One of the questions crypto enthusiasts get asked a lot of the time is what makes Bitcoin unique, and this is a multi-faceted question. There’s a common misunderstanding that Bitcoin has such great value because it was the first. This is not true! There were several prior attempts at digital money before the eponymous Satoshi Nakamoto invented the king of cryptocurrencies, including B-money, Bit gold and Hashcash (which was invented a full 10 years before Bitcoin was conceived).
Satoshi’s algorithm solved a critical flaw in the use of blockchain as a public ledger known as the Byzantine General’s Problem. In his version of the blockchain, the Byzantine General’s Problem is resolved by the miners who are like the Generals. Multiple nodes are required to validate transactions, which are like the messages being sent to the Generals, thus decentralising validation, and weeding out bad actors.
The concept of blockchain predates Bitcoin by almost two decades. So the value was never in blockchain but the way Bitcoin was able to utilize blockchain as a decentralized public ledger to democratically create, distribute and exchange value.
Bitcoin is not just a cryptocurrency. Bitcoin, in the broader sense, is a protocol capable of functioning as the network layer of a decentralized Internet. Bitcoin can therefore fix the Internet’s original sin, centralisation at the hands of a powerful few, and restore it to its originally intended form – a decentralized P2P network protocol.
Bitcoin is capable of remaining decentralized by allowing any participant in the network to access their own version of the truth in a very economical way. You can run your own Bitcoin full node on a Raspberry Pi. This allows you equal rights on the network and not have to delegate trust to a third party. Without being able to verify on your own, you’re just going from trusting bankers to trusting a random person on the internet.
What makes Bitcoin Unique and Anti-fragile ?
Bitcoin is not only time-tested but has proven to be doggedly anti-fragile because it allows any user (with sufficient technical capability) to run a full node. Every node is equal and they’re distributed all across the world on every continent. Bitcoin has never been hacked, and to this date remains one of the most transparent forms of currency on the planet, as everyone is able to view every transaction from the moment of mining to the current day.
But probably one of the most important factors in explaining what makes Bitcoin unique is that there is no requirement to trust a third party company or individual, because every holder can be their own bank. If you own the keys to your Bitcoin wallet (as opposed to keeping your coins on an exchange), nobody can take your funds from you.
Secondly, there is no Bitcoin incorporated which can be shut down by authorities, and this is one of the key elements which explains why many traditional financial institutions and governments have been so concerned with trying to find a way to shut it down. The long and short of it is that they cannot, but they can find ways to regulate an individuals ability to exchange fiat currency into crypto, and this has led to some high profile cases where banks and regulators have effectively shut down, or limited an exchange’s ability to trade in a certain jurisdiction.
What are the possibilities of exploitation?
Altcoins bring a lot of necessary innovation in every cycle, more so since Ethereum came along, but the problem with open, unbridled innovation is that, while it engenders infinite possibilities, it also breeds exploitation and self-seeking greed.
Initial Coin Offerings (ICOs) were all the rage 4 years ago. But thanks to exploitation, they have all disappeared. The idea of crowdfunded development of decentralized protocols wasn’t the problem. The problem was that without a native set of rules to prevent exploitation, greed will defeat innovation.
Necessary innovations will become impossible to stop once we are able to self-police cryptocurrency from greedy opportunists.