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
============
Liked this article? You can read more from us here.
============
(16 votes)
»
- Capitalist Exploits's blog
- Login or register to post comments
- Printer-friendly version
- Send to friend
- advertisements -
The masses are not using bitcoin, so good luck with you fantasy coin with a fantasy value
Fysical gold/silver is accepted in every pawn shop for cash arround the world do
See if you can sell your KJHgJHvJHGvJHvgjmkhnbKJbkJHGkjhg on a peace of paper at a pawn shop
BTC tranactions are up 126% year over year. People have begun to catch on. I'm not linking that factoid, takes two seconds to look it up if you don't believe me. Market cap also up a few billion in just a few months. Best performing currency/asset of 2015.
Physical may be accepted at pawn shops, yet BITCOIN can be used to purchase goods/services at 36 million merchants worldwide who accept VISA. It's called a SHIFT card, and it's a lot more convenient than having to sell physical, PLUS you can avoid the fiat system altogether. Isn't that a desire we all share here, to be free of the tyranny of central banking? Why has the one real alternative to this tyranny been so despised and misunderstood? Have trolls been influencing this debate?
Use BTC for spending, physical for saving. If you have a better way to avoid the fiat fractional reserve system as much as possible, I'm all ears. And by the way, it's "PHYSICAL", not "FYSICAL".
P.S. Thank you, ZH and Tylers, for posting informative articles about BTC/blockchain tech.
Awesome, downvotes are best case scenarios in BTC threads at ZH, the consumate contrarian BTC indicator on the planet, so thanks for the props!
Hey, fuck the masses. If/when they use BTC in the future they likely won't even know it.
It STILL utterly amazes me that some of the specimens around here naturally assume that because one plays with BTC, that as a rule/law/declaration they cannot and will not own any other form of money as in Au/Ag for instance.
It's pathetic really given a documented history of idiocy and utter fail in the comments sections...
Thanks
"Possible 2mb block size increase", awesome dude! With a little luck they might even get it up to 10 transactions per second, or say say 1 million transactions a day. Any single large bank is processing orders of magnitute more transactions daily. So often bitcoin transactions don't clear in minutes, let alone milliseconds. What a stellar financial transaction clearing platform that makes.
Then we have the ego's of primadonna developers clashing about various improvements and code forks without any person clearly in charge or responsible in the end for accuracy and timeliness.
Bitcoin is a hype based currency, and has about as much value as FB, Twitter or any of the other shiny object distractions designed for millenials with attention spans of split seconds and who have all the combined common sense of total immersion Zio-media programming.
Agree on all points and excellent analogies ! Interestingly the folks that think BTC is a grand thing and this article think so because they have very little real life experience to fall back on as a guideline. So somethiong as dumb as BTC is not really vetted as it should be in its entirety. There is one glaring flaw in it. It is competely dependent on electronics to function. So it is rife for fraud and of course it must have electricity and circuits to function. Guys like Jack Spirko think it is the new wave and that is more than enough for me to raise my questions and doubts from its inception. Anything salesmen like him profess, I want none of, in fact I would run the other direction !
Your entire life as you know it is dependant on electronics to function unless you're holed-up in the woods, moron.
How is Bitcoin "rife for fraud", simply by virtue of the fact it's electronic? Don't you think it would have been "hacked" by now? Why do you suppose it hasn't?
...and specimens like this call Bitcoin dumb.
"Your entire life as you know it is dependant on electronics to function"
And this is in contrast to human historical norms. There's an underlying assumption that the necessary infrastructure will continue to support AND scale up. In what I've known to be an extremely stable electrical grid (hospital zone) I recently experienced a prolonged power outage. Of course, this is no real cause for concern, especially not when compared to places where electricity is more fickle.
I've been in the business of software development for both telecommunications AND electronic currencies, in which case I have a little understanding of things (of how precarious things really are).
But, of course, those that wish to promote electronic currencies are free to do so. We only really manage to increase our personal wealth by finding a bigger sucker.
As most of the wealth in the world lies in the hands of older people one needs to address how one is going to get them to buy in. I've dealt with some really dear old friends who perpetually end up with their computers being trashed (many times over the years; I've had ZERO problems over the course of a good ten years or so)- it's user error, and it's SIMPLE stuff.
Best shot you folks have is to mandate it via govt support/edict, in which case it'll have to come with one of those nice little "back doors."
