The Bitcoin Saga


...Yea, you probably don't want to know my opinion on how wasteful the payment infrastructure is either.
(Certainly we need one, but the current one's...argh)

But with bitcoin, the massive inefficiency is both by-design and increasing.


For once we agree.

But with bitcoin, the massive inefficiency is both by-design and increasing.

When it comes to computer applications, everything is increasingly inefficient by design. Programs are generally as inefficient as they can get away with, given current hardware. Whether you were writing a book report, processing a loan application, or playing a game, there is no doubt that you used far fewer computing resources in 1994 than in 2014.

Bitcoin happens to factor this unpleasant reality directly into its algorithm, rather than waiting to unveil it in Bitcoin v2.0.


Well, look at servers - there are major efforts to reduce server workload, to the degree of creating standard open-source hardware designs and the massive optimisation seen in some GPCPU code efforts. Then there's the way things are running today on mobile in fewer resources than people believed possible.

I'll agree it's true for the desktop side to some degree, but I argue that that's in primarily because of a move to higher level API's rather than a deliberate waste of effort - and there are also trends against that, like Mantle.

(And well, I've...heard stories from someone who once worked on banking code, though. Including the sort of processors and programming languages they use, the idiotic level of "security through obscurity" they embrace (which seems, incidentally, to rule out proper code review - whereas I'd mandate open source banking software), etc.)

Bitcoin is simply by it's very nature not only inefficient, but will become increasingly inefficient.


I wonder if we'll eventually hit a point where the costs of mining Bitcoins exceed their monetary value; and so people just stop mining them before hitting the theoretical upper bound on Bitcoins. Probably we'll just come up with cheaper, more energy-efficient ways of mining them; but I'm amused by the notion that Bitcoins might run into the same problem as pennies & nickels, only without Uncle Sam to make us foot the bill.


Except that in Bitcoin, the mining process is what powers the transaction processing, so if that happens the whole thing comes to a crashing halt. I don't think it's too likely to happen though...a large part of the overhead is that miners are competing to finish a block first and only the one who does gets any coins. As cost rises and miners drop out because they're losing money, the remaining miners should see their success rate rise.


Apart that, the Bitcoin algorithm adjusts itself to keep the mining rate constant. If hardware costs slow down mining, the computational barrier to mining falls. And even after the last Bitcoin is mined, processing blocks can earn transaction fees (automatically paid by the buyer or seller).


Yeah the CPU power in bitcoin mining is largely zero-sum and relative -- if a chip that is 1000x faster at the same wattage released tomorrow the entire network would soon speed up and the arbitrarily difficult problems would ramp up so the mining rate is the same and nothing would change. This also applies if the value drops, the number of miners goes down, so its easier to mine.

The reason mining keeps the network secure is that is makes the dollar-cost to get 50% of the mining power of everyone impractically high. As long as hardware costs apply to everyone than better hardware has no real effect.

This is also why some newer coins are intentionally ASIC resistant. There's some concern that the specialized nature of mining ASICS means the distribution of mining is more centralized and can actually increase the risk relative to GPUs or CPUs. I might toss my Crossfire gaming GPUs at a new coin, but I'd never purchase dedicated mining ASICS.

(Seperately you'd probably prefer distributing a new coin widely if possible).


Yes, "Money and Opinion" are in the hands of the rich, that's what I'm saying. And that's why I think the government should be shielded from it, which is exactly the opposite of what you're saying I want to do ("fighting against parring back that control").

But tell me, how do you plan to take power to implement that little fancy agenda of yours? If you don't have a plan, then all the grandstanding is for naught, isn't it?


Well, it almost happened back in January, the GHash.IO pool hit 45% before it took major steps to cut down it's own usage.

Vetarnias - Except the present system, the one you're defending, does not protect against it. You can mis-characterise what I want to do all you like, and I've talked multiple times about solid steps - the Nordic System's economics is one example, a basic income is another, etc.

And I see, not liking paternalism is "grandstanding". Ha.


No, I did not mean: "What would you do once you take power?". I meant: "How are you planning to take power?". And until you have a cogent plan for taking it, any action you want to take once you have power is grandstanding.


