How about that for a click-bait-y title?
A friend sent this to me today. Most of the short article is a bit whiny, but the last bit is the important question... and one I couldn't readily answer.
- What happens when all the bitcoin is mined? Bitcoin transactions are authenticated by the thousands of people who dedicate their computers and electricity to building the blockchain. They’re not donating all this money and computing power; they are being paid in bitcoin. Mining for bitcoin and authenticating transactions is the same thing.
What is the incentive for people to spend millions of dollars on computers and power once there’s no more kickback of coin? I have asked this question of the world’s leading blockchain investors, miners, and scholars, and none of them have offered a satisfactory answer. The best they can come up with is “we’ll figure out when the time comes.” (How is that good enough justification for a combined quarter of a trillion dollar bet on cryptocurrencies?) I spoke to the CEOs of four companies that have either just issued or are about to issue tokens, and none of them had even considered how the blockchain is administrated once the coin is all mined, or what that means to the future of their operations.
I'm curious about all y'alls thoughts on this.
By convention, the first transaction in a block is a special transaction that starts a new coin owned by the creator of the block. This adds an incentive for nodes to support the network, and provides a way to initially distribute coins into circulation, since there is no central authority to issue them. The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that is expended. The incentive can also be funded with transaction fees. If the output value of a transaction is less than its input value, the difference is a transaction fee that is added to the incentive value of the block containing the transaction. Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free. — Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System Fees provided incentive to miners from the start. Bitcoin was not intended to run on good will. If users don’t find using the technology worth the cost, they can switch to alternatives.6. Incentive
Gonna be inline snark 'cuz that's all this is worth That's all he does. use that magnifying glass at the upper right and search for "rushkoff" and tell me otherwise. Rushkoff is the edgelord's Michio Kaku. It was absolutely instantaneous. NCSA Mosaic was developed with public money and released in April 1993. Marc Andreesen took the code and released Netscape for profit in October 1994. He sold it to AOL for $4.3b four years later and immediately got into for-profit hosting. There's this idea that the Web was somehow going to be an altruistic cypherpunk utopia without anyone paying attention to the fact that there have been exactly zero altruistic cypherpunks. No one ever thought this. They just paid lip service to it so they could ignore patents and trademarks. LOL and they sold it as net neutrality Bitcoin was intended to circumvent tariffs and taxes. Nobody intends to "circumvent the banking system" by taking the books and making them universally public. I mean, you can sell bitcoin. Used ASIC miners? Not nearly as liquid. What keeps miners committed to the integrity of the blockchain is their investment in the ecosystem. If anything the past couple years have taught us that miners give no fux about politics or geography, they go where the power is cheapest, even if it's Texas. I doubt you'll find many nerds ascribing to "good" vs. "bad" considering how many of them are libertarians. The argument isn't "we do this for good" it's "you can't tell me what to do." Miners are resistant to 51% attacks because they lose money. "Working properly" has nothing to do with it. It's kinda weird that Rushkoff is building an argument that Bitcoin was intended to be something out of the Whole Earth Catalog and is now something out of the Sears Catalog rather than observing that a bunch of arrogant nerds thought they could out-computer the government but whatever. "Extractive" was never the argument - "manipulated" was the beef. of course, BTC manipulation is trivial compared to markets (see, for example, the massive sell-off this morning to cover last night's futures) and that argument could certainly be made, and has been made. Yet Rushkoff seems to be going for a "betrayal of principles" thing here, an odd position to take considering the general chaotic neutral disposition of the average bitcoiner. Do let's not confuse "elites" with "governments." Which, oddly enough, is an even more laughable assertion but nonetheless one of the core Bitcoin beliefs. There is very little evidence of this. The monetary value of a shekel is fully 1500 years older than shekel coins. The Romans used base metals that were always substantially less valuable than the units of currency they represented. The Chinese used paper money. Only certain backward barbarian kingdoms of the European Middle Ages had coins worth their raw materials. It is accepted as gospel truth that we've always traded with gold and silver, but the fact of the matter is, we've always made jewelry out of gold and silver and used bookkeeping for trade. I love how these sorts of diatribes always include some form of "we used to use nothing but barter, but barter also sucked" or "we used to use nothing but gold and silver, but gold and silver sucked." It's Van Danicken Syndrome through and through - "us moderns can clearly distinguish how stupid this idea was, but people born before the invention of Twinkies had entirely smooth forelobes and could barely brush their teeth." The fucking Incas were absolutely baffled why the Spaniards cared so much about gold. So were the Aztecs. Gold and silver were an obsession for that period of time between "Gibbon" and "Era Gibbon wrote about" and since nobody wrote about anything in between, we just assumed we'd always used gold and silver for everything even though it absolutely sucks for trade. Even primitive Europeans immediately realized how stupid gold was the minute they were shown anything else It was actually Marco Polo who introduced Europe to paper money. He even wrote a book about it. inter-village trade was always based on favor economies because it has always been based on favor economies and if you tried to say Jane didn't owe you a dozen eggs because Jane didn't redeem her egg coupon before sunset everyone around you would kick you out of the village and then ask you why they'd bother with a system of account that required a priest since everyone was illiterate. Or... you know... the Italian city-states created fractional reserve banking. Or... you know... the Jews became the merchant middle class because they weren't allowed to work or own land ...seems like that would warrant a link. Or a footnote. Or an example. Or the part of Rushkoff's colon that it was removed from. "Central" is it relates to Feudal Europe is particularly hilarious considering that it was a mess of Medicis, Borgias, Hapsburgs, Forzas and other families that didn't give a fuck about the peasants so long as they paid their taxes. You are now aware that Italians have been speaking Italian since shortly after the American Civil War and that the rulers of Russia mostly spoke French. England's royal family changed their name from "Saxe-Coburg Gotha" to "Windsor" at the outbreak of The Great War. The drain was taxation. Always has been. This is weirdly wrong. I mean, even people with a real itch against central banks will tell you they're a modern phenomenon. This is directly wrong and incredibly nuts. The issue of the middle ages was paying for conflict, which is one of the reasons the Medicis came to power. Inflation is actually a modern phenomenon, as catalogued exhaustively by Piketty. It had nothing at all to do with Trade. Bocaccio's Decameron certainly wasn't about a bunch of bored travelers sitting out a quarantine, and when Engels wrote "The Condition of The Working Class of England in 1844" everyone knew he meant 1244. Shit's gettin' WIERD man LOL Right - 'cuz as we all know, the bitcoin is indivisible which means it cannot be used to trade for anything worth less than one bitcoin. Ladies and gentlemen, cargo cult economics. I've never seen the like. AND NOW FOR SOMETHING COMPLETELY DIFFERENT Well... but by definition, the guys who bought early are... not banks. Just because the Bolsheviks replaced one bad system with another does not mean the Romanovs survived. I mean yeah people do stupid shit for money. I'm not entirely sure Bitcoin is that much more offensive than influencers selling jars full of farts but in a capitalist economy you do what gets you paid. Ahhh yes. "Proof of plant and other stories by people who don't get it" (waves hands) "you know, crypto-whatever stuff."How about that for a click-bait-y title?
