Separating blockchain from Bitcoin

Coin Rivet columnist Irina Litchfield asks how we can change the way the advancement of blockchain technology has been held up

As we end the third quarter of this year with the return of volatility to the Bitcoin market, several points arise as positive markers and differentiators from previous crypto winters:

  • The progress in the development of blockchain technology continues its adoption through public and private enterprises despite the continued drop of alternative cryptocurrency prices throughout the year. 
  • Bitcoin’s hash rate is continuing to grow at an enormous rate. For example, since the summer, it would appear that 600,000 new ASIC chips (which are more efficient than ever) have come online. 
  • Crypto conferences across the globe continue to operate with consistency.


So why is this happening? How come it is so different this time?

One of the most obvious answers that comes to mind is… time.

We are finally arriving at the point where blockchain technology adoption is becoming independent from Bitcoin price. And that’s great news, because it is the technology itself that is going to bring us solutions for many infrastructure problems in so many industries.

Specifically, blockchain technology should help fix broken incentives structures, which are hanging over so many industries like an ever-growing parasite, taking advantage of the weakest and most innocent victims.

Let’s take a look at the finance industry as an example.

Traditional securities

In a nutshell, the traditional securities world functions essentially by taking advantage of the most unsophisticated investors.

Let’s take an existing popular company as an example. I won’t name the company as I do not want to point any fingers. I’m just using this example to get the point of broken incentives across.

This company does not charge commissions for your trades. Instead, it earns money via a deal it has with big, high-frequency trader (HFT) liquidity providers. The HFT shops generally make their business by being willing to take either side of a trade, because usually prices move about randomly. 

The risk they have is that sometimes a big trader like Goldman Sachs is going to actually take (or exit) a large position and they will move the price a lot (they get ‘run over’).

The reason that the HFT shop would rather trade with (against) the most unsophisticated retail customers (like users of the company I am referring to who are buying hopelessly complicated options spreads) is because those retail customers, by definition, lack the buying or selling power to actually move the price.

So, the HFT pays the company a lot of money to be able to trade risk free against these unsophisticated customers.

A better way

I think this is very wrong. And it does not have to be that way. There is a better way.

The reason why we have not been able to implement better incentives structures is not because an evil man is sitting somewhere on top and wants to take advantage of the weak. It is because we had limitations with the technologies that were available to us at the time. And through history, the incentives naturally worked out that way.

That’s terrible.

So how can we change that? How can we reimagine, reinvent, and establish incentives to benefit everyone?

We can apply conscious economics principles and technological innovations to make practical reality from what has only recently been described as a hypothetical possibility.

Blockchain technology innovations allow us to reorganise the outdated and abusive structures and benefit all players in the game.

Using the latest developments of these technological advancements, we should expect a better world not just for the traditional finance industry, but for many industries.

Those who will figure out how to implement these new structures will become new leaders of their respective industries, and I believe that it is exactly the reason why the Bitcoin price is not affecting the traction and adoption of blockchain technology negatively.

It is time to build new global standards.


Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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