Why bitcoin is very different from all other altcoin "cryptocurrencies" - Part 3 - Bitcoin vs CBDCs - a detailed side by side comparison

Part 1 of this 3 part series introduced the high level of cyber crime taking place in the world of altocoin "cryptocurrencies". Part 2 of this 3 part series comparied Bitcoin and all other altcoin "crytocurrencies" to emphasize how bitcoin is indeed truly unique. While CBDCs are still in their infancy, this post compares in detail, the similarities and differences between Bitcoin and CBDCs:

Criterion	Bitcoin	CBDCs
Architecture/Issuer	Bitcoin has no central issuer. A peer-to-peer blockchain based network regulates bitcoins, transactions and issuance according to consensus in the network.	Reserve currency CBDCs such as the digital dollar or digital euro, non-reserve currency CBDCs such as the digital Singapore Dollar as well CBDCs of restricted currencies such as the digital Yuan have a two-tier architecture, where the central bank (Federal Reserve, ECB, MAS or PBOC) issues digital CBDC tokens to commercial banks (tier 1). Commercial banks maintain the digital wallets for user authentication, transaction authentication, user interface and define the smart contract languages to support the innovation and customization (tier 2)
Regulatory classification	Bitcoin is not a security according to the SEC as it was started by an unknown person or persons going by the pseudonym Satoshi Nakamoto and does not exist as a way to raise money for a specific project for profit thereby failing the Howey test. SEC chairman Gary Gensler classifies bitcoin as a commodity to be regulated by the CFTC.	CBDCs are by their very nature a security and considered equivalent to cash as an asset class.
Purpose/ Use Cases	Originally intended as an electronic peer-to-peer payment system that is based on cryptographic proof, instead of trust that would operate free of central control. Now used more as store of value or digital gold.	Intended as an electronic peer-to-peer payment system substituting person to person or person to business cash payments.
Regulatory oversight and Compliance	Bitcoin’s decentralized Blockchain architecture is specifically designed not to be controlled by a state, a central bank or any other central authority for regulatory oversight and compliance.	The two-tier CBDC architecture aligns closely with existing banking system customer service delivery models, compliance mechanisms for anti-money-laundering, countering the funding of terrorism (AML/CFT) laws. CBDCs avoid disruptive disintermediation through enforcement of regulatory and compliance rules ensuring financial stability.
Account Management and Identity Checking	Bitcoin miners delegate this task implicitly to Bitcoin exchanges which maintain a traditional account and business relationship with each individual customer to address the gap between cryptographic keys in Bitcoin and human identity-checking tasks required to ensure compliance.	In CBDCs, Central banks delegate the task of account management and identity checking to commercial banks.
System Operators/Miners	In the Bitcoin architecture, system operators (miners) receive rewards to incentivize them to follow the Bitcoin protocol.	In the CBDC architecture, Central banks do not choose the system operators (miners) in the open system but determine the inflation rate.
Cross Border Payments	Cross-border payments with Bitcoin do not require currency conversions, as it takes place outside the Bitcoin system where counterparties convert from/into domestic currencies. The absence of intermediaries brings cost benefits and efficiency with no risks from operational or financial failures of intermediaries.	For Cross-border payments with CBDCs of reserve currencies such as the digital dollar or digital euro, participants from partnering jurisdictions are allowed access to the digital dollar or the digital euro which becomes available to counterparties inside and outside of that jurisdiction enabling cross-border payments.For Cross-border payments with CBDCs of non-reserve currencies, access and settlement arrangements aiming to facilitate cross-border interoperability are established among multiple CBDCs from different jurisdictions (mCBDC), built on strong technological, market structure and legal frameworks between central banks
Smart Contract capabilities	A Turing-incomplete script language allows the creation of custom smart contracts on top of Bitcoin like multisignature accounts, payment channels, escrows, timelocks, atomic cross-chain trading, oracles, or multiparty lottery with no operator	It is not necessary for a CBDC to provide smart contracts in order to fulfill its primary role as a digital currency, and some CBDCs such as the digital yuan are unlikely to do so.

