a mass produced bread which is optimized for shelf life instead of flavor so you can save money on spoilage. You switch from free-range eggs with beautiful, nutritious, yellow yolks to bulk-produced, tasteless eggs. And so on, and so on, for every ingredient. Each replacement brings your costs down but the product suffers a death of a thousand tiny cuts. Eventually you have a product which doesn’t taste as good, has more preservatives, and isn’t as nutritious.

What’s worse is that everyone is doing this! Even if you kept your ingredients the same, the people making those products are facing the same dilemma to cut quality or increase prices. Even if you kept trying to make your gourmet hamburger, all of your input ingredients are slowly getting worse or more expensive.

Related reading : How Bitcoin Protects Against Inflation And Currency Devaluation

No one notices because everything gets worse at an insidiously slow pace. Unless you’re over 100 years old, slowly increasing prices and decreasing quality is all you’ve ever known. With the increases we’ve had in production efficiency due to technology, specialization, and global trade, we should be living in a utopia of increasing quality and decreasing prices. Instead we get the opposite! Quality goes down and prices go up. All so the people in charge, that you don’t vote for, can print money and give it to their friends, all for your own good.

Inflation Ruins Finance

Your money is constantly losing value — it’s on fire. How can you save for your future, for your retirement, for your children? The only choice most people have is to “invest” by gambling in the stock market. It’s not called gambling, of course. It’s given a more reasonable, official name like “401k retirement account” or “Roth IRA”, but it’s all the same: you give your money to someone, hope they make 1,000,000 correct decisions about what stocks to buy and sell and when to time everything, and pray they can just beat inflation.

Lots of people have retirement accounts. That means lots of money is going into the financial sector. This creates a huge incentive for all the top talent to work in finance and drains them away from other industries. Instead of starting a business building something, creating innovations in the medical field, innovating some new technology that’ll make all of our lives better, they solve another problem, one created by government: it’s so damned hard to persist the value of your labor through time. Huge, powerful financial companies are created and fed by all of the money from retirement accounts pouring into the system. These companies can then use their power and influence to corrupt the government. There’s a revolving door between banks, the SEC, and the FED. They’re all in bed together and as a cold-eyed capitalist, I don’t blame them for making the rational decision.

And all this trading is to beat inflation, remember? The Federal Reserve targets 2% inflation per year but their official numbers for 2022 are closer to 8%, and that’s with all of their bullshit hedonic adjustments. Real inflation is closer to 17% if you go by the 1980s method of calculating.

Turns out you can’t lock down the economy for 2 years and print out a bunch of free money for people without some consequences. Since 2012, prices have been inflating at 10% a year. Making a 10% return with stock trading is an extremely good year, and even if you can manage it, you’re just breaking even.

Inflation Ruins People’s Morals

The stated goal of inflation is to discourage saving and encourage spending and that’s exactly what it does. If you put your money under a mattress or into a savings account, the value is evaporating every year. Might as well spend it! This way of thinking leads to ruin.

The ability to forgo present consumption for increased future consumption is core to what makes humans different from other animals. The famous Marshmallow Experiment showed that children who could control themselves and save for the future did better on average in future test scores. This is essentially what the Gom Jabbar tests for.

This scene from the sci-fi classic Dune. Paul is being tested if he can endure his hand being in a box which causes him pain. The pain grows over time and he dies if he takes his hand out.

“It kills only animals, Let us say I suggest you may be human. Steady! I warn you not to try jerking away. I am old, but my hand can drive this needle into your neck before you can escape me.”

―Reverend Mother Gaius Mohiam while testing Paul Atreides with a Gom Jabbar

With inflation, savers are punished and spenders are rewarded. This creates a society obsessed with consumption. People ruin their futures by over consumption and going into debt. This harms society because of having morally strong people who’ve been taught from a young age that saving pays off, we have a bunch of people living paycheck to paycheck with no savings for an emergency. And what are they buying with all of this consumption? Increasingly cheap and inferior products!

When your mind switches to a Bitcoin standard, you’ll find yourself constantly talking yourself out of buying stuff because you know you can just buy Bitcoin and it’ll be worth more later without any work. Why shouldn’t it be this easy? You worked hard for your money; why shouldn’t it be worth more as society gets better at making stuff? You start to think in terms of how to work harder and smarter and save more. This lets you take risks as you get older and maybe start a business, invest in your community, donate to charity, etc.

Inflation Ruins Government

Check this out. It’s a map of all the countries the united states has “intervened” in.

How do you suppose the government paid for all this? Taxes? No, no. If you had to raise people’s taxes to pay for your endless wars, the great unwashed masses might get suspicious, or worse, angry. With inflation, you just fiddle with some numbers in a database and poof! you have more money and no one is the wiser. Now, you’re free to give this money away for “free” to encourage everyone vote for you. When the economy invariably suffers, you can just blame someone else!

