More dog coins…
You get the picture.
To date, there have been over 20,000 altcoins created. 99.9% of them have no legitimate use case. Their main purpose is to enrich their creators. Over time, most have seen their values tank by over 99% against Bitcoin, never to recover. The reason has to do with why Bitcoin is the most secure blockchain, and altcoins can’t compete.
They are not decentralized by definition. Some of them are even pre-mined, meaning the coins were all brought into existence at once by one central group of people.
According to crypto research firm Messari, the vast majority of proof-of-stake (PoS) coins saw a large portion of their pre-mined tokens go to insiders.
Here’s a great video on the subject (start at 2:00 for the Messari research):
Once the token’s price rises, insiders then dump it on the general public, pocketing a hefty profit.
Some coins have no supply limit, making them the same as fiat currency (e.g., Ether, Dogecoin).
These tokens are not sound money – they’re pieces of software.
And they are not decentralized because they have concentrated teams behind them. These teams can make unilateral decisions that impact the network. Users often have no say in these decisions (just look at Ethereum, the DAO hack of 2016, and the resulting ETC/ETH split).
Even protocols that use delegated proof-of-stake, like Steemit, can be taken over at a whim (if you’re not familiar with the Steemit/Justin Sun saga and how he took control of the entire network, read about it here)
Proof-of-work is the only sound and secure consensus mechanism. It has had over 13 years to prove itself.
This brings us to the topic at hand: why bitcoin is the most secure blockchain.
I don’t mean to sound like a “toxic bitcoin maximalist.” I have nothing against innovative new software projects. And I hold small amounts of Ethereum (ETH), Litecoin (LTC), and several smaller altcoins (Shiba Inu, when moon?).
But Bitcoin truly is different. There’s no marketing team behind Bitcoin (little b for the currency, big B for the network). Bitcoin is the only blockchain to have survived “in the wild,” as Saifadean Ammous put it at the Unconfiscatable conference in February 2020.
And bitcoin is the only currency with a fixed supply limit of 21 million, making it perfect, unconfiscatable money (yes, in theory, the supply limit could be changed, but in practice, this would be almost impossible, as a majority of nodes could just hard fork and maintain the original chain with its fixed supply cap).
Bitcoin is the most secure blockchain for a few key reasons, including:
- Pure decentralization
- The highest hash rate of any network
- The longest history
- A long list of competing altcoins that make for easier targets for attackers
Let’s examine each of these in more detail.
Decentralized Node Distribution
Bitcoin is the most secure blockchain in part because it’s the only network that can claim to be truly decentralized.
There was no pre-mine, ICO, IEO, or SAFT of any kind. There is no marketing team behind bitcoin.
In fact, there is no team of any kind behind bitcoin, period. There are only volunteer developers.
Other coins have entire companies built up around them. I’ve worked with many of the people behind these projects. They’re highly intelligent and motivated individuals. Their contributions to the technology sector should be admired.
But here’s the problem.
With other coins, the team can step in at any time and make decisions that affect the network. Even Ethereum, the second largest cryptocurrency market cap, saw its team intervene in the midst of the DAO hack of 2016.
It was decided that the network should hard fork so the blockchain could be rolled back to a time when the hack never happened. The result was the new ETH blockchain, with ETC being the original chain.
Some proponents may argue that “the community” made this decision together in solidarity. Even if it were true that some kind of democratic vote was held and this action was the will of most Ethereum users at the time, this misses the point. The goal of a decentralized monetary system is to avoid such governance structures, not re-create them.
A Hash Rate That Bests All Others
It’s no secret that bitcoin boasts 98% of the total hash rate of all proof of work coins in existence. Even after China banned bitcoin mining, the Bitcoin hash rate still managed to reach new record highs later on in the same year.
Why is this important?
At this point in time, taking control of the Bitcoin network would require more computing power than exists in the world. In the absence of a highly advanced quantum computer (approximately 100x more powerful than anything currently known to exist), there’s simply no way to compromise Bitcoin.
Decentralization and a high hash rate are a big part of why Bitcoin is the most secure blockchain.
This brings us to the next point – proof of work.
13 Years of Proof-of-Work
Coins that do not utilize the proof-of-work consensus mechanism cannot claim to be secure. Even those that do utilize proof of work but have very low hash rates are still vulnerable to 51% attacks, as Ethereum Classic (ETC) suffered more than once in 2020.
Consensus mechanisms like proof-of-stake show some potential promise, at least in the minds of their zealots, but are still unproven.
PoS is in its infancy. It remains to be seen how these networks will remain decentralized or respond to high-powered attacks. And attacking such a network only requires one thing – money. If Jeff Bezos cared to, he could take over every PoS network on the planet overnight.
And why do we even need to experiment with PoS in the first place?
We know that the Bitcoin energy FUD is a joke, yet this is one of the main points that PoS proponents point to as necessitating the use of an alternative means of achieving consensus.
Proof-of-Work: Wasteful or Net-Zero?
While much has been made of the “wasteful” nature of the energy-intensive proof of work process, the entire argument against proof of work is pure FUD.
