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Building the Bitcoin industry: a lesson from history?

When mass production emerged in the nineteenth century, its success was built on a few important ideas:

– Assembly lines to integrate the work of different teams making components

– The mechanisation of human labour

– The interchangeability of component parts, leading to…

– Uniformity of output

Together, these principles became known as ‘the American system of manufacturing,’ as Professor John Nye discusses in his interesting lecture Economics of the Industrial Revolution. Nye shows, for instance, how the demand for guns and ammunition in the American Civil War accelerated manufacturing in the U.S., overtaking Britain, which was left ahead only in the more expensive, hand-made guns used by the wealthy for hunting. (See above, a munitions factory in Connecticut where the shaping, loading and counting of cartridges was done by machines.) Nye also tells how the gun-maker Remington used its manufacturing expertise to make typewriters, leading to its entry into the world of computers through the Rand Corporation.

So what does this have to do with Bitcoin? Well, it shows that a successful industry needs uniformity and standardisation. Bitcoin businesses won’t need assembly lines, so we can forget about the first item on Nye’s list. And ‘mechanisation’ of software development is arguably already replacing hand-crafted work in the whole tech sector through the no-code movement which allows anyone to develop software through graphical interfaces instead of writing code. ‘Interchangeability of parts’ could, in this context, be taken to mean the creation of software components that can be integrated into many different products in modular form. And ‘uniformity of output’ is highly relevant if it means standardised processes that allow different products to work together.

Bitcoin—as Bitcoin SV—is already standardised. The robustness of its standard has been proven since 2009. Hacks, scams and outages have been features of the ‘crypto’ sector but the Bitcoin blockchain itself has been demonstrated to be all-but bulletproof. But between the blockchain and the end user, whether commercial or consumer, there is still a dizzying mix of standard and non-standard products and processes.

There is the single, integrated, self-organising network of mining nodes at the centre of the Bitcoin design; there are exchanges which compete to allow users to acquire Bitcoin in the first place; and there are competing wallets which let them transfer BSV from one kind of wallet to another, but not NFTs or tokens, which are confined to a single brand of wallet. And there are hundreds, if not thousands, of BSV startups building their own bridges between the blockchain and the consumer—many, I suspect, reinventing systems that their rivals have just finished working on.

A thriving sector requires a balance between centralising agreements between rivals to increase efficiency, and competition to motivate innovation through the prospect of profits. We’re familiar with the idea of competition as a driver of consumer benefits. But we also know it’s not a universal principle: would we really want to see competing designs of electrical plugs, for instance, rather than agreed and long-lasting standards? It’s infuriating when Apple makes us buy new power cords by changing the connectors to its products and only a little less annoying to have to bring plug adaptors when we travel between countries.

The more that standards can be agreed and wasteful battles like the famous one between VHS and Betamax home video systems avoided, the better for both businesses and consumers. Such agreements are probably more common than most of us realise. There’s actually a long history of semi-official bodies that create standards in different industries—as documented by JoAnne Yates and Craig N. Murphy in Engineering Rules: Global Standard Setting since 1880.

The good news is that Bitcoin SV already has an industry-wide Technical Standards Committee (TSC), whose inaugural meeting I reported on in 2020. The TSC exists to agree on common standards for Bitcoin SV to accelerate the growth of the whole sector. Under the auspices of the Bitcoin Association, the original work has now spawned a process which you can explore on the Association’s website. It shows there are eight areas with industry-wide standards at various stages of development. One, the Merkle proof standardised format, has already made it all the way through the process and is now officially designated “Recommended”. As in many industries, the standards set by the TSC are voluntary: the hope is that businesses will recognise that it’s in their interests to adopt them if everyone else is.

In my original report on the TSC, Steve Shadders, its Chair, said they were “aiming high” in their hopes for the Committee. He urged his fellow members to think in terms of the IEEE, the Institute of Electrical and Electronics Engineers, an august body whose history stretches back to the late nineteenth century— almost as far back as the invention of mass production.

What Steve couldn’t have forecast is that Dr. Craig Wright, champion of BSV and the inventor of Bitcoin, would soon be invited to give a keynote to the IEEE about the integration of the Bitcoin blockchain with its work, especially in relation to the IPv6 internet standard. That happened in Dubai in March this year and IPv6 is due to be discussed further at the forthcoming BSV Global Blockchain Convention, also in Dubai, in May.

The tension between creative chaos and restrictive but ultimately productive standardisation is a feature of many developing industries. Tim Wu describes it in relation to movies, radio, TV and the internet in his book The Master Switch: The Rise and Fall of Information Empires. The alternating dominance of a mass of disruptive innovators and a few centralising powerhouses, as Wu describes in U.S. media, is one we’re likely to see in BSV in the coming years.

Ideally those battles will be fought after some basic standards and processes have been agreed by most players. Then BSV will be able to benefit from its equivalent of the ‘uniformity of output’ and ‘interchangeability of parts’ that accelerated the adoption of mass production more than a hundred years ago. If so, the rest will be history.

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