Over the years, myths about Bitcoin have taken on a life of their own drawing the attention of speculators and bad actors who aim to take advantage of less knowledgeable investors.

This has led to a growing class of digital assets which are popular and highly valued but offer no scalability or utility. Speaking at the recent IEEE Blockchain Summit in Istanbul, nChain’s Chief Scientist Dr Craig Wright dispelled some of the myths surrounding Bitcoin.

Decentralisation myths

Wright began his keynote speech by asking why Bitcoin is decentralised. He notes that decentralisation is implemented for security reasons and not as a political statement or for the sake of decentralisation itself. The idea behind decentralisation is to make it more challenging for attackers to compromise multiple systems that are running different operating systems and different software, he said.

By distributing the workload across individual machines, the network can be secured at the edge, where each user’s system is located. Decentralisation is not achieved by having everything run on every device, as with Ethereum, but rather by enabling individuals to run only what they need on their machines. This is why the edge of the network is crucial, as it is where users interact with the system, regardless of whether they are using Bitcoin or any other platform.

Bitcoin as ‘anti-institutional’

Wright then explains the concept of a peer-to-peer system where individuals, such as Alice and Bob, can directly communicate and transfer funds between each other without intermediaries or the need for a network of nodes.

Due to its peer-to-peer nature, Bitcoin is often regarded as being an anti-bank and anti-institutional medium. However, this approach is simply designed to facilitate low-cost transactions and high-speed micropayments, which were previously not feasible. Bitcoin’s approach to decentralisation is based on direct communication between individuals, and the traceability of transactions is a crucial aspect of the system.

Despite attempts to undermine this traceability through initiatives such as the Lightning Network, the primary communication path in Bitcoin remains between individuals like Alice and Bob.

The nature of Bitcoin’s Trustlessness

The role of nodes in the Bitcoin network is to act as a decentralised set of servers that broadcast spends and detect double spends without relying on internet intermediaries, which should not be confused with trusted third parties in general.

While Bitcoin does not aim to eliminate the need for trust, it does provide a digital negotiable instrument that is registered on the network and visible to all parties involved, ensuring a higher level of transparency. To ensure funds reach the intended recipient, the recipient must register the transaction.

Nevertheless, Wright emphasises the importance of privacy in transactions. He advises that users must use a new key for each transaction and avoid using well-known addresses. By doing so, it becomes challenging to trace the communication path and identify the parties involved, providing a higher level of privacy.

Bitcoin’s actual value: Making PKI secure

Wright then emphasises the importance of Bitcoin’s security model in contrast to traditional Public Key Infrastructures (PKIs). PKIs can be compromised, as evidenced by the DigiNotar breach that affected over 200 government departments globally, including military and intelligence agencies.

The breach went undetected for five years, and the signing certificates of Microsoft were also compromised. The security model of Bitcoin revolves around the public dissemination of the block header hash. The more people have the hash header, the more secure the network becomes. In this way, if five billion people run Bitcoin, it is practically unimpeachably secure. Conversely, if only a small group runs it, the network is insecure.

Even DigiNotar, which had one of the best security models in the world, was compromised, leading to severe consequences such as the execution of several people in Iran, compromising US military servers, and dissemination of information from South Korea to North Korea.

Therefore, when looking at private blockchain solutions like Hyperledger, it is important to note that there is no such thing as a truly private blockchain, and security cannot be guaranteed in the same way as it can with Bitcoin.

One Internet – One Blockchain

Wright also discusses the question of which blockchain protocols will persist and continue to shape the future. In the 1990s, the public was still concerned about the network protocol war. While there was a time when various networks competed, ultimately only one prevailed, he said.

A similar thing will happen with blockchains, according to Wright, where scalability will be the make or break factor. He points out that BSV blockchain will be able to carry out billions and hundreds of billions of transactions per second in the future, with transaction costs dropping – even lower than they already are – to a thousandth of a cent.