No Minister

Bitcoin Monday: more CO2 than New Zealand

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Labour Day?

HA!

Everyday is Labour Day, which increasingly might mean a day on which to do nothing except think about what our current Labour government is doing to this nation.

No, today shall be bitcoin day, at least here on No Minister.

By now you should all have heard of bitcoin. If you haven’t you can read the detail at that link, but the following summary is good enough:

Bitcoin () is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.[8] Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.

It was invented in 2008, is based on mathematics, cryptology (public and private keys), computing technology and has gone from being worth $ 0.30 to $US 44,000 at one point. In between it’s jumped around a lot in price.

The math behind it means that only 21 million bitcoins can ever be created, which goes to the heart of the original White Paper:

“The root problem with conventional currencies is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”[173]

Is it real money? Yes.

Of course it relies on people being willing to buy and sell stuff using it, but that can be an issue with normal currency because ordinary currency ultimately relies on trust as well. Nobody wants to use Venezuelan currency because it’s been destroyed by their communist government creating huge amounts of it. The nation now runs on US dollars. In the same way there are perfectly solid companies and nations or parts of nations that have accepted bitcoin, including the Canton of Zug, Switzerland, which started accepting tax payments in bitcoin earlier this year.

Bitcoins have three qualities useful in a currency, according to The Economist in January 2015: they are “hard to earn, limited in supply and easy to verify.”

But, just as with US dollars vs Zimbabwean currency, the ultimate success of bitcoin as a means of exchange will depend on how far such acceptance spreads.

Is it a scam? Yes.

At least in the sense of the 1637 Tulip Mania. I see that Bob Jones was hot on this the other day, although it should be noted that he’s attacking the speculation on the currency, rather than the thing itself. The cryptology and inbuilt limits on creating bitcoins means that it’s not “fake” currency.

But that creation is something else. The first bitcoins could be created using ordinary computers. But as the theoretical limit of 21 million is approached it gets harder and harder. Ever more computer power must be applied, resulting in huge banks of computers grinding away 24/7. That takes a lot of electrical power and that’s where this chart comes in:

Incredible is it not? There are other digital currencies currently being promoted, using the same, basic concepts of mathematical cryptology and computing.

Written by Tom Hunter

October 25, 2021 at 10:49 am

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