That's what R3 is all about, for instance, isn't it?
How are these guys going to subvert Bitcoin, which is now forking, if nobody involved has commit access anymore? All they can do is create Bankcoin.
#1 currency on the planet in the meantime.
Are their bank accounts and pension funds held on their own computers ? BTC protocol will eventually swallow the entire system to the point you won't even know you are using it. Just like most are unaware that they are using TCP/IP when sending an email or watching porn. BTC is a value transfer protocol not just an information transfer protocol.
Santoshi will walk on water and deliver infinitely scalable and perpetually secure fix to the bitcoin kludge. And you can keep your doctor too.
The bitciin protocol itself can scale beyond VISA/Mastercard /SWIFT tps rates combined.
A secure global digital currency that will likely swallow up the entire global stock market . commodites markets , global FX , and that's just for starters. Yeah, no way that has any value.
Bitcoin secure? Yeah maybe.
But then the Earth used to be flat, then it wasn't.
Earth used to be the centre of the universe, then it wasn't.
USA used to be the good guy, then it wasn't.
Seeing a trend here?
The comment I made 3 comments above only appears when I am logged on.
That used to be called ghosting.
Not nice.
And very strange for such an innocuous comment.
If I had said "Eat out my taint herpes!" Then OK, ghost me mother fucker!
water was wet, still is.
the sky used to be blue, still is.
people used to fear new technologies, they still do.
seeing a trend here?
And when bitcoin is found to not be completely secure, will you apologize? Or reimburse those you have mislead?
Oh, sorry, it has already been found not to be secure.
bitcoin is *not* secure
It's just that it would take every single computer on this planet working in parallel around 9 billion years to crack it's encryption.
Does any hacker have that much time & resources available ?
Are you a software salesman by chance? Talk is cheap, and often it takes a tyrant like Steve Jobs to force the software artisans with their oversized ego's to pull the ship in one direction. Who is the steve jobs of "bitciin"?
Then we have this great explanation about how power hunger and greed have lead to a deadlock in the bitcore at 7 transactions per second...
https://medium.com/@octskyward/the-resolution-of-the-bitcoin-experiment-...
The dispute between Hearn and other Bitcoin developers was made very public in this NY Times story today.
http://www.nytimes.com/2016/01/17/business/dealbook/the-bitcoin-believer-who-gave-up.html
mike hearn is a whiny bitch.
his leaving, even if in a hissy fit declaring bitcoin a "failure" becuase he counldn't have things his way, is a good thing.
mike hearn: dont go away mad, just go away.
Thanks for the link. Very illuminating reading. Makes me conclude that many who hawk BTC here have little effective understanding of what is transpiring. Corruption and malfeasance by a small group controlling such an endeavor sounds a death knell.
You can say the exact same thing about gold and silver but many of you guys have coins and bars after all these decades of manipulation?
Still worth something too, imagine that...
bitcoin has already died 93 times. This is just another little bump that will make it stronger and scale up quicker.
The blockchain(s) have the Y2038 problem as well. 22 years to go!
The blockchain is growing exponentially and will be unwheeledly at some point. There are other problems not mentioned with holding bitcoins. I do some trading with bitcoins but refuse to hold any substantial amount of them for very long. I don't feel comfortable with the risks as I understand them and I'm pretty computer and technologically literate.
There are several protocols in the works to "prune" the blockchain to keep it manageable. There is also Moore's law at work here - as the blockchain grows, so does the computing power to sustain it. There are some valid risks with Bitcoin, but I don't see this as one of them.
If the power goes out no one will be worrying about much less even talking about blockchains and bitcoins. Nuclear reactors maybe...
If the power goes out, the killing will commence.
If the power goes out the commerce will be killing.
Buck Fitcoin. Another ruse to misalocate funds. Aaaaaand it's gone!
"underpinning the Bitcoin digital currency has been more interesting to us than a gaggle of suntanned string bikinis."
Wadda fucking geek.
Get your tulips....I mean bitcoin here!
“He stepped to the window and pointed to the skyscrapers of the city. He said that we had to extinguish the lights of the world, and when we would see the lights of New York go out, we would know that our job was done.”
When EBT stops, the mobs will become more restless.
"Coinbase.....licensed as a bank."
Why would anyone with bitcoin want to put it in a licensed BANK?