More nonsense on Bitcoin

The Indy reports on Bailey of the Bank on Bitcoin, who warns, “Cryptocurrency has ‘no intrinsic value’ and investors will ‘lose all your money’, says Bank of England chief” I add, “Bitcoin only works because the ‘proof of work’ is so expensive and time consuming; and its also destructive of the environment due to its useless power consumption. (It’s also very slow, doing 700 TPS, that’s not enough for a business, let alone an economy.) …

There’s no divorce in Bitcoin

There’s no divorce in Bitcoin

I attended a presentation hosted by the BCS, and given by Ron Ballard, based on his article in IT Now, “Blockchain: the facts and the fiction”. What he said inspired some thoughts and reminded me of others, some of which I have previously published on my blog. I wrote an article, called Learnings of Bitcoin, which was meant to be a spoof on the Borat film title and posted it on my linkedin blog, The article looks at the tight coupling of Bitcoin, and its consensus mechanism, the proof of work, together with its costs and vulnerabilities. It examines the goal of eliminating trust authorities and its questionable ability to meet the necessary roles of money as a means of exchange and a store of wealth. In the comment pushing it, I say, "This might be a bit basic for some, but you can't have a coinless immutable blockchain, at least not one based on 'proof of work'.", at which point you need to consider if there are better data storage platforms for your use case. I use more words to explore these issues below/overleaf ....

Bitcoin

This is a long diatribe at Hacker Noon about the Bitcoin bubble and the blockchain hype. I had been considering writing something similar although my focus was on the excessive use  & cost of electricity to “mine” coins and the demonstrable industrialisation and economic consolidation of the mining operations.

Bitcoin, in particular, has a shrinking use as a means of exchange, as identified by this business insider preview of a Morgan Stanley opinion. This is compounded by the fact that the transaction fees are now too high for small or micro payments, and that it is not real time, (it can take minutes to clear) and thus cannot be used for transactions that require simultaneous exchange, be it a cup of coffee or a house.

The block chain does not scale well, despite the massively distributed architecture. If its performance is matched with say Visa or other significant global payment processors, VISA is rated at 60,000 transactions/sec (TPS) where as the Bitcoin maxes out at 7 TPS. So not only is it expensive, but it can’t cope with real world volume; it’s just as well that small transactions are deserting the platform.

What started me thinking this time round, was the realisation that the amount of power required to “mine” the currency grows and is now significant. While the compensation for the miners is scrip/free, the real cost in electricity and thus carbon pollution is significant. This adds to the cost, both internal but more importantly the external cost. The planet cannot afford the electricity power and the carbon footprint to virtualise global capitalism’s money supply.

Kai Stinchcombe argues that the lack of regulation is also a disincentive to use crypto currencies and examines the Etherium/DAO hack and draws the conclusion that on the whole society needs contracts to be interpreted by people, not by software.

Money must be a means of exchange, and a store of wealth, block-chain crypto-currencies are struggling and increasingly failing  to be the former and it’s current price peaks , historic volatility and lack of regulator suggests it’s weak as the latter. Is it just a con? …