Even if you believe the government should have the ability to print money because you buy into the mainstream argument that they’re saving us from ourselves, you have to admit that having access to the money printer is a huge temptation and there’s very little public understanding or oversight into how it works. We just sort of trust whoever is in charge of the central bank is really smart and is totally trying to keep the economy in tip-top shape.

Related reading : ‘Rich Men North of Richmond’ Artist Rejects $8 Million Offer From Music Industry Giants

How Bitcoin Fixes Everything

There will only ever be 21 million bitcoin. As we get better at making stuff, there’s more stuff to buy, and there will still only be 21 million bitcoin chasing an increasing number of goods and services. This means the prices for things in bitcoin will go down as the purchasing power of your bitcoin goes up. Importantly, you can’t get rid of bitcoin — it’s an idea. Governments can ban it, sure, and they could ban the internet too, I guess. If they ban bitcoin, all of the bitcoin businesses, talent, innovation, and tax revenue just go elsewhere. Meanwhile, regardless of the ban, people will continue to sell their increasingly worthless fiat for real money: bitcoin.

Related reading : Bitcoin Is Digital Scarcity
Related reading : Warren Can’t “Throw Darts” At Bitcoin Because It’s Just Code

If your value is in bitcoin, the government can’t rob you through inflation. They could beat you with a rubber hose, I guess, and get you to reveal the private key, but, on the whole, the cost of seizing your property goes up. As the cost of stealing from you goes up, governments have to rely on you giving money voluntarily, and they have to treat you more like a customer instead of a tax cow. As governments have less ability to pay for stuff with inflation, they have to focus on things people actually want. All the wars, waste, corruption, and boondoggles slowly fade away.

With bitcoin, you don’t need to gamble in the stock market to save money. You don’t have to incentivize stock traders and giant financial companies. You can just buy bitcoin. Done. All of those clever, hard working stock traders can now go work somewhere else and solve real problems instead of ones created by government. You don’t have to hope the FED doesn’t tank the economy and destroy your life’s savings in your retirement account right before you retire.

Fix the Money, Fix the World

Money is information. If I do work for you and provide value, you give me money as a way of recording how much value I provided. Money is a value of how much you’ve helped your fellow man and how much value you’ve added to society. If people are giving you money voluntarily and you’re not lying or using violence, then the amount of money you get is a proxy for how much value you’ve given society. If government distorts this mechanism, this information, by artificially assigning itself more value, it throws the system into chaos because everyone’s value, information, money is on fire. The world is worse and in subtle, insidious ways that are hard to put a finger on.

People have been sounding the alarm about the dangers of inflation since forever. Maybe the warnings fell on deaf ears because people were too busy, too distracted, and the damage is spread out so thinly over time. Maybe it didn’t matter because the government forcibly confiscated everyone’s gold.

Related reading : When the US Government Seized All Citizens’ Gold

Bitcoin doesn’t suffer the same problems as gold. Gold is easy to confiscate because it’s heavy and hard to move around. You have to pay people to custody it and you have to empower intermediaries to verify it exists and coordinate transactions. Bitcoin doesn’t have these problems. It’s weightless and can be sent to anyone anywhere with no one’s permission in seconds or minutes. Bitcoin’s much harder to confiscate because it can be reduced down to just 12 seed words you can just memorize — it’s like knowing an honest-to-god magic spell that gives access to money. If you’re worried about the $5 wrench attack, Bitcoin is programmable so you can use a collaborative custody multi-wallet such as Unchained.

Now is the time to vote with your value. If you don’t like inflation, if you believe in the separation of money and state, if you don’t like being robbed without getting to vote on it, simply trade your increasingly worthless fiat for Bitcoin. Start today. Buy a little every week. Join the future.

The post Bitcoin Fixes Everything Because Broken Money Ruins Everything appeared first on Bitcoin News.

https://bitcoinnews.com/decentralization-is-the-innovation/

This article was originally published Caleb Fenton on Substack.com.
It is republished here with permission from the author.

Bitcoin is new and interesting because it’s decentralized — no one is in charge and no one can be in charge. This is an extreme design decision with serious trade-offs which almost no other crypto projects have attained. In this post, I’ll explain why decentralization is special and how to evaluate how decentralized something is.

What is Decentralization?

Simply put, it means there’s central authority like a company, person, small group, etc. who’s “in charge”. In a decentralized system, everyone who participates influences what the rules are. This may seem strange but it’s just like language. There’s no King of English, no President of grammar, yet we all somehow agree on what words mean. We come to a consensus without anyone deciding the meaning of words by fiat. The concept is simple, but the implications are profound.

