What is the price for a blockchain implementation?
Blockchain is the technology Bitcoin is based on.
But the blockchain cannot just be used to store wealth!
The blockchain could also be used to store contracts and copyrights. Different big players and states are currently implementing applications based on blockchain technology.
Fans of blockchain tend to just see the upside of the technology.
• get rid of the middleman (Banks in case of Bitcoin)
• security enhancement due to decentralization
• fair wealth distribution
Is there just an upside to blockchain?
Now, as the Bitcoin went to a relevant volume it is actually going through a real-life test and it will not sustain for different reasons!
Main blockchain issues
Same as the Bitcoin, blockchain is mainly based on cryptography.
We are paying a high price for Bitcoin mining through energy consumption.
Bitcoin mining is the process of encryption of the Bitcoin transaction.
A Bitcoin miner earns Bitcoins in the mining process for accomplishing the cryptography of a transaction. A study unveiled, that more or less 50% of the earnings through mining are spent on infrastructure, energy, and maintenance (This figure changes in a volatile price environment of Bitcoin).
Bitcoin enthusiasts favor the argument, that Banks are charging high fees for transactions to justify their business model.
If you think through the entire setup, Bitcoin also charges fees on any transaction within the cryptocurrency.
There is one difference!
The fee is not paid by the Bitcoin seller or buyer. The fee is paid by the community of Bitcoin owners and priced into the entire construct.
This would be the same as if gold diggers would be paid a fee by the financial system for their digging, pricing it into the gold price.
As long as Bitcoins can be created (there is a certain maximum defined in the spec) miners can get paid for creating Bitcoins, but when the maximum of issued coins will be reached, the Bitcoin environment has to finance itself, so miners have to be paid by the system itself and by those who own the currency.
Whenever implementing a blockchain, the same encryption process as with Bitcoin has to be applied and it costs real energy and infrastructure!
Let's think this through concerning a possible use case of the blockchain.
Let's suppose we create a blockchain for copyright issues, where creators can insert their creation into a blockchain as a contract (this is already existing).
The benefit of the decentralized blockchain would be, to secure copyright internationally so it does not depend on the states and their laws, normally involved in copyright registration (and charging a fee for their service).
This blockchain would get paid on the income side by those who use the copyrighted material (mainly distributors) and this fee should be paid to the copyright owner, right?
So far so good, but how do you pay the "copyright blockchain miners" who process the cryptographic calculations for the transactions?
The blockchain will have to be financed by somebody and somebody means BY ITSELF as no independent state or organisation is involved.
Copyright is one possible use case of blockchain but there are other ideas like a "Digital Identity" like a blockchain for real estate contracts, like a blockchain for production of agricultural goods ...
Conclusion and final thoughts
There is no free lunch in the markets and a perpetuum mobile does not exist!
We now know from the Bitcoin experiment, that costs in energy and infrastructure for processing encryption are substantial, so what are the costs for a blockchain?
Is the technology worth it or is it just an energy shredder?
Personally, I see the benefit of the different blockchain implementations for those who live in a state where their rights are not respected by a dictatorship.
I also see the benefit when it comes to cybersecurity due to decentralization of the key information. (In comparison, states and institutions are vulnerable to attacks and data manipulation).
In comparison with Bitcoin in my point of view, it will be difficult to spread the "Blockchain Mining" of other blockchain solutions like mentioned to enough parties to avoid cyber attacks and profit from the decentralization concept.
Then there is another issue concerning payments and value. As far as my understanding goes, all new coins and other blockchain solutions require to use Bitcoin to exchange the cybermoney into a real currency.
So the question is: DO YOU TRUST BITCOIN TO BECOME A PRESTIGIOUS CURRENCY?
We are now experiencing a 4.0 energy problem.
We are trying to diminish our energy consumption on a personal level but at the same time, energy consumption is growing exponentially through 4.0 tech revolution.
- Artificial Intelligence
- Quant Computing
- Internet of Things
The entire package of the 4.0 tech revolution is burning energy like never before.
A part of it might get covered by renewables but even Amazon's CEO Jeff Bezos mentions, that we would need to nearly cover the entire planet with solar panels to generate the energy needed in our datacenters and to run our technical infrastructure.
We have to solve BIG PROBLEMS during the next decades.
Where will we spend our energy?