The Bitcoin Standard: The Decentralized Alternative to Central Banking

by Saifedean Ammous

For any other computing process to be run using blockchain technology, it would need to fulfill two criteria: First, the gains from decentralization need to be compelling enough to justify the extra costs. For any process which will still require some form of trust in a third party to implement any small part of it, the extra costs of decentralization cannot be justified. For implementing contracts dealing with real-world businesses under legal jurisdictions, there will still be legal oversight relating to the real-world implementation of these contracts that can override the network consensus, making the extra cost of decentralization pointless. The same applies for decentralizing databases of financial institutions that will remain as trusted third parties in their own operations with one another or with their clients. Second, the initial process itself needs to be simple enough to ensure the ability to run the distributed ledger on many nodes, without the blockchain becoming too heavy to be distributed. As the process continues to repeat over time, the size of the blockchain will grow and become more and more unmanageable for distributed nodes to hold a full copy of the blockchain, ensuring that only a few large computers can operate the blockchain and rendering decentralization obsolete.