Why patented and closed-source blockchains never will rival Bitcoin

[d5000]

In the last months, some "blockchain projects" (or "DLT projects", to include DAG-coins) with closed-source and/or patented algorithms have emerged.

Some think that it's legit that these projects use patents to protect their investment in R&D. But even if some people could agree with that (I don't), patented and closed-source have a number of crucial disadvantages with respect to Bitcoin and other open-source coins.

One of the most important disadvantages: Patented/closed source coins can be easily shut down or attacked by a government or state.

Why? Well, in both cases, a "developer group" has exclusive maintainer rights. It can accept participations from other developers, but there can never be a competing implementation without consent of the development team.

Now let's imagine that a government charges the development team, e.g. by "facilitating money laundering".

What would the government do? Well, behind the curtain, they could keep the illusion intact that the coin is working. But as they can seize property of the prosecuted developers, they can obtain control over the official repositories. And then they simply could introduce changes that destroy the consensus model and make the blockchain stop working.

(If the coin is a DPoS coin where the devs control most of the validator nodes, they do not even need to do that - they simply seize the access keys to the DPoS nodes and let them stop validating. The blockchain would simply stop working.)

Developers who publish a "fix" to save the coin could be charged of "patent/license infringement". So the most likely scenario is that nobody would save the coin and it would die very fast.

It is an extreme scenario, but I regard it as possible. And even if the probability is low, it can happen.

An open-source, not-patented coin instead - even if the main repo was "hacked" by NSA and friends - could change rapidly to an alternative implementation.

Conclusion: Patented/closed source coins are Paypal rivals, not Bitcoin rivals. They are not decentralized, can be censored and shut down.

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[Outsider07]

The main difference between closed source blockchain and blockchain projects is that the government can easily shut down or stop the closed.

[samiraetn]

In crypto market there are lots of coins are available also those coins have different market value and different purpose of using also paypal and btc both are maintaining financial activities also btc is more useful than paypal also btc have good face value in market.

[zxrcoin]

This was a very informative post. As the patented or close source blockchain are not decentralized, it cannot compete against Bitcoin. Let's see what happens!

[d5000]

I want to add that the "governments can shut them down" is not the only disadvantage of cryptocurrencies with a "team" that monopolizes development with patents and closed-source licenses.

- They do not incentive collaboration by independent developers. So the likelihood to contain serious bugs is higher than in non-patented open source projects.
- Often vulnerable to the "Not-Invented-Here-syndrome", which leads to a less efficient development process - in open projects there is more human capital which can improve the software, write alternative implementations, etc.
- As developers often hold large parts of the currency, distribution is unequal, what leads to some other attack vectors. For example, if the currency uses a PoS or DPoS consensus algorithm (like most centralized coins do), if a developer key is hacked, the currency could be attacked in the same way than the "government attack" I described in the OP by simply stopping the blockchain to work. In this case the team can release a hard fork to correct the attack and block the hacked key, but the value of the currency will very probably plummet.

[dothebeats]

One of the most important disadvantages: Patented/closed source coins can be easily shut down or attacked by a government or state.

Well technically this is the most important and crucial factor on deciding whether to go closed-source coins or support open-source coins. Technically there isn't anyone who can seize or take control/authority over open-source codes as there isn't anyone who have the rights on the code to begin with, and by that no one could be held legally responsible if the government starts its crackdowns and whatnot. Like you mentioned on the side of closed-source coins, once the government signalled that something is fishy over a certain coin, they can immediately order a closure of operations or halt all services that is being run by the coin. It only gets worse the more you dig deeper into it, whereas on bitcoin people can buy everything they want since no one would stop them and price is determined ultimately by supply and demand, nothing more.

[jseverson]

Conclusion: Patented/closed source coins are Paypal rivals, not Bitcoin rivals. They are not decentralized, can be censored and shut down.

I agree in a general sense, but I don't think centralization is the main reason behind it. I mean, I guess you could say that they're not direct competitors because they couldn't be more different in that context, but they're both "payment systems" at the end of the day.

Either way, just because something could be shut down doesn't mean they will be. If it were, we could make a compelling argument that Bitcoin is absolutely better than Paypal just because the latter could be shut down, but it doesn't work that way. There are several aspects that make a project good, and decentralization is just one of those. We haven't seen a good centralized coin that can compete with Bitcoin yet, and we never may, but I'm not ruling it out.

The reason I believe Bitcoin can't be rivaled by closed source coins is because it can tick all the right boxes plus decentralization, not just because of decentralization.

[buwaytress]

Even prior to blockchain, closed sourced projects have always had limited lifespans. Just look at the software we use, today, yesterday and tomorrow. Everything that we still use today that we used 20 years ago owes its longevity to being open source. You want to point to the successes of giants like Microsoft? Well, they're slowly losing their grip on impactful use. Even the most successful patented tech will eventually only be in mainstream use for non-impactful sectors.

It was inevitable blockchain tech would become patented, once corporate interests moved in and banks began turning their eye to the tech they once despised so much. They know their days are numbered. So they're trying to take back what they can.

I like what someone somewhere said way back in 2016 about projects like Ethereum (which, to me, was the first iteration of all these projects we're surrounded with now). Single point of failure.

[d5000]

Either way, just because something could be shut down doesn't mean they will be.

Right. But it's a "sword of damocles" that doesn't exist in Bitcoin and other decentralized currencies. It's a crucial competitive advantage - together with the things I mentioned in the second post.

If it were, we could make a compelling argument that Bitcoin is absolutely better than Paypal just because the latter could be shut down, but it doesn't work that way. There are several aspects that make a project good, and decentralization is just one of those. We haven't seen a good centralized coin that can compete with Bitcoin yet, and we never may, but I'm not ruling it out.

You are obviously right that a decentralized payment system isn't better than a centralized one per se. Paypal and similar services, for example, are much more energy efficient than Bitcoin and can easily peg their token to a widely-recognized "unit of account" like the USD.

But I have doubts that a "centralized cryptocurrency" has a real use case. Cryptocurrencies are technically designed to be trustless (or at least low-trust, like in PoS currencies). This comes with tradeoffs in terms of efficiency.

At the end, a client-server model (like Paypal does it) is probably the better model for centralized currency/payment system projects. The only advantage a "centralized cryptocurrency" has is that users take a part of the maintainance costs because they have to run an app that does much more "work" than a typical Paypal/e-payment web-app, but that is an advantage for the maintainers only, not for the users.

A (semi-)centralized open-source cryptocurrency (e.g. Bitshares/Steem) can have some advantages with respect to Paypal, because in the case of insolvency or retirement of the "maintainer" its value will not necessarily go to zero if an alternative maintainer is found ("community takeovers"). These takeovers are not likely in the case of closed-source or patented cryptocurrencies, so they do not have that advantage.

I conclude that closed-source/patented cryptocurrencies have almost no advantages with respect to centralized client-server payment systems like Paypal, and they are also less efficient and thus more costly.

[ALI AKBAR]

The main difference between closed source blockcchain and blockchain project is that the government can easily stop. BTC are maintaining financial activities also btc is more useful and helpfull than and also btc have good face value in market.

[kidamazo]

 I am wondering about my country, why the government is fighting those things that could make them more successful economically this is really strange for me to understand.