When we "consume" bitcoin, what exactly are we spending?

Unlike in the real world, the value of a public chain is determined by consensus cost, not by application. The application is only the risk that affects that value, which is a very disruptive view. For this we need to explore a little more closely.

Imagine we have a bunch of code, like the Bitcoin code, and we're asking what it does, which gets into product thinking. Product thinking is consistent with our intuition that if something doesn't have use value, it doesn't deserve our attention. But there is a downside to product thinking, which is that the products we see are provided by companies or individuals with a strong centralized point of view. This makes it seem that when we understand the product, only I am interacting with the product itself and the service provider behind the product, and the use value of the product is mainly reflected in the product itself or the service provider. Sometimes a good product development may determine how many users there are.

However, Bitcoin is different. When we use Bitcoin, it's not the Bitcoin code or some organization that is providing us with a service, but the millions of miners behind the code that are providing the service, which is very different from a centralized product. The first thing is that the code itself doesn't have a lot of value. (Note: If there is a lot of value, the code is all open source, you can copy one to provide the service for free, is everyone switching to the new code?) The second is that a person running this code and making your transactions go smoothly is also not of much value. It is only when the miner's computing power is large enough and the miners are dispersed enough that the transfer has "value".

This is similar to the difference between weather forecast and WeChat. As long as the weather forecast company is operating, anyone who opens the weather forecast app will be able to get the service they want; but WeChat is not. If your friends around you don't use it, even if Tencent opens a million servers and puts it there, it is of no value to you. This kind of interdependence between users is somewhat similar to the dependence on consensus.

So, when we "consume" Bitcoin, we are not "consuming" the Bitcoin code. Because the code can be copied by anyone, it has very little value, but rather we are "consuming" the consensus provided by millions of miners. This consensus includes the unity, authenticity, and immutability of the data on the chain, as well as the recognition of the intrinsic value of bitcoin and the expectations of future use scenarios, which is the difference between product thinking and consensus thinking. Consensus does not necessarily point to a definite application, and a definite application does not determine the value of the blockchain.

What the blockchain has to offer is not predetermined by the developer at the beginning. While the vast majority of blockchain systems have an initial functional definition, eventually this functionality will move towards abstraction, i.e. the application may be beyond the designer's imagination and simply the same as predetermined at the most abstract level. For example, Bitcoin was intended to be used for payments, but now it looks like it is not equipped to be a payment and instead moves to value storage, but both are consistent at the level of transferring money. Another example is Ethereum, whose whitepaper pushed for applications that didn't flourish while various decentralized financing and decentralized finance developed, but again, all of these applications use smart contracts as a feature.

The idea of expecting a specific application to drive the development of a decentralized system is a bit of a give-and-take. If the consensus itself is not built up, that is, the embodied consensus cost has not come up, then it is difficult to develop applications based purely on a software function; and even if the raw subsidies, will eventually return to the original nature of things. Ultimately, it depends on the consensus building, "rigid" use of back-end pull front-end way, success is very unlikely.

Let's focus on the consensus building, which is defined by each blockchain system. For example, some are consensus for on-chain transaction data, some are consensus containing smart contracts, some are consensus containing market prices, etc. Each consensus has its own intrinsic value, and all have a cost. Moreover, consensus is not like ordinary products that remove the friction of the world and let the water flow down; instead, consensus is the formation of new value, which is the water flowing upwards. So, the higher the cost of consensus, the greater the value, and this is what makes blockchain decentralized systems special.