Why is Decentralization Special?

Decentralized systems are incredibly durable — they’re hard to change and even harder to shut down. Continuing with the language analogy, you might think dictionaries define words, but they merely record usage. They’re descriptive rather than prescriptive. If you want to coin a new word or change a words meaning, you have to get enough people to agree to go along with it, and this can take years.

This is annoying because it’s hard to “fix” all the the weird words and spelling rules, but it’s also great because no one can easily “attack” English by redefining or deleting words. However, words still change in meaning over time but it takes a while to get enough consensus. For example, in English, the prefix “in-” usually means “not”. This rule is generally consistent and people like it, so eventually the word “inflammable” changed from meaning “can burn” to “can not burn”. Don’t believe me? Check out this video from 1937 about the Hidenburg to hear it used in the old way:

“Inside the silver envelope are 16 separate gas bags — each filled with hydrogen — a highly inflammable gas.” — 0:33

In Bitcoin, changes that make sense are adopted but it takes a few years for everyone to debate the issue and for consensus to be achieved.

The exception to slow change is when there’s an extremely natural and acceptable change which attains a rapid and overwhelming majority consensus. For example, you probably remember when the verb “google” was coined. The search engine was such an amazing success and everyone loved it and used it all the time, and the language needed a word that meant “searched for something online”, so that was coined quickly. In the same way, if a security flaw was discovered in Bitcoin, the community would rapidly converge on a solution and would rapidly adopt it, because there is a huge need.

I would absolutely love to geek out about linguistic oddities like the history of inflammable, how data, media, and agenda are all plural, why we have ruthless but ruth is gone except for in names, why methodology is a stupid word, the debate on using impact as a verb, and so on, but I’ll spare you and just stick to Bitcoin. You’re welcome!

There were several attempts at a digital currency before Bitcoin such as DigiCash and e-gold but they were all centralized. As soon as they became popular and started to threaten the monopoly on money or regulators, they were swiftly and easily shut down. In many ways, Bitcoin isn’t the first cryptocurrency; it’s the last. Bitcoin has survived over 13 years, mostly unchanged, despite relentless attacks and attempts at subversion from extremely well-funded and powerful groups. And it did this because the protocol and the community have embraced decentralization.

Is Decentralization A Spectrum?

Centralization is appealing because it makes everything easier and faster. The argument in favor of centralization is that with just a little centralization the design constraints are significantly reduced which allows for things like scaling and neat features and it’s also a lot easier to make quick, decisive changes in the future. For example, Rome was normally decentralized in the form of a republic but in times of crisis they would centralize under an elected, temporary dictator who could cut through the red tape and get shit done. I’m just one person, I don’t know everything, and the market will ultimately decide who the winner is, but I think this is a disaster if the goal is to become a global monetary standard or a threat to any government anywhere.

I believe decentralization is more like a step function — like being pregnant. You’re either highly decentralized or you’re centralized with coercible points of failure. If there’s a throat to choke, it’ll get choked. Decentralization isn’t important until you’re attacked either internally or externally, and you’re not attacked until you’re a big enough target. If a submarine has a hole in it, it’s not a problem if it’s floating on the surface. In fact, you can argue that the hole is useful because it lets fresh air in, it’s not too hard to pump the water out, designing a pressurized submersible vessel is really hard, etc. However, if you want to go deep into a mysterious trench at the bottom of the ocean full of giant monsters, your submarine will implode way before it gets there. Bitcoin assumes it’s going to the bottom of the ocean.

How Is Bitcoin Decentralized?

Bitcoin is developed under the assumption that it will be attacked by the most powerful organizations on the planet. This has led to a design which:

1. allows anyone to run a fully validating node on cheap hardware with limited internet connectivity
2. respects and incentivizes miners who invest a lot of money into securing the network by being predictable and not making their investments obsolete by suddenly changing rules or algorithms
3. carefully considers the game theory, incentives, costs between all the various stake holders in the network

The stake holders can be broadly defined as:

• Bitcoin developers — Developers who maintain the core software, debate technical merits of changes (many of which aren’t controversial)
• Wallet developers — Have the difficult task of making bitcoin easy to use for normal people while keeping up with the insane rate of change
• Miners — Invest large amounts of money and energy into mining equipment to secure the network and are in turn rewarded by the network with fees and newly created bitcoin
• Node operators — Validate, relay, and store transactions. If you wanted to delete bitcoin, you’d have to shut down every single node. All miners are necessarily node operators.
• Users — People who store their value and transact in bitcoin. These are merchants, customers, non profits, charities, etc.