The argument goes like this: the Bitcoin network uses as much energy as some small nation-states, and is therefore extremely wasteful.
On the surface, it seems like a reasonable assertion. Anything that uses such a tremendous amount of energy must be wasteful and harmful to the environment, correct?
But this line of thinking leaves out many key factors. This is no mistake. One of the most powerful rhetorical tools involves using bits of truth to spin a narrative that leads to a larger falsehood.
In this case, opponents of bitcoin never seem to ask the most important questions, such as:
- Where does the energy that powers the network come from?
- How much of that energy comes from renewable sources?
- How much of that energy is power that would’ve been wasted otherwise?
- How much value does the bitcoin network secure in comparison to its energy usage? How does this compare to other industries like gold mining or banking?
The answers to these questions are not hard to find. They reveal that bitcoin is the most green and efficient use of energy that human beings have designed so far.
In brief, the answers are as follows:
According to research from the Bitcoin Mining Council, bout 60% of the energy used for Bitcoin mining comes from renewable sources. This includes solar, hydroelectric, geothermal, and wind power.
Of the remaining 40%, nearly all of that energy would have been wasted otherwise. For example, solar-powered mining projects might partner with utility companies to buy their energy that isn’t being used during off-peak hours (at 3 AM, for example, utilities often have extra energy that otherwise goes to waste because no one is using it. There’s no demand and the energy can’t all be saved in batteries or something like that). This allows miners to make use of otherwise wasted energy without creating any extra carbon emissions.
The Bitcoin network secures over $400 billion as of today. When taking into account the value of transactions that are sent on an annual basis, the number is even higher.
To mine all the gold that is currently above ground in the world, which is valued at approximately $11.7 trillion, has taken many generations and used an amount of energy that is almost incalculable. Entire portions of the planet have been desecrated to create gold mines.
The number of carbon emissions created by the equipment required to extract the ore, refine it, and manufacture bullion or industrial gold is hard to even imagine. Few industries on the planet can say that they are dirtier, more wasteful, or more destructive than gold mining.
Bitcoin is almost a net-zero technology: the amount of carbon emissions generated is negligible. Bitcoin accounts for 0.1% of global energy usage. Almost everything else humans do creates more pollution than sending a transaction over the Bitcoin network.
Altcoins – Easier to Hack
If you’re a hacker trying to conduct a 51% attack or take control of a network somehow, you’re not going to even think about targeting Bitcoin. There’s no point. You’d need more computing power than exists in the world (quantum computers are, as of today, nowhere near powerful enough to compromise Bitcoin, as far as publicly available information can show).
Altcoins Are Not All Bad
Altcoins do have a purpose. That purpose is usually to serve Bitcoin in one way or another.
Litecoin is a great example. LTC can serve as a live testnet for Bitcoin. In 2017, for example, the Segregated Witness (SegWit) upgrade went live on Litecoin before going live on Bitcoin. When it became clear that things worked just fine on Litecoin, it seemed certain that the same would work with Bitcoin, and it did.
Ethereum is a similar example. All kinds of great applications have been built on top of the Ethereum network. Smart contracts are a wonderful invention (at least when they don’t get hacked, which they usually do).
But smart contracts have now come to Bitcoin. It’s only a matter of time before projects begin migrating to the most secure base-layer protocol. Add to that the Lightning network with its almost non-existent fees (10 to 20 satoshis on average, which amounts to less than $0.01), and projects will also solve their scaling problems (ETH gas fees are so high that it can cost $20, $30, even $50 dollars for a simple transaction at times).
While Ethereum could manage to scale if it upgrades to ETH 2.0, changes to proof-of-stake, and implements sharding, this will still make it vulnerable to the other problems mentioned. The network will become even more centralized and less secure.
All in all, it’s great that so many software projects are being experimented with. Some of them might prove useful. But most won’t survive. And very few, if any, ever wind up bringing the immense promises of blockchain to the world in the way their founders envision.
Why Bitcoin is the Most Secure Blockchain and Always Will Be
Altcoins are not in competition with Bitcoin. There is no way to compete. As far as holding monetary value and peer-to-peer transactions are concerned, Bitcoin will always be king. There is nothing to improve upon and no “next big thing” or “bitcoin 2.0” will ever be needed.
Bitcoin’s energy usage, scalability, transaction throughput, or lack of privacy or other functionality are all red herrings. They are non-issues. In no way do they detract from the underlying value proposition that Bitcoin has to offer.
To recap: here’s why bitcoin is the most secure blockchain:
- True decentralization
- Proven proof-of-work consensus
- Extreme security
An alternative blockchain cannot achieve these feats in the same way, nor is there a need for such a thing.
What do you think? Is Bitcoin the most secure blockchain? Or is there an altcoin that should be considered superior?
Leave a comment below with your thoughts.
Disclaimer: This article is for informational purposes only. Views expressed here are that of the author and shall not be considered investment advice. Invest at your own risk. I am not a financial advisor. Brian Nibley and BDN Content, LLC shall not be held liable for any investments that readers make.