Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts

by David Gerard

Short Version 1) Should I buy Bitcoins? No. 2) But I keep seeing all this stuff in the news about them and how No. Tech journalism is uniformly terrible, always remember this. 3) How does this work? It doesn’t make any sense! No, it really doesn’t. It’s impossible to accurately explain Bitcoin in anything less than mind-numbingly boring technical terms so you should probably just not worry about it. Go do something useful instead.

Bitcoin and blockchains are not a technology story, but a psychology story: bubble economy thinking and the art of the steal.

Obviously, the competition gets viciously Darwinian very quickly. Mining rapidly converges on 1 BTC costing 1 BTC to generate.

This electricity is literally wasted for the sake of decentralisation; the power cost to confirm the transactions and add them to the blockchain is around $10-20 per transaction. That’s not imaginary money – those are actual dollars, or these days mostly Chinese yuan, coming from people buying the new coins and going to pay for the electricity. An ordinary centralised database could calculate an equally tamper-evident block of transactions on a 2007 smartphone running off USB power. Even if Bitcoin could replace conventional currencies, it would be an ecological disaster.

The prehistory of cryptocurrencies Cryptographic money was first mooted by David Chaum in his 1982 paper “Blind Signatures for Untraceable Payments”12 and his 1985 paper “Security without Identification: Transaction Systems to Make Big Brother Obsolete.”13 Chaum founded DigiCash in 1990 to put his ideas into practice. It failed in the market, however, and closed in 1998. Most concepts later used in Bitcoin originated on the Cypherpunks mailing list in the early 1990s. The ideology was libertarian right-wing anarchism, often explicitly labeled anarcho-capitalism;

Tim May’s “Crypto Anarchist Manifesto,” a popular document on the list, is all about the promise of money and commerce with no government oversight, and anticipates many of the future promises and aspirations of cryptocurrency.14