Energy Security vs Energy Sovereignty

Energy Security is all about ensuring a more equitable, diverse, and independent energy matrix that can withstand any uncertainties in global oil markets. India’s Ministry of Petroleum is seeking to bring all national refiners – public sector as well as private players – together to scour the global market for the most affordable physical oil grades to safeguard its energy security from future disruptions by diversifying its oil import sources at lower costs. India is already increasing the share of renewables and clean energy and increasing its SPRs. Indian companies have invested over US$ 16 billion in Russia’s oil and gas sector and handle the export of oil from Russia to India. Now, with the threat of US secondary sanctions looming on the horizon, a consortium of buyers can go a long way in working out the logistics to bolster energy security.

On May 16th, 2022 the Czech Ministry of Industry announced plans to launch a new state energy trader to purchase gas through foreign gas upstream producers at better prices as Russia's invasion of Ukraine prompted a re-think on energy security and a drive to cut dependence on Russian supplies and increase the state's influence on gas storage in the country. Utility bills for households and companies have also soared, worsened by the war which has caused energy commodity prices to spike.

Energy Sovereignty on the other hand is substituting fossil fuels imports from problematic countries with other fossil fuels imports from less problematic countries as well as independence from energy imports by boosting domestic energy production including an acceleration of renewable and nuclear developments. Poland, a coal-producing powerhouse, mining 55 million tons of hard coal and 52 million tons of lignite in 2021, rejected cheaper imported Russian and Ukrainian coal which previously accounted for a significant proportion of heating for households. Since Russian imports were banned by Poland in March 2022 shortages led to rising prices forcing the government to subsidize coal for households. The ability to meet most of the domestic demand with Polish coal leaves the country free to push for a cessation of the Russian gas imports achieving a coal-based national energy sovereignty.

State Oil vs. Big Oil

According to data from the Economist, State-owned oil companies (State Oil) such as UAE’s ADNOC, Saudi Aramco, pdvsa of Venezuela and Qatar Energy have roughly two-thirds of the remaining reserves of discovered oil and gas globally and produce three-fifths of the world’s crude and half its natural gas. Large international oil majors (Big Oil) such as BP and its rivals Royal Dutch Shell Plc and Total SE on the other hand produce one tenth of the world’s crude and natural gas (the rest is pumped by smaller independent companies) but they’re also some of the world’s largest commodity futures traders and see it as the heart of their business. Together the three companies trade almost 30 million barrels a day of oil and other petroleum products, equal to the daily production of the entire OPEC cartel. Shell alone trades about 12 million barrels a day. That’s physical trading. The paper volumes in financial trading are much larger. Trading also gives them an edge over their U.S. rivals, Exxon Mobil Corp. and Chevron Corp., which for historical and cultural reasons have eschewed trading.

While Big Oil does trade in physical energy markets, buying tankers of crude, gasoline, diesel, natural gas and power markets via pipelines and electricity grids, they also speculate in financial markets, buying and selling futures, options and closing deals with hedge funds, private equity firms, and investment banks.

Shell is by far the world’s largest oil trader, ahead of Commodity Trading Companies such as Vitol Group and Glencore Plc and makes as much as $4 billion in pretax profit from trading oil and gas; BP between $2 billion to $3 billion annually roughly half of the company’s upstream business of producing oil and gas; the French major Total not much less, according to people familiar with the three companies. In years of low oil prices, like 2016 or 2020, trading profits can far exceed those of the production business.

Why bitcoin is very different from all other altcoin "cryptocurrencies" - Part 2 - A detailed side by side comparison

Part 1 of this 3 part series introduced the high level of cyber crime taking place in the world of altocoin "cryptocurrencies". In this post, a detailed side by side comparison is provided below to illustrate how and why bitcoin is indeed very different from all other altcoin "crytocurrencies".

