Blockchain In a Zombie Apocalypse
By Chris at www.CapitalistExploits.at
With a strong focus on investing in game changing trends, whether in private or public markets, it's not surprising that the technology underpinning the Bitcoin digital currency has been more interesting to us than a gaggle of suntanned string bikinis.
I wrote about the technology recently, first here and then again here, and received lots of really interesting feedback.
At the same time I received lots of detractors of the blockchain technology emailing me. As far as I can tell, they fit into two main groups.
The first group don't understand what it is, how it works, or its potential applications, have no inclination to educate themselves accordingly, and are generally fearful of anything not yet in existence.
They would have been found criticizing the internet before it went mainstream, saying things such as "it's a tool to control the masses" by some never-been-seen (but we know they exist, really) group of old men in cardigans, huddled in a smoky room sipping Chivas and plotting the world's fate.
The second group, freshly indoctrinated by morons such as Al Gore, are to be found harking for the "old days".
By their logic we're all better off without technology, our homes should be made from sea shells, hemp, and egg boxes, our diets should consist of crickets, alfalfa and free range caterpillars, and our cars run on "friendly" electricity harnessed by happy thoughts.
What they forget about, though, is the fact that charging the electric car they just bought likely involves a power socket which sources its power from a nearby coal fired power station. How's that for "green"? It's not lost on me that this group will send me these thoughts via the internet, on a device which they're suggesting none of us should have.
It was therefore with glee that I received dozens of intelligent comments and questions to these articles from people genuinely interested and attempting to learn more, even if skeptical, an entirely healthy attribute. One reader in particular posed some very valid questions which I want to share with you today.
Please note that I don't pretend to have all of the answers on this particular topic and am really grateful and fortunate to have at my proverbial finger tips an exceptional team and a network of experts who know more about this than I.
So here goes the email:
First, I don't understand what a "blockchain" is.
Secondly, I am concerned that this technology is totally dependent upon a human constructed machine, and a supply of electricity. What would happen to your "assets", so carefully digitized, if electricity was somehow terminated throughout the world? (yes, I am sure you are laughing at this speculation)
Thirdly, I remember that "Bitcoins" have been easily stolen or lost in the past, and legal action has been difficult. This doesn't give me much confidence in this technology.
To make it clear, I am not necessarily arguing against this technology. I can see it being extremely useful, but at this point in time, I am still more comfortable holding a hundred dollar bill in my hand.
Let me deal with them one by one.
1) What is the Blockchain?
The first question requires a much longer explanation but at its core the "blockchain" is a public ledger of transactions. The transactions are collected in "blocks" and found in a random process called "mining". As transactions transfer ownership, each of these blocks represent an update of the user's balance on the network.
The technology is complex and not immediately easy to understand. There are lots of resources on the web providing granular explanations and I'd encourage anyone interested in this space to really dig in to understand the technology and the implications; it is going to completely revolutionize entire industries and 5 years from now it's likely that you'll be consuming products and applications which are just being developed today.
That is fine if you want to be a bystander to the investment opportunities but if, like us, you're not then now is the time to begin in earnest.
2) Concern with the technology dependent on a human-constructed machine and electricity
You're partly correct in saying that we're reliant on a human constructed machine but what's critical to understand is that the blockchain works like the internet in a sense that it's a network of machines. The failure of one or even millions of machines will not affect the operation of the system. It is decentralized and this provides it with many times the efficiency, safety and incorruptibility of any centralized system.
To your point on the reliance on electricity. Absolutely! It's a very real fact that we're reliant on a technology which, while it uses the internet which is decentralized, is reliant on electricity which is largely centralized. Centralization creates single points of failure not to mention inefficiency, corruption and abuse.
Two things come to mind when answering this question. The first is that in the modern world we're already completely tied to the availability of power, and the second involves a deeper discussion around what is happening in the power industry which itself is due for disruption.
