by James Corbet, The International Forecaster:
…the blockchain can be used to create digital currencies that represent the very vision of a totalitarian tyrant’s wildest wet dream.
Yes, the blockchain is truly revolutionary. Yes, bitcoin is Tulipmania 2.0. Yes, cryptocurrency is a nail in the coffin of the bankster parasites. Yes, digital currency is a tool of the totalitarian tyrants. No, these statements are not contradictory. But don’t worry if you think they are. You’re a victim of the bitcoin psyop.
What’s the bitcoin psyop? Well, look at a headline like this: “Former Chairman of Federal Reserve to Speak at Blockchain Conference”
If you immediately think “Aha! I knew it! The Fed is behind this bitcoin nonsense, after all!” then you might want to stop and contemplate this headline from two years ago: “Ben Bernanke: Bitcoin Has ‘Serious Problems’“
Do you think there’s some kind of contradiction here? Or do you think that Bernanke has “flip-flopped” on the issue? Or do you suspect that Bernanke was always secretly behind bitcoin but couldn’t admit it until now? If so, then you have fallen for an embarrassingly simple trick. That trick is to use the words “bitcoin” and “blockchain” and “cryptocurrency” and “digital currency” interchangeably, as if they are all the same thing. They are not.
Confused? Well, fear not! Our good friends at the Bank for International Settlements have written a handy-dandy article that explains everything to you in simple, everyday language. They’ve even illustrated that article with easy-to-understand infographics!
Just kidding. Their unwieldy article on “Central Bank Cryptocurrencies” is a predictably hot mess of monetary jargon and Venn diagrams that somehow make things look even more complicated than they sound, like this and this.
Now, to be fair, their proposed new “taxonomy of money” has real explanatory power, and the diagrams that result are genuinely insightful, but it hardly makes for light bedtime reading. So, let’s see if we can make it a little easier, shall we?
A blockchain is a decentralized, cryptographically secured ledger.
The geeks in the crowd will appreciate the fact that the blockchain is a stupendously elegant solution to some incredibly complicated problems in the obscure recesses of arcane subjects like distributed computing and payment processing. But for the non-geeks, perhaps this will suffice: Some of the oldest documents ever discovered have been ledgers of one sort or another. Medical records, legal and business contracts, accounting ledgers; as long as there has been civilization, there has been the need for secure and accurate record-keeping of transactions and events. And since the birth of civilization there has only been one way to keep those records: a system where a recognized central administrator stores, secures and updates that ledger.
Until now, that is. With the advent of the blockchain, an accurate ledger can now be maintained without a single, central point where that information is stored, maintained or updated. Registrars? Notaries? You might as well be talking about farriers and chimney sweeps.
But talking about the blockchain is like talking about the printing press. Yes, it’s revolutionary. Yes, it will change the course of history. But what, specifically, does it print? Well, whatever you want it to, of course. A papal bull or the ninety-five theses, the 9/11 Commission Report or The Road to 9/11, a GMO cookbook or The Anarchist Cookbook, colorful pieces of toilet paper or Federal Reserve notes (but I repeat myself).
So what does the blockchain record? Well, whatever you want it to, of course. It can be used as a tool for creating smart contracts or registering land ownership or creating decentralized cryptocurrencies.
This is where bitcoin comes in. What’s bitcoin? Bitcoin is a peer-to-peer cryptocurrency whose transactions are recorded in a public blockchain ledger.
There are three things to note about this description of bitcoin.
Firstly, bitcoin is just one application of the blockchain ledger technology. They are not the same thing. Bitcoin is not blockchain. Blockchain is not bitcoin. Bitcoin uses the blockchain innovation to run an electronic payment system.
Secondly, bitcoin is a cryptocurrency. That means it uses cryptographic functions to secure and verify transactions on the network and to control the issuance of new units. Bitcoin conforms to a certain protocol, and that protocol defines the rules by which the bitcoin network operates. You can tweak those rules and create similar-but-separate payment systems, each with its own qualities. These bitcoin-like cryptocurrencies (Namecoin, Litecoin, Dash, etc.) are called altcoins.
Thirdly, bitcoin uses a specific kind of blockchain ledger called a “public” or “permissionless” blockchain. This means anyone can join the network and contribute to the maintenance of the ledger (“mining,” in the bitcoin parlance). There is another kind of blockchain, called a “private” or “permissioned” blockchain, that requires nodes to be invited to join the network or otherwise given permission to participate in maintaining the ledger.
And as a further level of analysis, it should be noted that all cryptocurrencies are digital currencies, but not all digital currencies are cryptocurrencies.
OK, this is starting to get confusing, isn’t it? This is about the point where we’d need to bust out the Venn diagrams and start colouring the overlapping parts, right? Well, if you’ve followed all of this, good for you. If not, don’t sweat it. The point for right now is that there are a lot of separate-but-related concepts here, and to talk about them as if they are all just one big monolithic thing is not just unhelpful but actually misleading.
So, let’s look at those Bernanke headlines again. “Former Chairman of Federal Reserve to Speak at Blockchain Conference” and “Ben Bernanke: Bitcoin Has ‘Serious Problems’“
Are you at least beginning to get a handle on how those headlines are not contradictory? How it could be that a central banker could be interested in blockchain technology but dislike the bitcoin application of that technology?
If not, think of it this way: the same DVD player that can play Century of Enslavement can also play The Federal Reserve and You. The same printing press that can print Crossfire: The Plot that Killed Kennedy can also be used to print the Warren Commission report. The same web browser that can take you to The Corbett Report can also take you to The New York Times.
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