Blockchain Technology as a Mechanism for Producing Electronic cash

The only commercially successful application of blockchain technology so far is electronic cash, and in particular, Bitcoin. The most common potential applications touted for blockchain technology—payments, contracts, and asset registry—are only workable to the extent that they run using the decentralized currency of the blockchain. All blockchains without currencies have not moved from the prototype stage to commercial implementation because they cannot compete with current best practice in their markets. Bitcoin's design has been freely available online for nine years, and developers can copy and improve on it to introduce commercial products, but no such products have appeared. The market test shows that the redundancies of transaction recording and proof￾of‐work can only be justified for the purpose of producing electronic cash and a payment network without third-party intermediation. Electronic cash ownership and transactions can be communicated in very small quantities of data. Other economic cases which need more data requirements, such as mass payments and contracts, become unworkably cumbersome in the blockchain model. For any applications which involve intermediaries, the blockchain will offer an uncompetitive solution. There cannot be wide adoption of blockchain technology in industries reliant on trust in intermediaries, because the mere presence of intermediaries makes all the costs associated with running a blockchain superfluous. Any application of blockchain technology will only make commercial sense if its operation is reliant on the use of electronic cash, and only if electronic cash's disintermediation provides economic benefits outweighing the use of regular currencies and payment channels. Good engineering begins with a clear problem and attempts to find the optimal solution for it. An optimal solution not only solves the problem, but by definition does not contain within it any irrelevant or superfluous excess. Bitcoin's creator was motivated by creating a “peer-to‐peer electronic cash”, and he built a design for that end. There is no reason, except for ignorance of its mechanics, to expect that it would be suited for other functions. After nine years and millions of users, it is safe to say his design has succeeded in producing digital cash, and, unsurprisingly, nothing else. This electronic cash can have commercial and digital applications, but it is not meaningful to discuss blockchain technology as a technological innovation in its own right with applications in various fields. Blockchain is better understood as an integral cog in the machine that creates peer-to‐peer electronic cash with predictable inflation.