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Author Topic: [2018-06-057] The dumb Bitcoin network or the smart banking network?  (Read 45 times)
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June 05, 2018, 01:22:44 PM

Smart vs Dumb Networks

Bitcoin is a network. It is also a currency and a technology. It’s all these things, you can’t separate them. You can’t just build a blockchain without a valuable currency behind it and currency doesn’t work without the network either.

The Networks

Bitcoin is a dumb network. It really doesn’t do much. It processes transactions. It’s a dumb network for verifying a very simple scripting language. Bitcoin network doesn’t offer any other services. The network doesn’t have automation or any other feature built in. However, this dumb network supports very smart devices.

In contrast, phone networks are smart networks. But it supports dumb devices. Early phones were incredibly simple and dumb devices. Every feature of the phone was, in reality, a feature of the network. Call waiting, caller ID and everything else is a feature of the phone network.

So when you architect network systems, one of the most important issue is to choose: do you make a dumb network for smart devices or a smart network that supports dumb devices?

Dumb vs Smart

It’s easy to see the appeal of the smart network – if you want to improve the experience, just upgrade the network. However, this means that change and innovation occur at the centre, by one player and it needs permission. So innovation only happens when the new feature is needed by all of the subscribers of the network.

To innovate on a dumb network, all you have to do is add innovation at the edge. Because a dumb network supports smart devices, there is no need to change the whole network. There is no need for permission to innovate. It’s also much easier to implement. Unlike the smart network, an upgrade doesn’t disrupt the whole network. If a new application has only five users, all they need to do is upgrade their devices.

Internet, for example, is a very dumb network. It can only move data from point A to point B. It doesn’t know what the data is. Internet network can’t tell a difference between Skype call or a webpage, a vacuum cleaner or a smartphone. It just moves data.

The phone network essentially stayed the same with minimal innovation. The internet, however, allowed limitless innovation possibilities. It has made the dumb network essential to our everyday lives, while the relevance of the smartphone network is declining fast.

The same principle applies with regards to the bitcoin network. It is a dumb network. It moves money from point A to Point B. if you want to build a new application on top of bitcoin, you can do it without asking for permission – Write the app, launch it on your endpoint, and bitcoin will route it because it is a dumb network. Bitcoin, much like the internet, allows endless improvements and innovation.

The modern day banking and financial systems are supported by very smart networks. They are designed to deliver very specific applications to very dumb endpoints, in an absolutely and tightly controlled fashion. Sounds familiar?

Keeping in mind the internet and phone networks, which network do you think will eventually prevail – the dumb Bitcoin network or the smart banking network? Food for thought.

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