Watching the bitcoin phenomenon is a bit like watching the three-decade decline of the internet from a playspace for the counterculture to one for venture capitalists.
We thought the net would break the monopoly of top-down, corporate media.
But as business interests took over it has become primarily a delivery system for streaming television to consumers, and consumer data to advertisers.
Likewise, bitcoin was intended to break the monopoly of the banking system over central currency and credit.
In return for dedicating all that hardware and wattage authenticating transactions and recording them in a ledger known as the blockchain, they are rewarded with bitcoin. It is their verification activity that mines new bitcoin into existence. And the more bitcoin they have, the more committed they will be to maintaining the integrity of the blockchain recording their assets.
In essence, bitcoin is money built and maintained by nerds, based on the premise that good nerds will outnumber the bad nerds.
Sure, bad actors can dedicate all of their processing power to fake transactions, but they will be outnumbered by those who want the token to work properly.
At its most ambitious, bitcoin is meant to provide an anonymous, decentralized, frictionless, and incorruptible form of transaction–an alternative to the extractive, central, bank-issued currencies now enjoying a virtual monopoly in our economies.
Cryptocurrencies aren’t just about increasing efficiency, but taking down an economic elite that has been using its control over currency to maintain its wealth and power.
Central currency is not the only kind of money that ever existed. For many centuries, gold and other precious metals served as money.
The problem with gold was that it was so scarce and valuable in its own right, that no one wanted to spend it on daily necessities such as bread or chicken. Gold was hoarded, and really only useful for long-distance trading between the wealthy.
During the Crusades, however, many European communities adopted the more flexible market money systems they had seen used in Moorish territories.
Market money was virtually worthless: like a poker chip or IOU that was redeemed for a loaf of bread or dozen eggs at the end of the day. Unlike gold, which was no good for transactions because it was too scarce, market moneys existed only to enable trade, and often expired at the end of the day. They couldn’t be stashed.
But this sort of money was fabulous for trade, which was the whole point of money, anyway. Everybody who had a way of creating value–whether making shoes or growing grain–now had a way of exchanging that value with others. The use of market moneys led to a century or two of wealth creation unlike any we’ve ever seen since.
The former peasants of feudalism became the merchant middle class, working just three or four days a week, and exhibiting a level of skeletal growth (a sign of health) larger than at any time in the history of humanity, until the 1980s.
The problem was that the aristocracy, who hadn’t created value themselves for hundreds of years, was losing its stranglehold over the masses. As the poor grew wealthy, the wealthy grew relatively poorer. So they outlawed local moneys, and replaced them with central currency.
All money was borrowed from the central treasury, at a rate of interest set by the king. People had to pay back more than they borrowed. It was a terrible drain
The rising merchant middle class of the late Middle Ages became incapable of transacting on their own; the money was just too expensive.
The merchant class became peasants and laborers again, the cities became the only place to work, and the plague soon followed.
And that’s the system we’re stuck with today, with central banks issuing money, and banking conglomerates lending it to the public and verifying our transactions for a fee.
Bitcoin was meant to cut out those unnecessary intermediaries, and replace them with computer cycles. The high processing cost of mining bitcoin–as well as an arbitrary limit on the total number of coin that can ever be mined–keeps the money supply scarce.
But this means that instead of re-creating those high-velocity market monies of the Middle Ages, the abundant ones that worked like poker chips, bitcoin re-creates the market mechanisms of gold, a currency that invites hoarding and speculation while discouraging transactions. Oops.
This explains why bitcoin has become less a means of exchange than a speculative pyramid, as well as why the coin’s developers and early investors have ended up billionaires.
The wealth disparity in bitcoin is worse than that of central currency, with 4 percent of users owning 96 percent of bitcoin. So much for breaking the banking monopoly; this is just hackers seizing the banking industry for themselves.
The money itself is worthless. Less than worthless, in fact. We are spending massive amounts of machine cycles and electricity, burning fossils fuels for no reason other than to prove our commitment to the coin.
What if the “proof of work” for coin were based on something good for the world, rather than aiming so directly for ecological self-destruction?
The non-financial uses of the blockchain are certainly inspiring: Smart contracts let people devise and administrate complicated agreements without hiring lawyers. Whole companies and co-ops can be orchestrated and secured through simple sets of instructions that are confirmed and recorded on a blockchain such as Ethereum.
It requires a whole lot of code and electricity, however,