November 30, 2017


Filed under: Economics, Technology — Tags: , , , , — Nicholas @ 03:00

Charles Stross explains why he’s not a fan of Bitcoin (and I do agree with him that the hard limit to the total number of Bitcoins sounded like a bad idea to me the first time I ever heard of them):

So: me and bitcoin, you already knew I disliked it, right?

(Let’s discriminate between Blockchain and Bitcoin for a moment. Blockchain: a cryptographically secured distributed database, useful for numerous purposes. Bitcoin: a particularly pernicious cryptocurrency implemented using blockchain.) What makes Bitcoin (hereafter BTC) pernicious in the first instance is the mining process, in combination with the hard upper limit on the number of BTC: it becomes increasingly computationally expensive over time. Per this article, Bitcoin mining is now consuming 30.23 TWh of electricity per year, or rather more electricity than Ireland; it’s outrageously more energy-intensive than the Visa or Mastercard networks, all in the name of delivering a decentralized currency rather than one with individual choke-points. (Here’s a semi-log plot of relative mining difficulty over time.)

Bitcoin relative mining difficulty chart with logarithmic vertical scale. Relative difficulty defined as 1 at 9 January 2009. Higher number means higher difficulty. Horizontal range is from 9 January 2009 to 8 November 2014.
Source: Wikipedia.

Credit card and banking settlement is vulnerable to government pressure, so it’s no surprise that BTC is a libertarian shibboleth. (Per a demographic survey of BTC users compiled by a UCL researcher and no longer on the web, the typical BTC user in 2013 was a 32 year old male libertarian.)

Times change, and so, I think, do the people behind the ongoing BTC commodity bubble. (Which is still inflating because around 30% of BTC remain to be mined, so conditions of artificial scarcity and a commodity bubble coincide). Last night I tweeted an intemperate opinion—that’s about all twitter is good for, plus the odd bon mot and cat jpeg—that we need to ban Bitcoin because it’s fucking our carbon emissions. It’s up to 0.12% of global energy consumption and rising rapidly: the implication is that it has the potential to outstrip more useful and productive computational uses of energy (like, oh, kitten jpegs) and to rival other major power-hogging industries without providing anything we actually need. And boy did I get some interesting random replies!

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