And again you're obsessed with the top-down view that power's to be taken (away from the people) in the first place. And that it's grandstanding in your view to not have a "plan" to be a useless no-hoper party under FPTP rather than to work with organisations which can and have delivered real change like 38 Degrees, right.

I'll stick with being effective, and working on giving people power, thanks!


But power can't be "taken away" from the people because it currently doesn't reside in the people, this if we use your own description of the power structure. It resides, in your country, in this guy Cameron (stockbroker daddy, Eton, Oxford) and his party, with the support of the Lib-Dems, and propped up by the financial establishment. Unless you want to argue that the power belongs to the people because they've voted him in? Then what are you complaining about? But no, you know you would just be, as you say, "a useless no-hoper party under FPTP" (I have no idea what is 38 Degrees, because all this brings to mind is Korea), so you clearly don't want that, you don't want the status quo. So you can't be taking power away from "the people", because "the people" don't have it in the first place!

And the more obvious conclusion is that you can't give people power if you don't have power to give. You must first take it; and my question stands -- HOW?


I've been having fun in the last week getting into crypto currencies. Putting aside any anarcho-capitalistic uses of the technology, I can see a number of economic benefits. Extremely fast international transactions with minimal fees; would be very useful for large international purchases, people living in isolated countries, remittances, etc..

The mining thing has always confused me, and I think it's the one big downside of crypto vs. fiat currencies. The power consumption required to generate one is alot more than printing a note. There's one alternative coin called "mintcoin" where they have closed off all mining (after an initial mining period), and instead of allowing people to mine to generate new coins they give interest on all mintcoins held in the wallet program. Seems like a good idea, more equitable too.

I also recently stumbled on the concept of 'crypto stocks', the idea being you pay bitcoins to certain projects/companies in order to get 'shares' in whatever they are doing that can appreciate/depreciate in value based on the market as well as pay dividends. There's an exchange called cryptsy which is quite popular, but they are only just about to add markets for USD. I expect that will significantly increase the userbase of the site, hence its revenue, dividends, and potential share price. So it might be a good time to buy a 'share' in it: This is public knowledge, yet some of these crypto markets are sufficiently small and uninformed that I don't think the 'efficient market hypothesis' applies here (i.e. this knowledge hasn't already been priced into the trade value of the share). Of course there's a downside to this, with rampant price manipulation going on with the bitcoin/USD markets.


How does that work? My understanding is that mining is part of the security feature, and that you can't make a cyptocurrency work without it. The security depends on having a process that's artificially slow to compute to verify transactions. You get multiple solutions from independent sources before you accept that yes, indeed, you really do own the coin you're giving me, and it doesn't belong to someone else. If you don't have this slow process, then a thief can spoof the process by creating bots that pretend to be independent entities doing to verification.

That Bitcoin gives out coins for doing the verification computation is purely an incentive. It still needs all that computing anyway. Saying that they're "closing off mining" means nothing, the expense is still required for security.


Ahh, absolutes. Which...oh wait, they don't exist in politics. The reality is that 38 degrees has stymied the UK government again and again - that you don't know about it, in THIS discussion, well...keep on making up crap to cover to that. And if I was stupid enough to follow your prescription, yes, I'd be a political no-hoper like you. And I don't go with your obvious "conclusion" of masochism (otherwise known as revolutionary ideology) - HULK SMASH is not the answer - stealing the power for the few is the wrong approach to take in the first place, again. It leads not to empowering people, but to the Terror and the following regimes like the Directorate and the Consulate - mutualism learned from that, as you evidently have not.

TimN - There are very good electronic/mobile payment infrastructures in some third-world countries, like Kenya's M-Pesa, because they're not dealing with what amounts to legacy cruft. Adopting one of those is far more sensible than taking on a rich-get-richer overhead and all the other issues inherent in crypto-currencies.


What the anarchists have yet to cogently demonstrate in any way is how an untaxed and ungoverned economy at any scale above a small village does not swiftly and surely result in the majority of the wealth being concentrated in the fewest possible pcokets.


