What BJJ Can Teach Us About The Difference Between
Bitcoin and Ethereum
Although I am working on a platform, Global Unity, that happens to integrate blockchain and a cryptocurrency into its design, I’m a total novice when it comes to the space, so take everything I say with a grain (pound?) of salt. Most of my time over the last few decades has been dedicated to Brazilian Jiu-Jitsu. I’m a second degree black belt, and have been studying, teaching, coaching, and competing for the last twenty five years, and own one of Toronto’s longest running and most highly decorated Jiu-Jitsu academies, OpenMat MMA.
Over the past year, I’ve been trying to understand both blockchains and cryptocurrencies, slowly learning more, dipping my toe in while working on Global Unity. I feel like a few things are starting to make sense, particularly in having a clearer understanding of the difference between the two biggest cryptocurrencies, Bitcoin and Ethereum, and the communities surrounding them. They say the best way to learn is to teach, so here we are.
Based on what I’ve learned, I feel there are some concepts from Eastern philosophy and martial arts that can help us understand what is happening in the space, but before diving in, it may be useful to have some understanding of how blockchains and cryptocurrencies work.
If I give you a dollar, you know that that dollar has left my pocket and is in yours. If we try to do that electronically, the problem is that I can send you a picture of the dollar, but I still have it. The only way to address it is with a trusted intermediary – most often, a bank – who can maintain a database of transactions to avoid what’s referred to as the “double spend” problem. The drawback with this approach is that the bank could change the rules at any time. With a blockchain, a network of interconnected computers, instead of a bank in the middle, it’s everyone. Instead of information being stored in a single database, it’s stored and auditable by everyone in the network. The code that governs how transactions happen is available to everyone, as are the records of each transaction.
These currencies, sometimes called coins, are transferred from your electric “wallet” to someone else’s. Blockchains are referred to as”trustless” systems because there is no need to rely on trusting someone running the system. This is particularly important in areas in the world where corruption and crime are rampant. With a bank, they know your name, where you live, and have a record of how you spend your money – whether you want them to or not. With cryptocurrencies, the only way you are known is by your “public address” – of which you can have thousands if you want -, but you are otherwise anonymous. Unlike a bank account, which can be frozen or even seized by a bank or government, no one can take your crypto assets from you without your consent.
Why Are Cryptocurrencies Able To Jump So High In Value?
Cryptocurrencies were launched in 2009, just after the 2008 economic crash. Bankers had grossly abused the system and rather than take action against those who had willingly caused great harm, the government bailed them out. It paid to save the industry from collapse at the expense of the people. This led to an ever-growing distrust of the government and an understanding that they can rig the system by creating money out of thin air and leaving it to bankers to manage.
An anonymous figure whose real identity has never been discovered, Satoshi Nakamoto, created a white paper – a technical document outlining how the Bitcoin system could work. Before disappearing, Satoshi tested, proved, and launched the coin. The program is designed to create more coins on a schedule, up to twenty one million – the total that will ever exist. Whereas governments can print money at any time, anything limited is inherently scarce. The more people who buy it – and the more they buy – the more scarce it becomes and as such, its value goes up. When large events like a celebrity or celebrity company like Elon Musk or Tesla invest massively in Bitcoin – Tesla recently bought one billion dollars worth of bitcoin – it causes more people to a) become aware of it, and b) buy it. Again, the more people who buy, the more scarce it becomes, the more its value escalates, hence the meteoric rise of Bitcoin and other cryptocurrencies, relative to traditional economic instruments.
Bitcoin is basically a distributed (vs centralized) ledger (a collection of financial accounts and transactions). Its ability to track ownership of money without requiring a bank or other centralized body was revolutionary, and once people saw the benefit, ideas popped up for how the same Bitcoin-like logic could be applied to other types of assets – real estate, borrowing/lending, escrow, etc. For this to work, Bitcoin-like programs would have to be created for each asset, as the code behind Bitcoin, the “Bitcoin protocol” as it’s sometimes referred to, is designed to be as simple as possible to support its core function as a digital asset and nothing more. After observing attempts to create these various Bitcoin clones for a few years, teenaged Vitalik Buterin, who was writing articles for Bitcoin magazine at the time, realized that instead of creating many specialized Bitcoin clones, you could create a generic version by embedding a programming code – a “smart contract” – into the ledgers. This would allow you to not only store the ownership information – who owns what – but also store the rules that govern ownership. This effectively allowed for the creation of a blockchain-enabled programming language.
