Eugen,
* Eugen Leitl (eu...@leitl.org) [110618 04:42]:
> On Sat, Jun 18, 2011 at 12:21:42AM +0530, Sirtaj Singh Kang wrote:
> > This is a very thorough and compelling takedown of bitcoin.
>
> Currencies are consensual belief systems.
No they are not.
Example:
In the USA, I *must* pay taxes in USD,
not bitcoins, regardless of my level
of belief or consent in either.
> Bitcoin will remain useful as long as there are
> no effective attacks against the cryptosystem and/or
> the infrastructure, and people continue
> to believe in it.
The idea of Bitcoin is grand; however, it seems deeply
flawed on many levels.
First, here's my unified framework for understanding the
relationship between fiat currency based systems
and n-way barter asynchronous systems:
[1] Multiflow on timed, colored, prioritized Petri nets
with variable & uncertain topology approximates barter.
Currency is a bartered "color".
[2] Colors in a barter Petri net have time & place dependent
{estimated|actual|perceived} marginal:
o "intrinsic local" value
o "gamed network" value
[3] Modeling currency as a multiflow-bartered color,
Petri net place color values depend on place intrinsics,
topology forecasts, and supply/demand game theory.
[4] "Faith" in a bartered item is reliance on estimates of
its {present|future} "local intrinsic" and "gamed network"
{estimated|actual|perceived} marginal values.
[5] All items in barter exchange are created "by fiat"
when they are created by someone else.
For these reasons, it doesn't bother me at all that Bitcoin
is a "fiat" currency per-se, but it *does* bother me that
it is not a proxy for something with intrinsic local value
to someone somewhere.
Essentially, we are asking people to barter things the
make or do that have intrinsic local value for something
that has none at all -- without the force of law twisting
their arm to do so (as the US government does when I pay
my taxes in USD).
Further, Bitcoin is encouraging the production of useless items
(ie: key block solutions) merely because of the mathematically
easy with which they can be verified, and the apparent difficulty
of faking them.
To do that robustly in the context of a computational arms race,
Bitcoin makes these blocks harder to solve as things go along,
thereby effectively *centralizing* the process of mining coins.
It all comes down to blocks/$ efficiency, so if you can't compete
with Exxon access to cheap energy, or the Fed for cheap USD to buy
energy/computers, then you can't economically mine coins in the
long run.
This argument leads to a very sobering conclusion:
centralized mining is implicit in the trust model Bitcoin uses.
Ouch.
Why would I want a purely faith-based "color" in this
barter Petri net anyway, if I could just as well get
one with some intrinsic value? I'd prefer to trade in
proxies for something with easily convertible worth
outside the system during both the bootstrapping
phase and afterwards.
What Bitcoin mining looks like to me is a computer-science-only
solution to a verification problem that has some extremely
robust solutions outside of the world of computer science:
multiple independent audits.
While it's true that someone might pay off N auditors
(thereby creating fraudulent receipts for barter),
lawsuits and insurance have already solved this problem
fairly well in the real world of commodities markets,
and in a way that does not count on some hashing cipher
never being broken. Decentralized webs of trust could
make a system like this extremely resilient to fraud.
Note that if the "colors" in a barter Petri net are proxies
for commodities, then you really *do* have a robust way of
auto-scaling currency supply to market size, and a decentralized
system of currency production (ie: audited receipts for commodities)
that encourages the production of things with intrinsic worth
according to their actual market value.
Bitcoin has none of this.
Bitcoin's choice of trust model for mining seems to make it not
very different from the USD fiat currency we have today:
controlled by energy/finance oligarchs, inherently worthless,
and divorced at point of injection into the system from
meaningful market signals.
> Bitcoin is unlikely to be it, but it will have successors and
> competitors.
Yes, I agree.
-Jon
