Is everything in Bitcoin as good as its proponents say?
I, as the owner of as many as 9 bitcoins, are certainly incredibly pleased with their sharp price increase. However, I personally do not understand the general rejoicing about this, as well as the reasons for growth are not clear, no, I want to say that of course I know and understand the specific reasons for the last bubble, but it’s the mood of many people that I understand that Bitcoins can become a revolution will undermine all our economic foundations (in a good way). Moreover, I consider that the properties declared by Bitcoin and praised by many are not true, for example, I want to show that:
- Bitcoin is not decentralized at all
- Bitcoin is not a cheap transaction
- and yes, that miners simply burn real resources
Before I go directly to what is wrong with Bitcoin, I want to tell the reason for the current bubble, I do not pretend to the truth, so judge you, but nevertheless ...
Investigations, intrigues, under the cut
')
As we all know, in 2012 the bitcoin exchange rate was relatively stable, of course by the standards of conventional currencies it was feverish as a boat in a 12-point ball storm, but still if you look at 2011, then 2012 was “relatively” calm, and now 2013 suddenly started for everyone, what's the matter? There is such a man, his name is Max Keiser, he works on thePath , on Russia Today TV channel as a financial columnist in his own program Keiser Report, also writes for The Huffington Post, he is also the founder of the rather famous Hollywood Stock Exchange website. So, Max Keiser is an active proponent of bitcoin, and it has been a long time for tweeting and writing anything, as if forcing us to buy bitcoins. But recently he made an interesting tweet in which he says that he works with Exante.eu and pumps up the price up to $ 1000 apiece, here it will be clear to any sensible person that if you really want to buy dohrenischa, then you’ll rather scream at the full throat that the course is about to fly down. And yes, I think I saw something about this Exanta.eu. We go to see who they are and it turns out that Exanta.eu is a prime broker, i.e. they provide various services to hedge funds and investors, but what is much more interesting is the news of April 9, i.e. from yesterday - that their Bitcoin fund has a portfolio of as many as 81,000 Bitcoins, which is most interesting, it has only been working for 3 months, i.e. his beginning of his work coincides with the beginning of an unexpected growth of bitcoin. So what happened? It is hard to say, but it is quite possible that the classic pump-and-dump scheme happened - several guys started buying bitcoins, the investment was rather risky, but thanks to people like Max Keizer, many began to believe that this was the technology of the future and it’s not surprising that serious uncles decided to diversify their facilities. Since most Bitcoiners keep their coins under the mattresses, even relatively small investments by dollar standards immediately angered the market, the media crawled behind the market, for many of which Bitcoin was already familiar and they gladly announced how the rate was growing, as if forgetting that the last time he reached 30, then he fell to 2. And then, as if, that story with Cyprus happened to happen on purpose, which gave the media a reason to blow even more about how the Greeks allegedly ran feverishly to buy expensive Bitcoins, the most once again about achav price. Those. There is no real economy under this bubble and it was not surprising that everyone understands and shouts at every corner, but nevertheless there are people who still believe and hope that Bitcoin is some kind of gold 2.0. and that his imitation is a matter of course ...
While I was writing this paragraph, the MtGox ticker in Chrome slowly descended from 250 to 180.
But it's not only about the fever, it's about the very nature of Bitcoin. And this is not even deflation. Deflation didn’t speak only lazy, I personally, as a rational person who does not use Bitcoin to exchange goods and services, is quite happy with deflation - you wake up this morning and see that your wealth has grown by 50%, isn’t it cool? True, as a rational person, I understand that I can wake up and see how my wealth will remain just to buy one lunch.
The matter is different, namely, in the statements that the Bitcoiners are doing, namely, that not all of what they say is the ultimate truth.
As many know, to solve the problem of the Byzantine generals in Bitcoin, a proof-of-work system is used, or speaking in our language: proof of labor. The meaning of the problem being solved is that in a distributed environment we cannot be sure of the honesty of the participants of this system, and in order for honest participants to use this system they agreed that each of them should provide such evidence that would show that he worked long enough. Making a chain of such evidence, honest participants can be sure that their chain will always be longer than the chain of malicious participants, if the number of malicious participants is less. In reality, for such a system, Bitcoin uses the selection of hashes, although the task is trivial, but difficult, and most importantly, costly. It would seem that this is good - the more work is done by honest participants - the more work must be done by the attacker, but there is one problem - they are rewarded for this work, and as a result this reward becomes the goal of the work, which affects the arms race - where each of the participants trying to increase their productivity by all means, but since the system provides a balance, then the methods found earlier to produce more at lower costs will sooner or later be replaced by newer ones, and if you want to continue To earn money by maintaining the system, you will have to invest new additional resources. This arms race will go on constantly, forcing more and more capital investment in maintaining the infrastructure. She will stop only if it is not profitable to do it, and here is the most interesting part.
