I do not understand the rise and rise of bitcoin. Bitcoin has an inbuilt handbrake that, as far as I can see, will stop it ever becoming a major currency that many people can transact with on a regular basis. That handbrake is the energy (and time) required by the proof of work necessary to add a block to the chain to register a transaction. Currently Bitcoin uses more energy than Argentina, and each transaction is tens of thousands of times more costly than a Visa transaction (although…). As Bitcoin gets bigger and is used more, and as it gets more valuable, that handbrake exerts a greater effect. That’s because the reward for doing the proof of work is Bitcoin, so the more Bitcoin is worth, the more machines will compete to win the competition to do the piece of work to earn the bitcoin, and therefore the more they’ll all have to spend in energy and processing power to win… The handbrake cannot be removed because it is integral to the distributed ledger / no single point of control design, and because it makes a 51% attack much harder.
Now I know some arguments about the flimsiness of fiat currency (not least from the Money As Debt film), and about store of value, and of course all that matters is what people believe matters, but I just don’t get how bitcoin can be mainstream with this handbrake always on. And that’s without worrying about all the digital wallets that get hacked and stolen and lost. And that’s even without worrying about how the cost of the energy used must eventually be transferred to the user — although of course our economies have always been terrible at properly pricing and apportioning that externality (Platform Pravileges).
But still, Ruffer and Musk are buying hundreds of millions of dollars of the stuff and its value has gone stratospheric. I must be missing something, and I’d be delighted if anyone can tell me what it is.