So if I understand correctly, when the Visa and Mastercard corporations collect 3% to process your credit card transaction, or when the Safaricom corporation collects up to 30% to process your M-Pesa transaction, that's "very good and sensible". But when some lucky hacker collects a Bitcoin after processing your cryptocurrency transaction, that's "rich-get-richer overhead".

No wonder nobody takes anarchists seriously.


Soapyfrog - Ah, another one of your beliefs, against tax and government, you're trying to push off as anarchist. Indeed, the growingly lawless nature of your capitalism is concentrating the cash in every fewer wallets. And? Oh, it's you.

Maginot -

No, you're not an anarchist, but thanks for being that person you describe, who can't be taken seriously. Never mind some anarcho-capitalists (regarded as drooling idiots by other anarchists, for good reason - your slam at "anarchists" is rather less accurate as a slam at "Americans") are crypto-currency crazy...but most of the real fans are vulgar libertarians.

I am hitting out there, of course and specifically, at Visa and Mastercard as being legacy cruft. Moreover, thanks for the misrepresentation on M-Pesa; It's 30% only when the sum being sent is 10 KES, which is 7 cents. Sending 2 dollars, 178 KES, has a fee 15% and sending 10 dollars - 864 KES - has a fee of 3.8% and it falls off rapidly as a % from there. Sending 100 dollars, for instance, would see a fee of 0.63%!

Given the transactional costs for small payments, that's quite reasonable - and there's potential to cut it further. (But if you're making really small transactions? USE CASH)

Transaction fees on bitcoin (and the number of transactions which need it, leading into them all doing so in are going to rise substantially, but hey, facts. And no, when the hacker steals all your bitcoins because of a software flaw...never mind the entire rich-get-richer nature of ASIC's and mining which is happening today...

(Oh, and for the REALLY scary side effect - if those ASIC designers turn their hand to slightly different ones, say....ones for password cracking then they have both flipping powerful hardware and an amazingly low time to market. In fact, some of the USB-based ones now...erk)


What i'm not fully understanding is why AMD cards have shot up so much because of all this? It has been shown that mining is basically not economical unless you do it on a grand scale (which will beyond the budget of 99% of people), earning $2 a day will not pay back your electricity bill/new GPU purchase etc.

So large scale is the only way to go, so does that mean there has been a glut of very rich people setting up huge 'mining farms'? I can see that being a small scale thing maybe, but it suggests every man and his dog that can afford to drop about $20,000 on systems that can make money has done? Is this a latest silicon valley fad/boom-bust/bubble thing? I'm just not feeling it, i can do many more things on my PC to make a better return (we all can, porn etc)? It sounds like it's been created (and marketed) to make a few people rich maybe, a cunning scheme but no more.


Ok that's pretty funny, Storebought.

Moreover, thanks for the misrepresentation on M-Pesa; It's 30% only when the sum being sent is 10 KES, which is 7 cents. Sending 2 dollars, 178 KES, has a fee 15% and sending 10 dollars - 864 KES - has a fee of 3.8% and it falls off rapidly as a % from there. Sending 100 dollars, for instance, would see a fee of 0.63%!

Let me guess, you still regret investing in M-Pesa stock instead of ASICs.

But of course, their fees are not reasonable at all. Sending 100 KES incurs a 5% fee. Sending 101 incurs a fee over 25%. Any economist can tell you the problem with that, and unfortunately for you their model is not likely to be successful in other countries.

Transaction fees on bitcoin (and the number of transactions which need it, leading into them all doing so in are going to rise substantially

In Bitcoin, transaction fees are like eBay bids. You can choose whatever amount you want, and the recipients can choose whether or not your transaction is worth processing. They are far lower than any fees charged by corporate payment systems, indicating that corporations all vastly overcharge.

But hey, it's ok with you when M-Pesa investors get richer, as long as we make sure people with ASICs don't get richer.

And no, when the hacker steals all your bitcoins because of a software flaw...

The only flaw is trusting the wrong person with your credentials. It may come as a shock to learn that similar things happen all the time with credit cards and checkbooks. The only difference is that banks and merchants restore individuals by making everyone else bear the losses, whereas Bitcoin is usually uninsured.