The fact is that the current arms race is covered with Bitcoin emmisia, for example, at the moment the cost of all the Bitcoins produced per day is $ 900,000 (nine hundred thousand American dollars). However, this will not always be the case, and the e-mail will fall, and this means one of two things - that the cost of this race will fall on the shoulders of paying through the obligatory commission for transactions, or the rate will be so high that even the emission of a small number of bitcoins will cover the cost of mining. But a high course as if by itself implies large spending on infrastructure, otherwise the temptation is too high for maliciously-minded participants. Those. there is no choice but to take a commission, and the blockchain.info/charts/network-deficit schedule hints at us that the commission for transactions has never covered the cost of producing one unit, and lately, in general, the difference has reached catastrophic proportions. And this provided that, for the majority of casual miners, it was no longer profitable to engage in this production.
Simply put, the widespread statements by all Bitcoin supporters that a low commission in Bitcoin does not correspond to reality at all. The market is a market, work is work, sooner or later the market will reach equilibrium and all those huge expensive calculations will require justification and the only means to justify them is the transaction fee, whether the cost of bitcoin transactions is lower than in traditional means of moving money - it’s hard to say but one way or another, it will not be scanty.
The second consequence of the arms race may be even worse than the first. The fact is that Bitcoin is gaining and gaining popularity as a distributed currency, but distributed! = Decentralized. With the increase in the cost of mining (casual miners have already fallen off), we can observe the enlargement of the miners themselves, if earlier - when mining took place on mass equipment - every schoolchild could take part in the process, now the focus is shifting towards the more entrepreneurial who bought ASIC for many bucks, i.e. the number of people directly involved in supporting the network is decreasing, the cost of equipment is increasing, and the cost of entering a narrow circle of miners, turning miners into a kind of IT. And this process is unlikely to stop, but there may be hard-core pools - when people buy equipment and get a share of its profits, but there is also a high probability that companies will find it easier to use and develop new aysics themselves, for example, the same Avalon will it’s more profitable just not to sell the equipment, considering how quickly it justifies itself. All this leads to only one thing - the narrowing of the circle of people who control the network, all the gaining network separation into lightweight participants and super nodes. In principle, as long as this circle of people is interested in maintaining a healthy network, there are no problems, but already now one can imagine the future when several large corporations will be engaged in maintaining the network, which will protect their technologies like the eye of the eye. Again, what's the difference, if only people were good, but still it somehow goes against the initial ideas about decentralization, universal democracy, and not being controlled by anyone.
Thus, two of the three basic statements that bitcoin is the currency of the future are, well, if not untrue, then clearly not quite true, and many newbies or people who are not versed in technology can be misleading, inspiring them - this is some revolutionary technology of the future, promising mountains of gold to all those who invest in this technology today. You and I should understand that the thirst for enrichment without doing anything is rational, as well as entangling other people to continue to enrich themselves. But sooner or later someone will say - and the king is naked.
PS When I started writing a ticker I showed $ 250, when I finished - 156
- Bitcoin is not decentralized at all
- Bitcoin is not a cheap transaction
- and yes, that miners simply burn real resources
Before I go directly to what is wrong with Bitcoin, I want to tell the reason for the current bubble, I do not pretend to the truth, so judge you, but nevertheless ...
Investigations, intrigues, under the cut
')
As we all know, in 2012 the bitcoin exchange rate was relatively stable, of course by the standards of conventional currencies it was feverish as a boat in a 12-point ball storm, but still if you look at 2011, then 2012 was “relatively” calm, and now 2013 suddenly started for everyone, what's the matter? There is such a man, his name is Max Keiser, he works on the
While I was writing this paragraph, the MtGox ticker in Chrome slowly descended from 250 to 180.
But it's not only about the fever, it's about the very nature of Bitcoin. And this is not even deflation. Deflation didn’t speak only lazy, I personally, as a rational person who does not use Bitcoin to exchange goods and services, is quite happy with deflation - you wake up this morning and see that your wealth has grown by 50%, isn’t it cool? True, as a rational person, I understand that I can wake up and see how my wealth will remain just to buy one lunch.
