Greed secures the blockchain, freeing capitalism on a global scale

James L. Salmon, Esq. 

Satoshi Nakamoto's ingenious Bitcoin protocol leveraged an age old human behavior, greed, to secure the Bitcoin blockchain. The token of value in the protocol, Bitcoin, increases in value the more secure the system becomes. Accordingly, all with a stake in Bitcoin - holders of Bitcoin and / or users of the blockchain - share a vested interested interest in securing the kingdom. That instinct, to preserve one's own resources, aka greed, incentivizes all stakeholders to act in a manner that enhances security of the system as a whole.

The protocol also enables peer to peer digital transfers of value within the system, without permission from a third party, trusted or otherwise and thus has the potential for exponential growth on the web. Releasing the power of capitalism over the web - and not Crony or Corporate Capitalism - will empower BILLIONS in poverty to participate in a system that raised BILLIONS out of poverty thanks to the industrial revolution and the knowledge economy, powered by the information age and now the blockchain. Deploying the knowledge economy on the blockchain will prove Hayek's thesis in "The Fatal Conceit" (1988) millions of times every day.

A word of caution

The Bitcoin protocol only contemplates the mining of 21 million Bitcoins. Thus, at some point transaction fees will replace the mining of new bitcoins as the cost of validation. This will impact Miners, who validate transactions in exchange for newly minted Bitcoins. Some argue a dearth of engaged Miners spells doom for the Bitcoin platform. Others, however, rejects such fears and instead see an even brighter future for Bitcoin and other blockchain technologies. Your author falls in the later camp.

As the Bitcoin blockchain approaches the 21 million cap uncertainty reigns regarding exactly how the system will respond when the Bitcoin spigot cuts off for the Miners and they transition to a fee per transaction model. Ultimately however, given the nature and effect of Moore's Law, I predict those per transaction fees will be far less than the value of a single Bitcoin as competition among Miners, and others offering the same service, emerges.

And as Satoshi wisely predicted, the ensuing system will operate smoothly and grow in strength. Smart contracts written on the blockchain hold enormous promise.

James L. Salmon, Esq. CSI, Benjamin, Yocum & Heather, LLC, 300 Pike Street, Suite 500, Cincinnati, Ohio 45202 (513) 721-5672. www.byhlaw.com