Bitcoin developers control the code, but they can’t change Bitcoin’s rules in a way the other groups don’t like because the other groups could choose not to run the new code. In the same way, miners provide value by securing the network, but they can’t just decide to give themselves more Bitcoin or node operators could say their transactions are invalid and users could simply not use the work from those miners. It’s a system of carefully considered checks and balances and no one group controls everything. If people don’t like how bitcoin works, they’re free to fork at any time and make a competing protocol.

What About Other Crypto Projects?

It would take ages to go through every crypto project and convincingly argue which are bullshit and which have merit. Instead, consider the questions below when evaluating. I’m going to pick on Ethereum a bit because it’s the second biggest crypto project.

How Hard Is It To Run A Node?

You can run a full Bitcoin node at home on a Raspberry Pi, a 600GB SSD, and over Tor, meaning the internet can be quite slow.

By contrast, a full “archival” Ethereum node requires much more expensive hardware such that most are run on AWS, which is a single point of failure itself. Additionally, it requires a 2TB SSD and the blockchain is growing much faster because Ethereum has bigger and more frequent blocks than Bitcoin.

_{(Editor’s note : Currently Ethereum full node size sits at 680 GB according to Blockchair.com data and a full archival node takes up about 15 TB of data according to data from Etherscan.io)}

Ethereum advocates would say they have a some complex solution which allows sharding and pruning and in the end only a few people need to run archival nodes so this isn’t a problem. Ok, maybe, but regardless, with increased complexity comes increased risk that something doesn’t work as intended.

Has This Project Been Attacked Before? What Happened?

Bitcoin has been attacked many times. There’s even a book about it: The Blocksize War. Some people wanted to upgrade the protocol to allow for more flexibility and scale, but it broke a secret technique some miners were using to have an advantage. It led to a long debate in the community about how large a block should be. Eventually, the majority decided to preserve decentralization by keeping the block size small. This means the blockchain grows slowly which keeps it easy to run a node and encourages people to optimize how they batch transactions, build layer 2 solutions, etc.

Ethereum was attacked during the aftermath of the DAO hack: Understanding The DAO Attack. There was a smart contract that raised $200m. A hacker found a bug and started stealing money from the smart contract. The community was split into two camps:

1. Let’s shut down Ethereum, undo the hacker’s transactions, and make it so that this never happened. This technology is new and mistakes will be made so we should be forgiving if enough people in the community agree.
2. Transactions should never be censored. If Ethereum demonstrates that it can censor transactions now, it’ll be forced to in the future by governments. If a few charismatic individuals can convince the community to roll back a transaction, it sets a dangerous precedent.

This disagreement caused Ethereum to hard for into Ethereum (ETH) and Ethereum Classic (ETC). The majority of the network’s value went with ETH and now there’s the open question of what if this happens again? If Putin kidnapped Vitalik (the creator of Ethereum) because he didn’t like a certain transaction, can it be undone?

Related reading : Ethereum Is The Mother A**hole From Which The Shitcoins Spring

How Is The Network Secured?

In Bitcoin, the network is secured by proof of work mining and Nakamoto consensus. This protocol has stood the test of time and has been producing blocks every 10 minutes for over 13 years virtually unchanged despite numerous attacks. Miners are rewarded for their contributions by getting new Bitcoin for every block they mine as well as transaction fees.

Ethereum has recently switched away from proof of work to proof of stake. There’s a big debate on if proof of stake is: 1.) actually new and 2.) offers the same security guarantees. For the record I don’t think it’s new and I doubt it’s secure since it hasn’t stood the test of time, but smarter people than me have talked about this elsewhere. I just want to focus on two inarguable facts:

1. Ethereum miners have been rug pulled. If you invested $100k into Ethereum mining and secured cheap electricity in the hopes that you’d make a return on investment after a few years, you’re shit out of luck.
2. Those with the most Ethereum will have the most authority and there was a massive Ethereum premine where a bunch of Ethereum was given out or sold to unknown parties. We don’t know if Vitalik + the Ethereum foundation own 60% of all Ethereum.

Summary

It’s not clear that a cyrpto project will invariably explode if it’s the least bit centralized. However, it’s certainly not suitable to be a global monetary system and all of the attacks that will come with that. Additionally, without decentralization, it’s not really new. We already have digital assets in the form of video game items. I have friends who have sold Counter-Strike knife skins for hundreds of dollars. We already have distributed computing platforms like Spark and Hadoop.

If something isn’t new or innovative, why do people care? Because we’re in a speculative craze. People want to be in on the ground floor for the next Bitcoin and hope that their chosen projects goes “to the moon” but they don’t realize that decentralization is the true innovation. Everyone’s money is corrupt and on fire, and they’re desperate, so they don’t think too deeply about threat models and the properties of sound money.

Stay humble and stack sats.

The post Decentralization Is The Innovation appeared first on Bitcoin News.