The various pieces that constitute the technology behind bitcoin, therefore the various tools used: decentralised system, open source system, digital signature, Proof of Work,
inflation schedule, difficulty adjustment algorithm, or the blockchain or timechain, which is the chronology that allows maintaining a unique version of the history of events, are not free.
Very often we hear these terms used in inappropriate contexts because we think that since they were used to make bitcoin something that actually works in the real world,
we think that, since it works for bitcoin, then we can extrapolate one of these tools and use it in other contexts
Often, however, this is not the case. It is not the case because in other contexts this piece of technology may not be necessary, not only is it unnecessary, maybe it even comes with costs,
which in the case of bitcoin we were willing to incur in exchange for the advantages of no longer having a central point that could be turned off, censored, closed or hindered.
Well, maybe in another application this cost has no reason to exist. For example, let’s think of the question “Where?”,
a question we answered with decentralisation of the system, a peer-to-peer architecture and an open source model, where everyone can see, copy and control the code.
This guarantees bitcoin the absence of a central point where the code is located, where the source is, where the data is located,
but on the other hand, makes it very difficult to develop business models similar to the technologies and applications that we use every day.
Think about a bitcoin wallet on the phone, developers who make a fintech mobile application to send money could make money on the patent, but with bitcoin it’s not possible because everything has to be open source
they could make money on the fact that they ask for fees, but in the open source sector this is not possible because anyone could take the code of that wallet and replicate it by taking away the fees or by taking away the banner ads.
Not only that, think about the digital signature. In the case of the digital signature we have a major security problem, we must keep our key secret and, as we have said, we can not be given a new one if we lose it.
Do you really want to use a system in your application where if the user loses a key you can not give them a second chance to access their funds? Let’s say that the security of the public and private keys is at the expense of the user experience.
A third case, for example, is the use of the Proof of Work and the bitcoin algorithm as a means to achieve a digital scarcity.
From a point of view of bitcoin, it is essential, because if we didn’t have this system, we would not have been able to introduce this digital value without a central party that could be censored.
However, if you have, for example, a system, an application, a use case that still requires a central party, then there is no point in recreating or regenerating a value like in the case of bitcoin.
The process of price discovery, which the market underwent in recent years and is still implementing on bitcoin, is a slow and painful process that was experienced with the significant volatility affecting bitcoin due to the fact that it is a new financial asset,
with little history, for which the market does not yet perceive the value in a stable way.
Whereas if we have a centralised system, we can simply use a centralised asset. The last trade-off to consider is privacy efficiency when using a blockchain.
Using a blockchain means that every node in the network must forever retain every change in the state of the system, hence every transaction.
Let’s repeat it, every bitcoin transaction that I perform on the blockchain must be stored, downloaded, disseminated and verified by every actor who will use bitcoin for the whole history of bitcoin in the future.
A person who will install bitcoin and run bitcoin in the year three thousand will have to download every transaction of those who bought a coffee in 2018.
This clearly limits enormously the scalability of the system but also the privacy of the system, we said that bitcoin was born to be something as private as exchangeable gold,
but this privacy is not really achieved if everyone keeps a copy of each transaction forever.
That’s why in reality many of the developments on bitcoin do not have to do with the use of the blockchain but with the attempt to limit the use of the blockchain.