Why tokens are not the same thing as Bitcoin – CoinGeek

Lets talk about the way the mainstream media talk about digital assets. A recent article we saw from a Forbes contributor about the Chainlink token highlighted some of the problems that have led the public to misunderstand Bitcoin, and naive investors to lose their savings.

The problems arent just with the way media articles presents information, but also with the infrastructure that supports it. There are exchanges who trade tokens alongside Bitcoin and other native blockchain assets, and data sites that list and compare them as if theyre the same thing.

The article was titled This Bitcoin Challenger Is Suddenly Soaring And Fast Approaching Its All-Time High Price. However this isnt a unique example; there have been thousands of articles like this over the years.

You can probably see a few problems in the headline already. First, theres yet another reference to a Bitcoin challenger (of which there have been thousands now). Then theres the focus on price, and an implied call to jump in before its too late. But first, lets clear up the tokens/assets issue.

Bitcoin, altcoins and tokens

Bitcoin, altcoins and tokens are all digital assets, but there are big differences in what they are, what theyre intended for, and what they do. Theres nothing inherently wrong with tokens, but not knowing the difference is one of the reasons digital assets have gained such a bad reputation in investor circles.

The digital asset space includes Bitcoin, altcoins, and tokens. Bitcoin is the first and only legitimate asset hereits the only one capable of scaling to meet the entire worlds demands. And when we say Bitcoin, we mean BSV.

An altcoin is a digital asset that is not Bitcoin, but is still the native asset on its blockchain. Even these assets differ: only those based on proof-of-work (POW) transaction processing contain the necessary economic incentives in their protocols to function effectively. Those based on proof-of-stake (POS) or hybrid POW/POS processing algorithms have warped incentives and are open to manipulation.

Tokens are another thing entirely. They exist as smart contracts on another blockchainfor example, ERC20 standard tokens on Ethereum, EOS or similar. Their ownership can be transferred or traded like any asset, and the records of such recorded on a blockchain, but their nature makes them fundamentally different to Bitcoin and altcoins. If the base blockchain fails for some reason, so do all the contracts and tokens that live on it.

Then there are assets that are native on their protocols, but use a different non-blockchain-based system entirely. The best known examples of this are Ripple XRP and Stellar Lumens.

Chainlinks tradeable asset is called Link, and its a token based on an Ethereum contract. So its clear that Link, whatever its utility, is no Bitcoin challenger as it depends on Ethereum to exist. Tether (USDT), the popular stablecoin nominally (but not actually) backed by actual USD reserves, is actually a number of different tokens living on multiple blockchains.

(Some) tokens are OK

As mentioned above, theres nothing inherently wrong with the concept of tokens. The problems arise when theyre presented as something equal to Bitcoin or other native blockchain assets, and/or traded as speculative assets regardless of their actual utility.

The Forbes article mentions: Chainlinks recent gains have also been attributed to the worlds largest bitcoin and cryptocurrency exchange by volume, Binance. Binance, and other similar exchanges, became popular by listing hundreds, if not thousands of tokens alongside Bitcoin. Market data sites usually compare their prices, market caps and trading volumes as one big list without any explanation of the difference. These practices have led to speculative bubbles, price pumps and money-losing drops like the ICO frenzy of 2017-18.

For the record, were not suggesting Chainlink itself is a bad idea, or that the Link token has no value or utility. Its a decentralized oracle network that facilitates connectivity through the use of external adapters, which connect oracles to any API endpoint. This would allow smart contracts of any kind to hook into data sources, extending their functionality.

In fact, developers at Google Cloud have built trial demonstrations with Chainlink, using its nodes to listen for API calls, execute the job requested, and make payments to the source. Google Cloud Developer Advocate Allen Day wrote that Chainlink could be used in prediction markets, hedging against blockchain platform risk, and enabling commit/reveals across Ethereum using submarine sends.

It could be a pretty useful and feasible projectif it lived in Bitcoin BSV. Unless its capable of migrating at some stage, it could face future issues with Ethereums scalability and the uncertainty surrounding its protocol.

Dont worry about all that, just pump the price

The Forbes article we saw, written by a crypto and blockchain contributor, devotes only two lines to what Chainlink actually doesand only mentions the Google trials briefly in its final sentence.

The rest of the article is devoted to the Link tokens price, percentage gains, and comparisons to BTCs price performance in the past few months. Its a strange parallel to draw, given the two assets are completely different things, but its clear where the authors priorities lie and what hed like readers to do.

Poor communication of the differences in digital asset type, structure, purpose, and utility has caused all of them to be mislabeled cryptocurrencies. It has led many an uninformed investor to leap blindly into the ocean of unregulated exchanges, with a false belief that a Bitcoin challenger is ready to roll, and that buying in is the path to quick riches.

Usually it isntwithout that knowledge, its more like an invitation to stay holding an expensive yet worthless bag long after all the speculators have moved on to the next target. Unfortunately, mainstream media sites use their famous brands to draw traffic and dollars, feeding the speculation beast another meal.

Exchanges and data sites could help by listing public proof-of-work assets separately to proof-of-stake ones, and tokens on their own platform. But since their income depends on not highlighting these differences, we wont hold our breath waiting for current offerings to do that.

Only Bitcoin BSV can provide the scalability and stability future utility tokens will need to serve enterprise-class applications. The tokens themselves need to be useful, and trading should be only for usage, not price pumping. And if they havent already learned the hard way, readers would be better served if they paid attention to trusted news written by experienced blockchain reporters. These articles will at least examine the technology and wont try to sell anything.

New to Bitcoin? Check out CoinGeeksBitcoin for Beginnerssection, the ultimate resource guide to learn more about Bitcoinas originally envisioned by Satoshi Nakamotoand blockchain.

Original post:
Why tokens are not the same thing as Bitcoin - CoinGeek

Related Post

Comments are closed.