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Why I've gone off bitcoin a bit

I first heard about Bitcoin at a Perth Linux Users Group talk in 2012 at a Perth Linux Users Group talk, where I thought it was a great idea but didn't think it would really take off so I didn't really pursue it.

But it kept coming up again an again so finally I took a more serious interest. I still think it's a great idea but lately, I've gone a little off bitcoin for 3 reasons:

  • Power Consumption
  • Over-valuation
  • Over-Hyped block-chain technology

Power Consumption Power Consumption is an interesting one, I was listening to a Risky Business podcast about a year or two ago (I can't find the episode) and they discussed how much power was being used to run all the GPUs / ASICs that are mining bitcoin. They linked to an article which said bitcoin minding was using some ridiculous amount of power like 1.21 Gigawatts their comments were (paraphrasing) "I think the numbers are a bit rubbery but the general idea is right."

To mine bitcoin, you need compute power, and for that you need electricity, and for that people are burning fossil fuels.

Over-valuation There was a Last Week Tonight episode where John Oliver called cryptocurrencies a giant ponzi scheme. I'd love to get angry and defensive about that, but unfortunately, for the most part, he is right.

Most buyers of bitcoin are buying it as an investment, and that's really not the point of a currency. Sure, some people trade in currency for a living, but for most people, you would only by Vietnamese Dong if you were going to go to Vietnam and expected to buy something with the currency.

With bitcoin, people buy it to hold on to it because the price is going up, but the price is only going up because people are buying it as an investment. I'm not sure if the bubble will burst or what will happen in the future, but right now most bitcoin is not being used to facilitate trade.1

I'd love for this to change, but I don't know if it will

Over-Hyped block-chain technology I feel like people will invest in anything that got the word block-chain in it right now, Extra Credits even did an episode "Can Blockchain Technology be a Game Mechanic?" and they talked about how they could use the blockchain to track a weapon throughout the game. They say:

"Okay, picture this: You start a game using a simple iron sword, you progress and level, and eventually use it to slay a boss named "Grillmig The Orc". Suddenly your simple iron sword becomes "Grillmig's bane", and with the name changed, it gains some extra stats.

Eventually, like all gear, you'll outgrow it and decide to sell it. Some upcoming player buys it and as they level they farm a ton of ghouls. And now it becomes: "Ghoul Slayer, the bane of Grill Mig". It gains more stats, but eventually this player too out grows it.

The weapon passes from player to player each time accruing new heroic associated with it, or unlocking achievements that no single player could ever do alone. Eventually, it becomes one of the most coveted swords in the game because its unique.

And any player who examines it can see the name of all the players who ever wielded it and what deeds they did. And if the designers were really clever, the sword would also benefit from having been used by characters that later did heroic deeds.

So when your character slays that final raid boss god dragon of nightmares, all of the sudden your first training sword no matter who currently has it, levels up and becomes the heirloom of the Great .

That's Awesome, and it's something that blockchain lets us easily do. "

Now, first of all, that's an amazing game mechanic and a really cool idea, but one of the top comments said:

Why does Blockchain make those MMO weapon concepts easier than any other methods? Would that not work with a standard database on a server?

And that was my thoughts exactly. A blockchain solves the problem where you have a distributed system the users don't trust one another but want to build trust into their system. But the key word there is distributed if you already have a central authority that everyone trusts then a blockchain simply becomes a lot of work for no gain. If you trust the game company running the servers to keep an accurate history of the scores you don't need a distributed blockchain.

And in fact, if you have a central authority it solves one of the "problems" with a blockchain which is that you can undo a transaction if it's malicious or accidental. What if in the example above someone found an exploit in the game and managed to kill all the bosses in the game at once, now their weapon has that stat and if you had a distributed ledger, you can't undo.

People are human, they make mistakes, having an undo button is a great thing.

Another way I've seen blockchain over-hyped and used in the wrong way was some article2 about a bank that was going to start using it for tracking their transactions. It was still at the R&D stage and probably just a puff piece with no substance. But the idea was it would be used by one bank, by them self, internally, tracking transactions but if it's just one bank why bother?

They can always go back and edit their internal blockchain to change some historical transaction and then just recalculate all the future transactions again after that. Who is going to stop them? Sure it might take some extra compute power to catch back up but they can do it. If their blockchain was running on 3 servers before just get an extra 300 servers onto it until you catch up again.

There are existing cryptographic tools that would do a better job with significantly less overhead in that situation, like time stamps. Make a file with all your transactions, calculate a SHA256 sum of the file and get it timestamped by an external trusted authority. It would give you a ledger that's much harder to alter.

The blockchain was a genius idea. It solves a very specific problem, but it's often being applied in situations where it's not appropriate. It makes me think of a kid who uses a VPN to log into Facebook and then make a derogatory comment about a teacher and later says "But I thought a VPN would make me anonymous"

All that's not to say that I don't like bitcoin, I do like it, I just think it's worth looking at the bad as well as the good.

  1. There are obviously some counterexamples to this, one of my friends has some bitcoin that he is using pay for things like a VPS directly with bitcoin. 

  2. I can't remember the exact article I was reading but just Google "Bank blockchain" and you will find hundreds of similar ones. 

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