Proof of Work (PoW) is slow, expensive, it wastes resources and is inefficient. But right now we don’t have a safer system.

Security is NOT based on mathematics, but on economics.

Those who perform the task successfully (miners) are granted two rights: they get an economic reward and are allowed to write a block on the blockchain. PoW is the only economic anchor bound to reality through economic incentives (profiting from mining and fees, in this way, tricking the system is economically inconvenient). All of this can be achieved through the expense of economical resources external to the online system.

It is PoW that creates immutability, not blockchain.

We often talk about immutability but actually we should analyze it because there are three factors that create it: political, technical and economical.

· Political, we mean the possibility of reaching an agreement on the will to modify a piece of data.

· Technical, whether it is feasible with the technology at hand,

· But the most important of all is the economical disincentive: only this can make double-spending impossibile, the raison d’être of blockchain.

To summarize:

Internet covers transportation. Mining covers security (thanks to the criptocurrencies that finance PoW). Blockchain solves the problem of double-spending (even insured by a previous Smart Contract).

Blockchain with cryptocurrency is a decentralized solution to the problem of double-spending for a digital asset bearer.

The bitcoin system is designed as architecturally decentralized. The decentralization of the bitcoin system is:

· Political, because there are no permissions to ask to get in.

· Economical, because mining is distributed, it isn’t based on “one node one vote”, because it would require authentication and to avoid being under attack (e.g. Sybil attack) we need to prove we spent a capital, we used some “energy”. For this reason, better than “one Cpu one vote”.

· Technical, because there isn’t a “single point of failure”, neither technical nor human.

For this reason the blockchain of Bitcoin isn’t a “ledger” where you have to keep record of everything, but only a log that tells you which transaction comes before the other. There is nothing of the ledger here, because the PoW isn’t interested in transactions, it prefers to ignore them. The Bitcoin system doesn’t see debts/credits/transactions, but exclusively messages it ties in a block, without any check if not that of their presence in the system.

Like any asset to its bearer, the hold of the private key of the wallet alone (even anonymous) confers property of the digital asset. The blockchain of Bitcoin is thus a public register of the proofs of ownership of the instrument by (pseudo)anonymous subjects.

On the contrary, in permissioned systems, the users who can access a network are previously identified and their assets and transactions are registered (not to the holder but on an account book), then the property is determined by a valid entry on that register.

So, the resources to the bearer, by definition, don’t register their owners on a register.

Bitcoin and Ethereum are completely separated from the legal aspect, they’re born to be censorship resistant and so they keep to that libertarian ideal. Following this goal, all public interventions in this system is considered obsolete and counterproductive (eg. KYC/AML). If we wanted to make a comparison with Internet and the Intranets (in the permissioned scenario) we should say that they also try to make networks that put together a few companies.

If we stay focused on Bitcoin, this is the goal: to avoid the double-spending of digital assets by the bearer. Any other use case is (at the moment) just a fantasy.

Twitter: @massimochi