Ep58 Bitcoin

Hi All

Just listened to S4 episode 58 and whilst I found it fascinating and educational, I’d just like to refute a few points made by Dr Ammous. Feel free to disagree with me in the comments because I’m using this as a method to confirm my beliefs as much as I’m using it to potentially educate. Firstly, most of the podcast I agreed with specially when discussing the economic side of Crypto currency and the values of decentralisation, fixed supply and security. Where I started to disagree with Saifedean was when Jordan pushed him slightly on why bitcoin and not other cryptos and tried to ask about some of Bitcoin’s disadvantages. I’m going to outline below some things that were deliberately skated around. I felt this was slightly disingenuous and has painted Bitcoin as the only Crypto that has any utility.

My goal for writing this is so that the people that read it can get a balanced view and ultimately so that Jordan can see it and interview alternative figures in the crypto community to give himself and Us a broader view of something that I think will be of Vital importance in the next 50 years.

All crypto’s bring something unique to the table and everything is often a trade-off, I’m not going to suggest any additional Crypto’s as I’m not writing this to Shill the coins, I believe in but I think Jordan if he ever see’s this should try to speak to more in the space than just Bitcoin Maxi’s as they are obviously biased.

Electrical usage

Whilst talking Jordan mentioned Bitcoins enormous electrical consumption and the environmental impacts of it, instead of addressing how Bitcoin’s consensus mechanism provides a positive feedback loop for electrical usage where more hash power to reach consensus is incentivised and how this doesn’t have to be the case for a crypto’s. He mentioned that anyone in the world can mine bitcoin. This simply isn’t true, the hash power required means that a standard computer would NEVER mine a bitcoin ever or even be useful enough to a pool (a group of miners that share rewards) to warrant the computer getting a pay out, not to mention the E-waste that is produced as a result of mining. This as a result gives an unfair advantage to the people that can’t afford specialised mining equipment, singling out the poorest in society and leading to centralisation (explained below)

It was mentioned that bitcoin actually does the opposite of waste energy as it allows the transportation of energy, once again this is somewhat truthful but all in all a false truth. Bitcoin doesn’t actually transport the energy it allows for energy wastage to have a value. If a power grid can afford to sell electricity cheaply this is most likely because the grid has excess energy or excess resources to produce it. To suggest that using these resources isn’t wasting them is only a truth if the system warrants the power usage in the first place, there are plenty of different Consensus mechanisms that don’t promote Energy usage as a way of securing the network. Thinking of resources in their simplest form say wood and claiming that boiling water is cheaper at the edge of a forest is true but its only saving energy if that water needed boiled.

Criticism of other Crytpo

When Other Crypto’s such as Ethereum were mentioned there was an effort to paint these as centralised or different to bitcoin. The reason bitcoin is different is because most projects have a creator who is still active, there reason bitcoin is different is because bitcoin’s creator Satoshi disappeared, Bitcoin isn’t actually different in any other way Bitcoin’s code has been changed since inception All that will ever be needed in a decentralised system to implement a Code change is the majority of the actors within the consensus mechanism agree to the change. Ethereum and other Alt coins accept these changes because a decentralised community (miners and node operators) see’s that the changes in code are for the better of the coin. There is a reason the majority of Crypto’s have moved away from POW.

An example of a time bitcoin has changed is here https://news.bitcoin.com/bitcoin-history-part-10-the-184-billion-btc-bug/ , this isn’t uncommon for cryptos as a living breathing real life currency network will always need minor revisions. Sometimes miners have different views on the direction the code should take and this is where Forks are created, this has happened for most big Crypto’s including Ethereum and Bitcoin.

Perfect distribution

The perfect distribution was mentioned where anyone who knew about bitcoin could mine it, this is once again true and bitcoin supporters will tell you this time and time again and also tell you that anyone who wants Bitcoin can mine it themselves. Here’s what they don’t tell you, mining rewards haven’t been flat since its inception, when it was first created the mining regards were a lot higher, every cycle bitcoin undertakes an event called the halfening. This is where bitcoin rewards for miners are halfed. Whilst this may not seem a problem as long as miners can profit enough to continue mining it fails to mention that early adopters were paid huge sums of bitcoin. So much in fact that there’s a handful of Addresses from 2010 era Bitcoin that have remained inactive for the last 9 or so years which own in excess of 20 billion dollars’ worth of bitcoin, whilst the keys of these wallets may well be lost or destroyed, they also may not. Which means that in 30 years' time there could be a few trillion worth of bitcoin discovered crashing bitcoins price. A perfect distribution is near impossible but a distribution which rewards the earliest of miners for fractions of a dollar in energy gaining a tremendous amount of the future value of a currency in my opinion is far from perfect.

Usability

Jordan Mentioned how bitcoin isn’t that easily usable and he’s right, bitcoin can handle about 7TPS and can cost anywhere from $0.01 to use $1,000 to use depending on the demand that the network has on its transactions. Bitcoin maxi’s claim that the network is slow and expensive for security but other crypto’s have addressed these concerns far more eloquently in my opinion. To try and counteract the problems of Usability Saifedean mentioned how Visa could eventually use bitcoin as a standard and allow for the notional amounts of Bitcoin to transfer for practically free. This to me was the most bewildering comment because he was basically suggesting that the Bitcoin should be held by a centralised entity. This fails to address one of the biggest criticisms of the current Fiat system. Fractional Banking. There would be nothing to stop banks etc holding bitcoin and allowing more notional bitcoin into the system than they owned which completely defeats the point of bitcoin and cryptocurrency in the first place, I fully expected him to mention the lightning network but my only theory as to why he hasn’t is because of all of its problems and the fact that he is committed to dismissing everything but Bitcoin that when it then relies on a L2 system that is completely different architecture he can see the hypocrisy of his argument.

Forces towards centralisation

Lastly, a point that hasn’t been addressed by basically anyone in the bitcoin community is the forces towards centralisation of mining power. You know how its profitable to mine at 4p per KW? Imagine if you can get that electric for 1p through good or bad processes, you know what you can do? You can make more money than everyone else. Whilst this seems great for you it means that you can literally mine actors in the system out of profit, now if 99% of all the miners are playing a fair game it means that if one miner cheats the system and steals the electric, they now have the most profitable operation. As a result, they can continue to buy more hardware and continue to grow. Not only is this unfair on the miners but it’s actually a huge threat to bitcoin itself as it results in a few actors gaining a greater and greater share of the mining power and therefore the reward. Over time this will actually lead to centralisation and worse, yet it allows them to bid up the transaction costs as they’ll then get the reward from mining it.

All in all, I think crypto is a very powerful technology that will change the world forever but I beg this community and Jordan to not be blind to differing opinions and technology.

If you found this helpful, please engage so others are more likely to see it! Any questions let me know.