Thursday, December 14, 2017

Bitcoin

Bitcoin
 
Bitcoins are cryptocurrency. That is to say "Off the books." As can be imagined, that might be appealing to some people. The problem arises with the question, "You may have a bitcoin but does anyone else want one?" That is to say, can you trade a bitcoin for a tomato?
 
Bitcoins enter the digital world when someone “mines” them by solving certain math problems. Mining operations have turned from college students sitting at their laptops to huge enterprises that use massive computing power to run ever more complex math calculations. Some of the computers dedicated to solving those math problems fill entire buildings.
 
Or so it is said.

It is also said the problems become harder so there will be a decreasing amount of bitcoins mined, so dilution will not occur.

The Bitcoin protocol was first described in a 2008 paper by Satoshi Nakamoto. “Satoshi Nakamoto” is probably a pseudonym, so it’s not clear whether the protocol was developed by an individual or a group of individuals, and attempts to identify the developer or development team have been unsuccessful. What we do know is how the protocol works. 

At the core of the Bitcoin system is the blockchain, a ledger that records the rightful owner of every balance of Bitcoin in existence. When you make a Bitcoin transaction, you effectively announce to the system that you would like to transfer a balance of Bitcoin on the ledger from one owner to another. These transactions are grouped into a block and members on the system then compete to be the first person to confirm that the transactions in the block are legitimate. Once a block is confirmed, the ledger, or blockchain, is updated to reflect the most recent transactions.

Bitcoin owners are not identified by their name or location, but by a string of characters known as a digital address. In other words, bitcoin owners are pseudonymous. You can transfer a balance of Bitcoin from one address to another without revealing your actual identity in the physical world. You only verify that you own the address.

Science writer Eric Holthaus wrote at Grist last week. (Grist is a hyperventilating modish internet site):

In Venezuela, where rampant hyperinflation and subsidized electricity has led to a boom in bitcoin mining, rogue operations are now occasionally causing blackouts across the country. The world’s largest bitcoin mines are in China, where they siphon energy from huge hydroelectric dams, some of the cheapest sources of carbon-free energy in the world. One enterprising Tesla owner even attempted to rig up a mining operation in his car, to make use of free electricity at a public charging station.

I do not know if that is true so his next claim should make you want to sit down and rest a moment. (Crazy behavior has more "currency" if it connects with other nonparticipants):
In just a few months from now, at bitcoin’s current growth rate, the electricity demanded by the cryptocurrency network will start to outstrip what’s available, requiring new energy-generating plants. And with the climate conscious racing to replace fossil fuel-based plants with renewable energy sources, new stress on the grid means more facilities using dirty technologies. By July 2019, the bitcoin network will require more electricity than the entire United States currently uses. By February 2020, it will use as much electricity as the entire world does today.
This is an unsustainable trajectory. It simply can’t continue.
 
This creates some nice symbolic sci-fi disaster themes.
Some people have made a lot of paper profits in this. But who is going to accept them in trade?
And the Tulip Mania wrecked the lives of some very hardheaded Dutchmen.
(includes stuff from Grist and Luther. There is a good, if old, article in Wired.)

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