I’m writing this a few years before Bitcoin’s twentieth anniversary as one of humanity’s biggest mistakes.
Bitcoin is three things:
I’ll try to be brief on why the token thing is bad.
Y’all know I think a post-scarcity, pay-it-forward mindset can be explosively productive in the digital world. Sharing is caring. Introducing a limited, scarce resource—whether it’s an artificially created one or not—into that mix does a lot more harm than good.
The blockchain ledger exists just to enforce the contracts that emulate those money-like tokens. That is why the ledger was invented and the tokens named the project.
Money is bad and I’ve spent the past twenty-five years arguing against market capitalism. The tokens share all the drawbacks of money and add a whole bunch of new ones.
But let’s say for the sake of argument that either you actually like the token thing, and/or that you’ve found other valuable uses for the ledger, so we can get into where Bitcoin really messed up:
The ledger is built on a peer-to-peer network of nodes. If you’re an Xennial like me you’re thinking “that’s awesome! P2p is great!” with fond memories of things like BitTorrent. Hold your horses for three seconds because BitTorrent becomes better the more reciprocators are connected. That’s actually a problem that PeerTube is struggling with; that so many of the clients and federation approaches don’t connect to the WebTorrent part of it and just hotlink the upstream copy of the video, leaving the servers overloaded.
Bitcoin’s not like that. Bitcoin becomes worse the more people are connected. So much worse. It provides the same block rate and transaction speed whether the entire network ran off one dinky li’l pocket computer as it does now when it’s over 70000 nodes, but the more nodes that connect and “help”, the more energy the whole thing uses.
Because they’re not helping, they’re competing. Instead of just making the network more resilient or better, they are racing each other, distrusting each other. The pool that burns the most gets the most rewards.
I know that humanity has a long history of creating systems that reward and exacerbate greed and injustice but this one is a doozy.
Other proof-of-work schemes like the “hashcash” anti-spam proposal and the new “Anubis” website blockers are really bad and I hate them (it’s not fun when my dinky li’l e-reader hangs for five rapidly battery-draining minutes just because I wanna look up a Dominion game card. If you wanna put a penalty or payment for connecting I’m not stoked that that payment is going directly down the drain. It’s like putting a toll sign on a bridge saying “burn a dollar bill in front of the camera in order to pass the bridge”) but at least they have constant difficulty rates that are manually settable by admins. Bitcoin’s difficulty scale is managed by a computer (and increases automatically so that the block rate is constant) which has led to it increasing to 150 trillions times higher.
“It’s not waste, it’s worth it because of the benef—” It is waste. It’s a penalty for participating. It’s a deliberate deterrent as an attempt to mitigate the “Sybil” attack (the risk of someone starting a bunch of extra nodes to overwhelm the network in order to falsify transactions). So in the infinite unwisdom of Bitcoin’s founders, they put in both a deterrent for participating (the recklessly limitlessly scaling “proof-of-work” hashing) and a reward for participating (the “mining” rewards that will be gradually metered out for over a hundred years, if there’s still a civilization then).
So in our “burn a dollar on camera in order to pass the bridge example from earlier, it’s like if on the other side of that dollar-burning-bridge there’s a two-dollar-payout. So lots of money burnery in order to make money. Destructivity that the clumsy invisible hand of the market can’t distinguish from productivity so it runs amok. Instead of creating good and useful products or services it’s pure destruction (repeating myself a bit but the purported “benefits” aren’t increased).
Except it’s even worse than the dollar-burning-bridge for two reasons. First is that instead of one dollar vs two dollars, it’s about 70 k on either side of the equation (margins are pretty tight—that’s how economics work) so it’s a rich man’s game, and the second reason is that dollar burning was an environmental disaster. It’s as if it was a poison dollar that killed birds and even humans as it burned because energy externalities is an unsolved and urgent problem.
“But (setting aside that almost half of it is dirty energy), when we use renewables, it’s making use of extra energy during peak hou—” It’d actually be less bad if that extra energy from solar and wind were wasted than it going into Bitcoin’s ASIC e-waste poison mill because you’re not helping by mining. You’re only increasing the difficulty scale for those dirty coal-fueled Bitcoin miners out there.
Bitcoin is a runaway train, a headless constrictor, a gray goo apocalypse, and it’s incredibly difficult to fight. Some approaches to stop it involve regulating energy externalities (which we need to do anyway in order to stop climate change) or tanking the value of BTC by making it harder to interface it with other goods and currencies.