Like it or not, today our assets are largely tied to machines, computers and electricity. Take, for example, your home. Who says you own it? A title register says so, and increasingly that title register is kept in electronic format on one or more databases. Your money held with a particular bank. Same thing. Try withdrawing your money from a bank when there is a power failure. Good luck. Try paying for gas with your credit card when the power is out.
What about your brokerage account, your business records?
Bitcoin and the blockchain, like any technology driven software system, are completely fragile in a non-digital world. Bitcoin, the blockchain, and any system remotely like it (including SWIFT) are dependent on a functioning global network, reliable power sources, cell phone towers, satellites and the infrastructure surrounding it all.
I don't believe the answer is to act like the Neanderthals we evolved from, dig holes in the ground and store grandma's pearl necklace. The answer lies in a better system.
The second thing that is important is that the power industry itself is due for massive disruption. I discussed this in an article on the electricity market and solar power.
In particular, the cost of solar as just one alternative will very quickly become a viable option for individuals and communities. The panels can be put up by homeowners requiring no centralized service.
This is an example of a decentralization of power (pun intended) moving from the large to the small. The same phenomenon we've been experiencing for the last 50 years but one which is gathering momentum and happening with greater speed.
3) Bitcoins have been stolen in the past and legal action was difficult
All true. I suspect that you're referring to the failure of Mt. Gox.
Risk can never be 100% eliminated and we're not about to change human behaviour which will include both the best and worst of humankind. As long as humans crawl the Earth we'll get bad actors, fraudsters, amazing wonderful people, geniuses and everything in between.
A few things are worth considering and understanding when thinking about fraud and security.
Firstly, by securing Bitcoin or any asset in a private wallet or in one of the many secure storage facilities, you can massively reduce this risk. The ability to do this is incidentally far easier than it currently is for you and I to take our fiat currency out of the bank and store it in a home safe.
Secondly, regulatory oversight is increasing in this space as it matures. Expect this to continue. For example, today Coinbase, a US based company, is many times larger than Mt. Gox ever was, has obtained all necessary regulatory approvals and licensing, including money transfer agent license and are licensed as a bank.
This means that you can hold fiat currency on the platform and exchange it for Bitcoin. The regulatory oversight of the "typical" bank used is much the same except the underlying system affords far greater levels of security and control to the individual (you and I).
As a point of disclosure: Partners at Seraph, who are also owners of the Capitalist Exploits site, are early stage investors in Coinbase and other companies not mentioned here which involve this technology. There. Bias disclosed.
- Chris
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Funny that this article talks about well traversed points.
And leaves out everything even nearing true current convtroversy.
Enjoy getting reamed as the price plummets.
Prominent Bitcoin Developer Declares the Digital Currency a Failure http://fortune.com/2016/01/14/bitcoin-developer-quits/
Hearn sold his ass to the bankers.
Pour $$ into the guy and he will say anything.
Which is why Bitcoin is forking as we type, XT (like Hearn and his comments) are history, and little bitcoin marches on...
One rather obvious problem with block-chain is that, by design, it has unbounded growth.
Unbounded growth within a finite system sounds like a Ponzi scheme to me.
Fiat has unbounded growth. Bitcoin is limited to a total of 21 million coins. It is naturally constrained.
That would have been true if the technology was called blocks-list. Since it's a chain you can only store Merkle root for best-block tree and be as secure as you were, although without transaction details.
What worries me about Bitcoin more than the fact that it requires an Internet controlled by the military, and that TPTB could outlaw exchanges and conversion from fiat to Bitcoin and vice-versa because it is used by "terrorists"; is the religious fervor of its devotees, the absolute faith that it is infallible.
That is a big red light. I'm with you devotees in spirit - but I see a black hole.