The matter is different, namely, in the statements that the Bitcoiners are doing, namely, that not all of what they say is the ultimate truth.
As many know, to solve the problem of the Byzantine generals in Bitcoin, a proof-of-work system is used, or speaking in our language: proof of labor. The meaning of the problem being solved is that in a distributed environment we cannot be sure of the honesty of the participants of this system, and in order for honest participants to use this system they agreed that each of them should provide such evidence that would show that he worked long enough. Making a chain of such evidence, honest participants can be sure that their chain will always be longer than the chain of malicious participants, if the number of malicious participants is less. In reality, for such a system, Bitcoin uses the selection of hashes, although the task is trivial, but difficult, and most importantly, costly. It would seem that this is good - the more work is done by honest participants - the more work must be done by the attacker, but there is one problem - they are rewarded for this work, and as a result this reward becomes the goal of the work, which affects the arms race - where each of the participants trying to increase their productivity by all means, but since the system provides a balance, then the methods found earlier to produce more at lower costs will sooner or later be replaced by newer ones, and if you want to continue To earn money by maintaining the system, you will have to invest new additional resources. This arms race will go on constantly, forcing more and more capital investment in maintaining the infrastructure. She will stop only if it is not profitable to do it, and here is the most interesting part.
The fact is that the current arms race is covered with Bitcoin emmisia, for example, at the moment the cost of all the Bitcoins produced per day is $ 900,000 (nine hundred thousand American dollars). However, this will not always be the case, and the e-mail will fall, and this means one of two things - that the cost of this race will fall on the shoulders of paying through the obligatory commission for transactions, or the rate will be so high that even the emission of a small number of bitcoins will cover the cost of mining. But a high course as if by itself implies large spending on infrastructure, otherwise the temptation is too high for maliciously-minded participants. Those. there is no choice but to take a commission, and the blockchain.info/charts/network-deficit schedule hints at us that the commission for transactions has never covered the cost of producing one unit, and lately, in general, the difference has reached catastrophic proportions. And this provided that, for the majority of casual miners, it was no longer profitable to engage in this production.
Simply put, the widespread statements by all Bitcoin supporters that a low commission in Bitcoin does not correspond to reality at all. The market is a market, work is work, sooner or later the market will reach equilibrium and all those huge expensive calculations will require justification and the only means to justify them is the transaction fee, whether the cost of bitcoin transactions is lower than in traditional means of moving money - it’s hard to say but one way or another, it will not be scanty.
The second consequence of the arms race may be even worse than the first. The fact is that Bitcoin is gaining and gaining popularity as a distributed currency, but distributed! = Decentralized. With the increase in the cost of mining (casual miners have already fallen off), we can observe the enlargement of the miners themselves, if earlier - when mining took place on mass equipment - every schoolchild could take part in the process, now the focus is shifting towards the more entrepreneurial who bought ASIC for many bucks, i.e. the number of people directly involved in supporting the network is decreasing, the cost of equipment is increasing, and the cost of entering a narrow circle of miners, turning miners into a kind of IT. And this process is unlikely to stop, but there may be hard-core pools - when people buy equipment and get a share of its profits, but there is also a high probability that companies will find it easier to use and develop new aysics themselves, for example, the same Avalon will it’s more profitable just not to sell the equipment, considering how quickly it justifies itself. All this leads to only one thing - the narrowing of the circle of people who control the network, all the gaining network separation into lightweight participants and super nodes. In principle, as long as this circle of people is interested in maintaining a healthy network, there are no problems, but already now one can imagine the future when several large corporations will be engaged in maintaining the network, which will protect their technologies like the eye of the eye. Again, what's the difference, if only people were good, but still it somehow goes against the initial ideas about decentralization, universal democracy, and not being controlled by anyone.
Thus, two of the three basic statements that bitcoin is the currency of the future are, well, if not untrue, then clearly not quite true, and many newbies or people who are not versed in technology can be misleading, inspiring them - this is some revolutionary technology of the future, promising mountains of gold to all those who invest in this technology today. You and I should understand that the thirst for enrichment without doing anything is rational, as well as entangling other people to continue to enrich themselves. But sooner or later someone will say - and the king is naked.
PS When I started writing a ticker I showed $ 250, when I finished - 156
Source: https://habr.com/ru/post/176253/
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