*Note: Whereas most feel the revolutionary power of cryptocurrencies is in their economic aspects, to me, it is this smart contract-enabled programming language aspect that holds their real potential for changing things. Smart contracts allow you to program the rules by which you create an organization. And if we can program an organization, we can program a society. More on this another time.
In a bank or other centralized institution, both the storage of data and that computing power would be handled by the institution’s servers, and the bank would charge you a transaction fee. With cryptocurrencies, the records of transactions are stored publicly in a file, a current copy of which is stored by each participating “node” (computer), but the processing of transactions requires computing power. This function is performed by “miners”. These miners must be compensated, which happens in one of two ways – a transaction fee you are charged for sending and receiving money; and an increase in the total supply by the system.
As more and more people join the network, there are more and more transactions which must be performed. The cryptography requires a great number of calculations to be made in order to process and validate transactions. So, in a sense, there emerges a mining “market” for those who can perform calculations.
Proof of Work
Miners are randomly selected in order to fairly distribute the opportunities to mine (and thus earn coin). The term proof of work refers to the process of a) selecting miners, b) their actually processing the transactions, and c) getting the reward for validating transactions. As these transactions require ever-more computing power, those with the most hardware are prioritized in being awarded more mining opportunities. In order to prove to the system that you have large amounts of hardware, one has to solve cryptographic puzzles. This dynamic creates an imbalance that unfairly favours the wealthy miners, who can get great discounts on both hardware and electricity, given the scales at which they are operating. Proof of work as a form of validation makes it more difficult for small players to participate, not to mention the ever-growing environmental cost.
One major critique of cryptocurrencies, in spite of their incredible benefits, is that they have a high carbon footprint. The need to solve cryptographic puzzles used in proof of work leads to a race to have the most powerful hardware – and means that more and more energy is used. The scale of the electricity demand and consequent carbon footprint is that Bitcoin today uses more energy than Argentina and Ukraine*.
Some are trying to ameliorate this issue by setting up mining operations near green energy sources like geothermal energy in Norway, or in ways that can leverage “stranded green energy” – excess energy from renewables that would otherwise be wasted. What percentage of overall mining this is or could be is unknown, but these are some of the counter arguments used against the concerns of Bitcoin’s (and other currencies’) carbon footprint.
Proof of Stake and Eliminating The Carbon Footprint
There is a different form of processing transaction that provides the same cryptographic security as proof of work while reducing the carbon need by 99%, effectively eliminating it (even dollars require energy to print, house with cash registers, actual wallets, safes, and banks). Moreover, it’s more democratic. Proof of stake achieves this by eliminating the need to solve cryptographic puzzles altogether and instead offers miners the opportunity to demonstrate their vested interest in the system by having them leave their own funds to be held in escrow. Whereas proof of work is undemocratic in that it favours the wealthy who can afford significant infrastructure, proof of work gives everyone an equal chance to mine. Of course the wealthy can offer more of their money to be held in escrow in a proof of stake model, but as a dollar from a small player is just as valid as one dollar from a large player, the small play is still able to participate.
Additionally, because proof of work requires large amounts of electricity, it leaves the system more open to detection by authorities who can see when great amounts of electricity are being used – not to mention the government having the ability, depending on their temperament, to turn it off. Proof of stake’s capacity to be run by a single machine means that it can remain relatively undetectable.
Bitcoin purists feel it’s protocols should never change, while the Ethereum community feels the benefit of reducing harm to the environment is worth tampering with the built-in protocols and they are planning to switch over to proof of stake later this year.
Cryptocurrency communities are particularly strong for three reasons. First, many individuals can have large sums of money invested, making it that much more personally important. Second, unlike random people on the street, they are economically aligned – they all win together when Bitcoin goes up and all lose together when Bitcoin goes down. The third is that it is meaningful – it meaningfully changes how the economy works as a whole, freeing the individual from the limits of the traditional economy.
And each community has developed its own philosophy and character. Some are more monetarily focused, while others are about experimentation, and others still are about social impact and even Earth regeneration. As Bitcoin is solely a currency, its community tends to attract those more monetarily focused. As Ethereum can be used for any purpose and is led by an individual with a slant towards impact, the community tends to exude that flavour.