Bitcoin would be extremely difficult to outlaw due to its decentralized nature. Also, government attempts to protect its currency with capitol controls are almost always a failure. Putting capital controls into place are an obvious admission of failure, that no one wants the currency they are trying to protect. The currency controls simply delay the inevitable. There are numerous examples from Argentina to Venezuela to the Roman Empire - outlawing a currency that is superior to the one you are trying to protect doesn't work.
Surely, you speak of Gold and Silver in your physical posession?
In addition, does that mean it would be easier for them to tax any wages paid with bitcoin immediately, and make it impossuible to work "'under the table"? I really dont know that much about it yet.
A matter of time before the Banksters figure out how to neutralize it.
"The failure of one or even millions of machines will not affect the operation of the system."
Righhhhhhttttttttttt ! Here is a fella who obviously understands complex systems and operations better than myself.
Ha! Here's the gist: like the Internet, Bitcoin is a dumb network. Its complexity is an emergent feature stemming from its growth, not the rules it's governed by. Old fashioned telephony system was a complex and smart system by design. It got ripped apart by dumb network. Now, the legacy financial infrastrucure we have now is about to be ripped apart by Bitcoin's dumb network, deja vu style.
A good job describing the trees but not the forest. Bit coin must be fully recognized by the political power structures. Why would they do that? My understanding, which may be flawed, is that bit-coin is not easily inflated. Countries of the world are reaching the end of an inflation cycle. Countries are about to enter a reform cycle. (eg see Catherine the Great.) I would agree that bit coin could replace SDR or be used by the BIS. Welfare states (Greece, Spain, California) would have to change for bit coin to be rolled out to the masses. Why wouldn't California wage a war on bit coin?
Why wouldn't California wage a war on bit coin?
Because they can't stop people using the internet.
Actually I like the concept and it does take banking out of the CORRUPT bankster hands.
What will happen is that corrupt bankers though will take over this or lose their parasitical lifestyle. It has nothing to do with the concept of bitcoin but to do with the greed of the banksters.
Now it is a deflationary idea and now you attach it to an inflationary one, trading between say dollars and bitcoins what will it reveal now you cn measure the difference? The amount of hidden QE in the current system will be revealed and all of a sudden the banksters are exposed.
So if the they do not destroy it on the first they for sure will on the second or banksters will be like unicorns or rocking horse shit, priceless when there is none.
SO I AM ALL FOR IT AND IT MIGHT BE INTERESTING AS IT PROGRESSES TO DEVELOP OTHER FORMS OF THE SAME FOR SAY LOCAL TRADING EXCLUDING THE BANKSTERS FROM LOCAL TRADING AND THEIR CUT OFF THE TOP.
It has the ability to compete with/displace transactional processing! Loans and other bigger things will still be under the control of banks. AND, perhaps banks themselves will issue Bitcoin to you, BUT, it will likely come with a cost. In the end it's not so much about who has control (someone ALWAYS WILL) but how much it costs to go about your way.
Yes, the growth of Bitcoins, and this is the key part, has some more organic limit on it. I applaud this. I don't, however, think that it can be realized given the need for governments to manipulate currencies: yeah, it's like a Catch-22. In a growth environment it wouldn't likely make it. In what is sure to be a deflationary environment for decades (if not longer) it might have more of a chance: however, this would see us struggling to maintain our existing infrastructure, of which Bitcoin relies on.
When I was working in this field I saw that we could offer lower-cost transactions; unfortunately scaling killed us (and I don't see that it's really that much different today- security has it's costs).
To me, just saying that it's bad for the Big Bad Banks isn't enough. Utility. Value. Durability. Food, Shelter and Water, these are where I invest: it's physical, and I have pretty good utility, value and durability with them (I don't really need a new transactional currency to support them).
OKkkkkkk:
It will revolutionize voting.
It will revolutionize share ownership
It will revolutionize patent ownership
It will revolutionize contracts
It will revolutionize everything we wish to log/timestamp
It will obviate the need for banks for transaction processing
Enough yet?
