Begin forwarded message:

From: Ray Dillinger <bear@sonic.net> Subject: [Cryptography] Bitcoin is a disaster. Date: December 28, 2020 at 9:07:03 PM AST To: cryptography <cryptography@metzdowd.com>

Okay, this may be just my depressive side talking, or it may be the stress of the last year just boiling over. But I'm inclined to think it's not and it isn't.

It is my opinion that Bitcoin is a failure. Worse than that, it's a disaster.

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. And we are learning that analysis of that record is sufficient to destroy any pretense of anonymity or pseudonymity.

The scarcity of block chain space has led people to re-invent every last feature of the banks they thought they were going to be escaping. Including debt brokering (lightning network) and fractional-reserve banking, starting with the case of Mt.Gox and continuing to ventures today by "responsible" businesspeople who just don't get, or don't care, or both, that the entire reason the system existed, as far as the early adopters were concerned, was to get away from exactly that. 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. You can't prove that they are, or aren't, maintaining sufficient assets until after those assets are spent and the evidence appears in the block chain.

And it's useless for small transactions. 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. 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. 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.

And that brings us to mining. Bitcoin mining has encouraged corruption (Because it's often done using electricity which is effectively stolen from taxpayers with the help of government officials), wasted enormous resources of energy, fostered botnets, centralized mining activity in a country where centralization means it's effectively owned by exactly the kind of government most people thought they *DIDN'T* want looking up their butts and where the people who that government allows to "own" this whole business work together as a cartel.

There's a pretense of monitoring the network to guard against a 51% attack, but to me it seems pretty clear that what they're guarding against is merely the mistake of the cartel failing to give the latest warehouse full of miners a distinct network identity. 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. 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.

Mining is f***ng broken, and ASICs make it actively work against a significant number of its design goals.

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. It doesn't scale, except by becoming the very thing it was supposed to replace.

The more scalable the network becomes, the more centralized it becomes, until ultimately a "scalable" cryptocurrency would be doing things exactly the same way as a credit card processor.

Bear

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