Within each community, there is a camp. By camp, I mean those in the community who “take a side” – those who ardently believe in and argue for only one coin or another – sometimes referred to as maximalists. The arguments are all centre around the differences between them. Bitcoin doesn’t change. It’s a static thing – the program is set and no one has control over it. Ethereum on the other hand has a loose governing body, run in a somewhat decentralized fashion within the Ethereum community. Some argue that the lack of a governing body and an unchanging program give Bitcoin more integrity. Others feel the flexibility of Ethereum to adapt and adjust make it stronger. What is the difference between Bitcoin and Ethereum communities? Talking recently to a friend who understands the space quite a bit better, I was able to draw an analogy to Jiu-Jitsu that seems to make sense.
Yin, Yang, and… Martial Arts?
The ancient framework and symbol, yin/yang is the concept that everything is comprised of opposing forces – light and dark, big and small, feminine and masculine, hard and soft. Yin refers to the soft, yang refers to the hard. It’s a useful analogy and goes quite deep, but in the context of martial arts, we could think of punching and kicking as fast and violent – like fire. And grappling – grabbing, tackling and controlling – like water.
Karate vs Jiu-Jitsu (Or Striking vs Grappling)
As an outsider, to understand how those deeply tied into both the Bitcoin and Ethereum communities see the difference between them, it’s valuable to understand the difference between Karate (or any other striking art) and Jiu-Jitsu.
Karate is by nature a hard art. You are asserting yourself against the other person. When you punch and kick, you literally invade the space the person (‘s face) occupies. In Jiu-Jitsu, we instead move into the space around which the opponent occupies. Literally translated, Jiu-Jitsu means gentle art and it is all about adaptability. What enables it to work against bigger people is that it not only provides a formula for overcoming larger, faster, stronger opponents, it offers ways of adapting to whatever they do. If you look at the symbol of yin/yan, there is a dot of white in the black and a dot of black in the white. This is meant to suggest that within the soft, there is hard and within the hard there is soft.
Any grappling art is soft – you move around the space the opponent occupies – and any striking art is hard – you invade their space. Within the hard arts however, there are softer arts and harder arts. Karate is actually a soft hard art – you look to dart in and out without getting hit. Muay Thai Kickboxing by contrast is a hard, hard art – you get so close to the opponent you can grab them and hit them with elbows and knees; it’s often taught with a philosophy of taking the hit and hitting back harder. Wrestling is a hard soft art. You power through, get on top of, and dominate an opponent. Jiu-Jitsu by contrast is a soft soft art. We recognize we may be put on bottom, or in compromising positions and instead of trying to force a solution, we adapt to the problem.
Within the gentle art of Jiu-Jitsu, there are hard and soft approaches. There is self-defence – a soft side, focused on not getting hurt, not wasting energy, and adapting to whatever the opponent throws at you. And there is the hard side, sport Jiu-Jitsu – aggressively imposing your will not on just any opponent, but the highly trained opponent who knows what you know – and how to stop it.
There is yet another way in which most striking arts and styles are hard compared to Jiu-Jitsu – innovation. Most martial arts are taught from a set of perhaps a few dozen or even a hundred or so set techniques. Not only does Jiu-Jitsu include literally thousands – one for nearly every situation – it is also always evolving. New techniques are being created, discovered and tested all of the time. While there is a tangible sense in which karate is hard and Jiu-Jitsu is soft, it’s in Jiu-Jitsu’s ability to constantly evolve that it shows the real power of softness.
Bitcoin vs Ethereum
Bitcoin is unchanging. Firm, some might say – to others, rigid. Ethereum evolves. It is soft, able to adapt. Too soft, some would say. But this dichotomy seems to also be adopted in how each camp holds their view. Bitcoiners, if that is a term, seem to hold very assiduously to their argument that its unchanging and autonomous nature gives it greater integrity, making it superior. The Ethereum camp, by the nature of its adaptability, are constantly facing new situations and as a result, changing and evolving their perspectives and arguments.
Which is better? It’s not my place to tell you, but the hope is that in sharing how I’ve come to see it, I’ve helped you better understand both of them and cryptocurrency more broadly.
P.S. Some of the concepts shared came thanks to a friend and listening to the bright Balaji Srinivasan.
Elliott Bayev is a second degree black belt in Brazilian Jiu-Jitsu and co-founder of Global Unity, a movement, platform, and game designed to unite humanity in the real world. He co-authored Sales Jiu-Jitsu – a book and video course for high-performing sales teams, and created BJJ101.tv, a beginner’s Brazilian Jiu-Jitsu course.