Judging Bitcoin and blockchain from your own needs: which one has a better future?

Chapter 0 Introduction

The recent rise in the price of Bitcoin has attracted a lot of media to comment on Bitcoin and blockchain. Blockchain technology is extremely popular now, while Bitcoin is facing a media attack. The media is enthusiastic about blockchain while besieging Bitcoin. The situation is very strange.

Is the media right? Who has a better future?

Chapter 1 What is blockchain?

Various media reports are consistently vague, and it is difficult to find accurate and clear definitions of what Bitcoin and blockchain are in their articles. But this is what should be written clearly, otherwise it would be misleading.

Blockchain is a ledger.

Our current accounting is done using double-entry books, whether it is a paper book or accounting software on a computer, such as Kingdee, UFIDA, etc., it is essentially a double-entry book.

Blockchain is another form of double-entry bookkeeping. Unlike current accounting books, blockchain books are open, transparent, and cannot be deleted or changed. The former means that anyone can access and review blockchain books, which is impossible in traditional accounting. The latter means that blockchain books cannot be forged, which is safer than traditional accounting.

Blockchain uses some technologies to ensure these characteristics, and various blockchain products will use various technologies to ensure these characteristics. And it is these technical details that ensure these characteristics, and different technologies will obtain different characteristics. But we will skip the technical details for now.

With these characteristics, blockchain accounting is more transparent, lower cost, more efficient, more secure, and more free for users than traditional accounting methods.

Precisely because the blockchain accounting method has these characteristics, the media is happy to praise it, and these are what the media praises.

Chapter 2 What is Bitcoin?

Bitcoin is a kind of blockchain. It is a set of accounting methods, which uses certain technical means to achieve the decentralization of this set of books. This represents three meanings: first, this set of books is stored all over the world, and any computer can download and store this set of books; second, the right to record books does not need to be undertaken by a specific institution or organization, but can be joined by anyone who is interested and capable and abides by its rules; third, the modification of the accounting format cannot be decided by a designated person or organization, but by a collective vote.

Then, the development of history was unique in that it defined the Bitcoin ledger as a currency through the free market.

As mentioned above, this monetary system is more transparent, lower cost, more efficient, safer and freer than legal currency.

In fact, using Bitcoin as a currency is just one way we participants use Bitcoin. Bitcoin itself is a ledger, and it can be anything in the form of a ledger.

Just like treating gold as currency is just one of its functions, gold is also used by us humans as decoration, industrial raw materials, etc. We humans have defined various terms to distinguish the various functions of gold, such as gold bars are a kind of currency, and gold necklaces are a kind of jewelry. But Bitcoin is in its early stages of development, and we don’t have such a clear definition. In order to write a more accurate article, I give the following definition:

In order to reflect that using Bitcoin as a currency is just one of our uses of the Bitcoin blockchain system, the Bitcoin blockchain system can be defined as a blockchain system with Bitcoin as its token.

Chapter 3 What does it mean to have a future?

This title may seem strange, but it is a concept that must be clearly defined in order to compare Bitcoin and blockchain.

The market acceptance is high and many people are involved in using it, which means it has a promising future.

What is compared in Chapter 4?

Because Bitcoin itself is a blockchain, we cannot say that Bitcoin is compared with blockchain. It should be more accurate to say: Which one will be used and accepted by more people, the blockchain system that uses Bitcoin as a token, or other blockchain systems that are not regarded as a currency or whose tokens are different from Bitcoin, the former or the latter.

Chapter 5: User Real Needs

It is actually very difficult to study whether a product will have market demand in the future. I generally use the following method (this is Li Xiaolai’s methodology): Analyze the product from three perspectives

1. Purpose;

2. Means;

3. Results.

For example, designing a blockchain product.

1. The purpose is to avoid making something that no one actually uses.

2. The method is: analyze your own needs first, and then find ways to investigate the needs of others.

3. The result of this method is: if we have this need ourselves, and through effective investigation we find that other people also have this need, then the blockchain product we design will at least be needed by ourselves and the people being investigated. Therefore, there is a high probability that more people will also have this need.

We use this methodology, especially the “means”, to analyze which one will be more in demand, Bitcoin or blockchain.

Bitcoin is successfully used as a currency in the market because it meets our real needs for currency and our dissatisfaction with legal tender. These real needs are: fairness in issuing currency; resistance to inflation; inability to make counterfeit money; freedom without borders; and inability to be frozen, etc. Obviously, Bitcoin is very successful in these aspects.

What if we want to realize other functions of the ledger besides currency? This is to ask what characteristics a ledger has that can attract more users?

For myself, I need a ledger with the following characteristics: transparent, cheap, efficient, secure, and free to use.

Take insurance for example. Whether it is the compulsory five social insurances and one housing fund I bought, or commercial insurance, it is inhumane and opaque! Expensive! Inefficient! Unsafe (who knows if I can get reimbursed if I get sick, and only lawyers can understand the various clauses)! Not free (countless documents must be provided when reimbursing)!

Blockchain technology needs to achieve these characteristics, but it is not something that can be achieved by just talking about it. Bitcoin has achieved these characteristics with great difficulty and has successfully passed the market selection. The most important means of Bitcoin is decentralization, which has enabled it to achieve these wonderful characteristics.

What about non-Bitcoin blockchain technologies? Let’s take Ethereum as an example. Ethereum is a blockchain technology platform on which various blockchain products can be easily constructed, and Ethereum is also the most popular product in the media.

Ethereum itself is too complicated, so complicated that few people can clearly understand Ethereum and the products built on it at this stage. I have participated in two Ethereum technical conferences, and the content was either English or code, and the speakers were all PhDs and senior engineers. It is really difficult for ordinary people to understand. I tried hard to read the Ethereum white paper, but I could only understand the basics.

Judging from the current data, such as the accounting speed and the cost of mining machines consumed in the accounting process, Ethereum's efficiency and cost are lower than Bitcoin.

What about security? Ethereum is developed in a centralized manner, and its development efficiency is very high. It is easy to make a hard fork, which is essentially contrary to security. The format of the ledger is more unstable, and of course less secure.

Finally, what about user freedom? This is related to the first feature of transparency. If the technology is too complicated, it will certainly not be transparent enough for users to use.

Chapter 6 Conclusion

We use the following criteria to compare blockchain and Bitcoin to see which one has more promise: more transparency, lower cost, higher efficiency, greater security, and more freedom for users to use.

From the perspectives of transparency, security and freedom, Bitcoin has obvious advantages.

From the perspectives of cost and efficiency, blockchain technology represented by Ethereum has more advantages.

But my conclusion is that cost and efficiency are meaningless without transparency, security and freedom. In other words, the latter two can be sacrificed for the first three.

So my conclusion is: blockchain technology with Bitcoin as its token will gain a larger market in the future development process, and more users will choose Bitcoin blockchain products.

Chapter 7 Conclusion

Clear concepts and methodology are the most powerful tools to avoid being fooled.