Yeah, people who play with BTC never invest in shelter, food, water, shiny rocks, utility, tools, value, knowledge... /s
Except we know, for a fact, that Carrington Events happen every now and again.
I have also studied Carrington events. They only blast a portion of the planet - say 25%. Bitcoin would carry on in the other 75% unfettered. If you were in the affected area your bitcoins would be safe on the blockchain for you to recover, if you should survive the Carrington event. If you want to prep for a Carrington event, why not have food, silver and guns stored as well as Bitcoin? I don't think anyone would argue that Bitcoin is a single solution for any catastrophe that might await mankind.
Exactly.
Bitcoin is a bet on an onoging successful digital future and is not designed for riding the apocalypse.
100%
And the scientists who discovered the two sine waves on the sun, one at surface and one inside the sun, found that when those two sine waves overlap we get a Maunder Minimum
The scientists noted that the sine waves are trending together indicating some possible event in the coming years.
http://www.dailymail.co.uk/sciencetech/article-3156594/Is-mini-ICE-AGE-w...
In a mad max event the criminals will use cash and PMs, maybe diamonds. Same as it ever was.
Mad Max will never happen.
Never say never... Only those unable to process reasonable levels of risk assessment will use "never."
Our sun eventually burns out, the centuries leading up to the finale could look rather mad maxish. Never is an outlier.
The Sun will eventuall expand into Earths orbit turning it to ash-but not for a billion years
Oh good, plenty of time for meteorites, solar flare eruptions, nuclear war, epidemics, polar magnetic wave reversals, earthquakes, volcanoes ,euthanasia for anybody over 50, and abortiion up to 16;+)
It already did. Read about the "Dark Ages", and you'll realize that Mad Max is a memory not a prophesy. With the addition of gasoline, of course.
Oh, don't spoil the doom fantasies for all the tortured keyboard warriors...
Just go back to real money for the economy and stop with all this "Here's a great new technological advance CERTAIN to improve your life!" nonsense.
Always, people want to make things more complex, more intertwined...sorry, but economics came long before your blockchain. And it is a very simple, straightforward thing...no 'high tech' needed.
All your so-called improvements have come close to shutting the whole thing down. And guess what? After that finally happens, we'll all be right back to the old standby...sound money and free trade.
But my God, you people have certainly wasted our time with your nonsense, haven't you? Just think of all the wonderful things we could have done with all that tech...how many lives could have been improved. And if you want me to put it in a way you can understand, try this...
If we HAD used these gifts properly, we would ALL be better off...rich AND poor. All those emerging markets now being dragged to the bottom by debt might actually be functioning economies instead of basket cases being drained by international banks for the benefit of big "investors".
But go ahead...keep trying to reinvent the wheel...I'm sure you can come up with a better model...:-/. No hurry...the rest of the world will just sit around and wait.
Bemused people should not be giving advice.
Then stop giving financial advice NoBillsOfCredit.
Since you don't seem to understand I'll inform you that people with ethics feel bad when their advice loses people money.
Do you benefit from the sale of bitcoins?
If so declare it and add a disclaimer. Then, no problems, shill for bitcoin all day.
Keep buying, keep buying Bitcoin!!!! Record high is just over the Deepwater Horizon.
Author's story is full of holes if the assumption is a Zombie Apocalypse. In such an event, you have nothing except what you can touch.
But let's assume an Economic Collapse (with electricity staying on). Which merchant is going to accept a currency that fluctuates as wildly as BitCoin? And what happens when all BitCoiners want to cash out? Who will be buying - and with what will they buy?
I welcome a stable international electronic currency that I can spend at Walmart - but BitCoin ain't it.
Bitcoin is only volatile today because it is so small - market cap around 6 billion. Because of this a small amount of "hot" money can move the price around quite a bit. As Bitcoin grows this problem will subside.
