Cryptocurrency is a security defense mechanism of a (permissionless) blockchain, not the main feature

Because there is no central authority controlling who can participate, decentralized consensus systems must defend against Sybil attacks, in which the attacker creates a majority of seemingly independent participants which are secretly under his control. The defense is to ensure that the reward for a successful Sybil attack is less than the cost of mounting it. Thus participation in a permissionless blockchain must be expensive, so miners must be reimbursed for their costly efforts. There is no central authority capable of collecting funds from users and distributing them to the miners in proportion to these efforts. Thus miners' reimbursement must be generated organically by the blockchain itself; a permissionless blockchain needs a cryptocurrency to be secure.

Because miners' opex and capex costs cannot be paid in the blockchain's cryptocurrency, exchanges are required to enable the rewards for mining to be converted into fiat currency to pay these costs. Someone needs to be on the other side of these sell orders. The only reason to be on the buy side of these orders is the belief that "number go up". Thus the exchanges need to attract speculators in order to perform their function.

Thus a permissionless blockchain requires a cryptocurrency to function, and this cryptocurrency requires speculation to function.


This is one of the many passages and charts I find in books and articles on a daily basis. They span many disciplines, including:

I occasionally add a personal note to them.

The whole collection is available here.