Criterion	Bitcoin	Altcoin "Cryptocurrencies"
Legal structure/ Issuer	Bitcoin has no central issuer. A peer-to-peer network regulates bitcoins, transactions and issuance according to consensus in network software.	All other cryptocurrencies are issued via an initial coin offereing (ICO) and are linked to a central issuer such as Ethereum foundation, Ripple, Algorand foundation among others
Regulatory classification	Bitcoin is not a security according to the SEC as it was started by an unknown person or persons going by the pseudonym Satoshi Nakamoto and does not exist as a way to raise money for a specific project for profit thereby failing the Howey test. SEC chairman Gary Gensler classifies bitcoin as a commodity to be regulated by the CFTC.	All other cryptocurrenecies having been issued through an ICO to raise money for specific projects for profit pass the Howey test. There is a strong likelyhood of all other cryptocurrencies being classified as securities by the SEC in the near future.
Purpose/ Use Cases	Originally intened as an electronic peer-to-peer payment system that is based on cryptographic proof, instead of trust that would operate free of central control. Now used more as store of value or digital gold.	Altcoins are often created to resolve some of the limitations of Bitcoin but similar to bitcoin intended to provide low cost, safe, secure payment system for transactions. Now used for different use cases from meme (Dogecoin), an open-ended decentralised software platform that supports smart contracts and the creation of distributed applications (Ethereum), to create a system of direct transfers (Ripple) to IoT environment (Iota).
Inflationary/ Deflationary aspects	Bitcoin is architecturally deflationary as the total number of bitcoins is capped at 21 million. Each bitcoin in theory will be worth more and more as the total number of issued Bitcoins maxes out.	Some altcoin cryptocurrencies with a hard maximum cap such as Binance coin, litecoin are deflationary. Ethereum had no hard caps and until 2021 was inflationary but an update mandated to burn some ethers whenever the network activity rises to make the cryptocurrency deflationary. Others such as Dogecoin with no hard caps are inflationary
Security, Scalability, Decentralization	Bitcoin sacrifices scalability for the sake of security encrypted with the SHA-256 algorithm and decentralization, and can be expensive at times of high demand. This also makes an attack over the Bitcoin network too costly or too impractical due to the cryptographic strength, and high number of nodes securing it through a decentralized mining network.	Altcoins are designed to address specific bitcoin limitations such as transaction speeds but are highly centralized -e.g. out of the 100 billion XRP, 20% are owned by the founders of Ripple and the remaining 80% were initially given to Ripple Labs. They use encryption algorithms such as ETHASH (Ethereum) which are less secure than Bitcoin and moreover use the less secure Proof of Stake consensus mechanism.
Network Availability	Bitcoin has the largest network comprised of tens of thousands of nodes and an unknown number of miners, with an unparalleled uptime built on top of the most secure database in history. Since 2013, Bitcoin has remained active and accessible without interruption.	Altcoins such as Solana have been subjected to assaults and have consistently experienced prolonged network unavailability.
Consensus Mechanism	Bitcoin uses the energy intensive yet super secure Proof of Work which prevents double-spending attempts and miners have direct authority within the network.	Most other Altcoins are moving to Proof of Stake,Proof of History or other mechanisms which cannot prevent double spend. Capturing control of the network is easy as it depends on staked capital leading to governance issues as users with more tokens can change the rules of the network.
Smart Contract capabilities	A Turing-incomplete script language allows the creation of custom smart contracts on top of Bitcoin like multisignature accounts, payment channels, escrows, timelocks, atomic cross-chain trading, oracles, or multiparty lottery with no operator	Most altcoins provide turing complete programming languages allowing full smart contract capability.
Adoption	Bitcoin could reach 10% adoption rate by 2030. It is already the most widely used cryptocurrency with the most number of users compared to altcoins.	The only altcoin that has a fair adoption rate is Ethereum but that too is at least 50% lower than Bitcoin's adoption.
Layer2 and Sidechains	Bitcoin has Layer 2 networks such as the lightning network to increase transcation throughput and lower costs as well as sidechains	Ethereum also has Layer 2 networks such as Polygon as well as sidechains but this is less common in other altcoins
Layer 3 applications	Chargeable events reportable on self assessment return	Any pension income taken is reportable under the foreign pension income section and as such 90% will be subject to tax at the member's marginal rate
Trustworthiness	The Bitcoin core layer one network with deep storage, and global root trust is very difficult or impossibly expensive to alter leading to its trustworthiness.	Depends on the local regulator e.g. In Gibraltar the Trustee is regulated by the Gibraltar Financial Services Commission
Antifragility	Bitcoin has survived external attacks, attempted bans from governments, and internal disputes over the direction of the protocol. Bitcoin has weathered massive price climbs and drops, and its volatility has declined over time. Bitcoin is the only cryptocurrency with over a decade of experience. The fact that Bitcoin has survived this long serves as a positive signal to many investors, developers, and former critics. Bitcoin’s protocol is enforced by the tens of thousands of decentralized nodes across the world, each verifying every transaction on the Bitcoin network. To change Bitcoin’s protocol as all nodes on the network must be simultaneously convinced to change their rules, this is simply infeasible.	Most altcoins with an identifiable issuer which are fairly centralized can be shut down by a government or regulators.