All "stable" currencies are controlled by some specific entity. That is the case of national currencies, for example. If they get too cheap, central banks raise interest rates, and viceversa. This process happens continuously, everyday. Because the quantity in circulation is artificially modified to achieve some medium term stability, they are prone for corruption and mass devaluation.
Bitcoin is not controlled by any individual entity. It lives in the world of maths and cryptography, with a predefined algorithm that is very difficult to change. Maybe less stable, but that is how honest money works.
"Maybe less stable, but that is how honest money works."
No, that's how "theoretical" money works.
There is ZERO way in which governments are going to accept such widespread transactions unless they can be monitored. If you think you can circumvent that then all you have to do is watch governments disallow major companies from transacting with crypto-currencies that are not monitor-able.
I bet you were late to using email to huh? using one tool does not make other tools for other purposes useless. It seems to me that many Bitcoin deniers are myopic.
NoBillsOfCredit
Straw man much?
You suck at it.
"I bet you were late to using email to huh?"
If you're trying to look inteligent and thwart off the "deniers" (if you cannot reasonably address the critics then you're going to be in for a tough time- it's the rule of the jungle, get used to it) then you really ought to brush up on your semantics. (yeah, right, it was but a typo!)
"using one tool does not make other tools for other purposes useless."
Well, yes, but you folks are making it sound, and you're pushing it as such, as though it's to REPLACE existing systems.
As I'd mentioned above, I'd been involved many years ago with crypto currencies (though not a key developer, I was well aware of the architecture, and to a lesser extent, the code itself). We were pretty much locked down by one of the world's largest banks, in what I believe was their way of just sitting on us so that we really didn't get launched elsewhere in the world: late one night a bunch of us were discussing the fate of the project and noting that it could readily replace banking- at that moment the thought of a bank continuing to fund us was a bit precarious. BUT, as one of Bitcoin's own has stated, there were problems with TPSes, we never really were able to get them up to what would be acceptable. And it's this point that I find interesting because after MANY more years I see the exact same issue being raised! After recently having the wonderful experience of grinding through airport security measures I can see how increased security ALWAYS leads to slower transaction processing.
"Bitcoin deniers are myopic."
Bitcoin promoters are promoters. I have wealth and I'm not buying. Carry on.
Pie, meet sky. Any currency that requires more than 10 seconds to process a transaction is not going to win.
But BTC is distributed. Is that why only two Chinese companies control 50% of the blockchain?
What evidence is there that 2 companies have 50% processing power?
There ya go....
http://mashable.com/2016/01/15/bitcoin-failure/#Z7V145e9oPqR
0
Wow, that's pretty unusual, someone posting complete and total BS about Bitcoin on ZH... /s
First, companies are different from mining pools.
If one wants to downvote, one would think someone would post the mining pool hashing distribution which clearly shows that what TheReplacement proclaimed is, in fact, BS.
Yeah, makes way too much sense. The downvotes are the last vestiges of pride for butthurt keyboard warriors spewing bullshit with nothing to back it up and getting called on it.
10 seconds?
Welll then shut down all the stock markets right fucking now!
3 day settlement time? Off with their heads!
Mike Hearn recently left Bitcoin and XT development to go work for banking consortium R3 to develop Bankcoin while declaring Bitcoin is a "failed experiment". Butthurt dev sells-out, good riddance.
Miners are quickly moving to BTC Classic & possible 2MB block size increase.
BTC, BTChez. Whether anyone likes it or not.
"Good riddance"? Incisive and eloquent reasoning. You make the case for Bitcoin so well.
Some developer who childishly leaves Bitcoin proper to work for banks so they can subvert the technology for their own purposes and proclaims such an obvious untruth on the way out, has little to do with Bitcoin/Blockchain as a technology.
Conveniently you fail to make that distinction but then again, failing seems to be a reflex or lifestyle for many these days.
However, I understand the need for any and all ammo to not only deride Bitcoin but to discredit the entire concept, is a continual work in digression for many of the bottom feeders.
You make my case very nicely too so thanks!