[Cryptography] Bitcoin is a Disaster

So, Bitcoin was a good effort, it deployed some new ideas and technology, and showed that at some scale the “block chain” idea worked, but ultimately, although a successful proof of concept, failed to deliver. But had it been deployed to a market the size of a college campus, the small pool of miners available would make mining bursty and unstable, and the block chain therefore not well protected from tampering. Had it been deployed to a market the size of, say, a college campus it could bear the load and the bidding for block space wouldn’t exceed the value of most transactions. Bear — — Howard Chu CTO, Symas Corp. And we are learning that analysis of that record is sufficient to destroy any pretense of anonymity or pseudonymity. The pseudonymity of coins being owned by the bearer of some cryptographic key is a failure; People have been eavesdropping and aggressively analyzing the block chain from day 1. And the block chain will always be there, it will always be public, and it will always be subject to further analysis.

People had been trying to solve it for decades without any luck. People like Wei Dai and Szabo came close but never managed to materialize their visions (assuming they’re not Satoshi). It becomes a “race to the bottom” to find where people can get the cheapest electricity, and then mining anywhere else – anywhere the government tries to make sure ordinary people actually get the benefit from electricity bought for tax money, for example – becomes first pointless, then a net loss. Yes. Again, Bitcoin showed us where the pitfalls are, so we can focus attention on solving them. It did what a Pilot system is intended to do: show where the pitfalls lie. They have made Bitcoin into a debt-based system like any other; as long as the “exchange” holds your keys for you, there is no obligation for them to maintain assets equal to the deposits. The whole idea of proof-of-work mining is broken the instant hardware comes out which is specialized for mining and useless for general computation because at that point the need to have compute power for other purposes is absolutely irrelevant in having any effect on mining, and there ceases to be any force that causes mining to be distributed around the world.

The Power Law is probably always going to favor larger centralized mining operations. I’d agree that the fact that a normal person can’t really participate in mining anymore is a major setback. Sure, but we have to accept the fact that it is in no way going to be the currency of the future. If there’s going to be one universal currency of the future for all human commerce, it’s going to need a network protocol that works on interplanetary scale, because we’re probably going to at least have colonies on Mars by the year 2140. Bitcoin was a landmark achievement, as a prototype, but it’s not fit for purpose, and we need to (and can!) design better systems going forward. The RandomX PoW algorithm will remain resistant without any algorithm tweaks for at least 3-5 years before we need to look at re-tuning it. They insist that its immutability is its source of strength, instead of recognizing that no first stab at any design is ever really that good, and systems need to evolve as we learn more about how they work in practice. ASICs make it actively work against a significant number of its design goals.

True. But preserving true anonymity online takes a lot of work anyway. Just as with the HTTPS-Everywhere initiative, I think the age of insecure, plaintext comms is over. TLS imposes an overhead cost compared to plaintext comms, and TOR/I2P imposes even more overhead compared to that. E.g., TLS keeps a communication private, but not secret – an observer can’t tell the content of the communication, but they can tell that the communication occurred between two parties. I suppose we can accept different degrees of privacy. Privacy and security are pretty much diametrically opposed to efficiency/scalability. Because of Bitcoin, nowadays we have much more scalable and efficient protocols. Same could have happened to Bitcoin early on, which is why Satoshi was mining like crazy and jumping on when needed to prop up the block rate and back off again when the blocks were coming too fast. This missing step is what all the Bitcoin proponents have failed at. Bitcoin was a Pilot system, a good first effort.

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