
Why Charles Stross Doesn’t Know a Thing about Bitcoin - dllthomas
http://bitcoinmagazine.com/9359/charles-stross-doesnt-know-thing-bitcoin
======
akkartik
I was mystified about how infinite divisibility addresses the deflation
argument. Then I found the author make this priceless statement in the
comments:

 _" I agree with folks that I basically dodged the argument about deflation. I
did it deliberately. Talking about deflation is like talking about God.
Basically as soon as you mention the word all dialogue stops. People already
have an idea in their head about whether it is good or bad and nobody listens
any more. I admit I am no economic expert."_
[http://bitcoinmagazine.com/9359/charles-stross-doesnt-
know-t...](http://bitcoinmagazine.com/9359/charles-stross-doesnt-know-thing-
bitcoin/#comment-1193079788)

That pretty much answers the question of whether he's a libertarian. At this
point does anybody besides hard libertarians like the mises institute think
deflation can be a good thing?

~~~
wyager
I keep hearing this meme of "inflation is always great, deflation is always
bad" with nothing to support it but the same tired "inflation makes you spend
money" argument.

Inflation encourages spending money but discourages earning it.

Deflation encourages earning money but discourages spending it.

People need to eat, so in the end these competing interests will always
balance out, whether your currency is inflationary or deflationary.

~~~
ewoodrich
Sure, but we have a economy that's extremely reliant on consumer spending, in
fact it's about 70% of GDP these days [1]. Major deflation of the USD and the
resulting decrease in spending would be devastating to the national economy
[2]. Moderate inflation, however, serves to stimulate economic growth (while a
similar degree of deflation would have a proportionally negative effect on
growth).

Is this an ideal economic system? Maybe not, who knows. It's what we have
though. And it is a direct consequence of an economy driven by growth, and one
that encourages liberal individual consumption.

[1]
[http://en.wikipedia.org/wiki/Consumer_economy](http://en.wikipedia.org/wiki/Consumer_economy)
[2]
[http://en.wikipedia.org/wiki/Panic_of_1837](http://en.wikipedia.org/wiki/Panic_of_1837)

~~~
wyager
>Sure, but we have a economy that's extremely reliant on consumer spending, in
fact it's about 70% of GDP these days

What a meaningless statement in this context. "Consumer spending" refers to
private sector spending. This is as opposed to, for example, Government
spending, which might also fluctuate with changes in monetary policy. What
percentage of the GDP is estimated to come from consumer spending has little
bearing on the effect changes in inflation rate might have on the economy. You
are trying to oversimplify a vastly complex system.

If what you are implying (that there is a causal positive relationship between
inflation and production) were true, it would be economically advantageous to
adopt zimbabwe-style inflation.

>...would be devastating to the national economy

Please actually read the article you linked.

"Speculative lending practices in western states, a sharp decline in cotton
prices, a collapsing land bubble, international specie flows, and restrictive
lending policies in Great Britain were all to blame."

Deflation was a _result_ of this panic, _not_ the cause of it.

~~~
dllthomas
_" If what you are implying (that there is a causal positive relationship
between inflation and production) were true, it would be economically
advantageous to adopt zimbabwe-style inflation."_

"A little is good, a lot is bad" is in no way an inconsistent position - it's
true about most things.

------
kordless
I'm really pleased to see someone else hitting on the value of the blockchain
data. One of the reasons I think Bitcoin itself will become more valuable over
time is the amount of big data being added to the system via the transactions
taking place. For the first time in the World's history, we actually have a
completely transparent system financial system we can observe and use to make
decisions.

Very exciting stuff. I'm glad to be part of it.

~~~
drakaal
The value? No. The more data you have about where money flows the less privacy
we have and the more control you give law enforcement.

Think about all the Friend of Friend wire taps. Suddenly the $20 bill you
bought starbucks with gets given as change to a drug dealer and you are on a
known associate list.

You also have all sorts of issues where if 50% of the world's transactions
were done in BTC the blockchain data would be too large for 90+% of nodes to
store.

~~~
dmix
Anonymity it still a choice with Bitcoin, regardless of having a public
blockchain.

Law enforcement is a strict finite resource. Much like the futility of trying
to bring down bittorrent seeders, BTC has the advantage of technology,
decentralization, and scale, which multiplies (in an increasing fashion over
time) the complexity of being able to track individuals to cryptocurrencies.
Is it possible with effort? Sure. But it's an incredibly expensive endevour.
Especially when someone invests time and effort into trying to hide.

~~~
kordless
As you say, it's a choice. There will be those who choose to be transparent
with their transactions.

------
chasing
"Being a sci-fi author is about being open to possibilities. When a writer
loses that ability to see what might be, maybe it’s time for him to step aside
and make way for a new generation of authors who still can."

What an insulting way to conclude an article.

"If you lack the vision to agree with me about Bitcoin, maybe you're old and
terrible at your job."

~~~
mccr8
It should be noted that Charles Stross wrote a book, Neptune's Brood, where a
bitcoin-like currency is used to finance interstellar colonization, so a lack
of vision is not really a problem.

~~~
rxp
"Slow money" in Neptune's Brood is a digital currency, and is confusingly
referred to as a "bitcoin" a few times, but it's actually a really fascinating
idea that's very different from BTC.

The gist of it, if I remember it right, is that all transactions are
authenticated by an interstellar 2-phase commit handshake. The distances
involved keep the value of the currency stable, because transactions can take
decades to process, and the direction of the signal is actually used as a form
of authentication, to guard against (literal) MITM attacks. The goal of slow
money was to have a currency that was stable enough to finance multi-century
interstellar colonization projects.

------
dllthomas
The point about efficiency increasing seems wrong. Yes, efficiency of hashing
has increased, but it's an arms race. When Visa buys more efficient computers,
we use less electricity to accomplish a goal. When I buy a better ASIC I still
pour as much juice into it as I can afford to churn out hashes - and if the
network is producing too many hashes they up the difficulty. As efficiency
increases, with bitcoin we keep pouring the _same_ amount of electricity into
mining, but we're _also_ pouring resources into building single-purpose chips
that will be useless when bitcoin migrates to a different hashing algorithm.

~~~
DennisP
The total cost of mining a block will approximate the block reward plus
transaction fees. To see how much of that cost is electricity, compare the
cost of the hardware to the electricity it uses.

For example, on Amazon right now I see a Bitmain AntMiner U1 USB miner. It
costs $70 and they claim it uses 2 watts and is a recent chip.

Let's say it has a lifetime of three years. Three years of two watts is 26
kWh, which will cost about $2.60, which means that for this chip, the
electricity is only 4% of the total mining cost.

Of course the rest of the computer uses power, I'm assuming that either the
computer is being used for something else as well, or a large operation has a
special chassis holding lots of these chips and not wasting power on much
else. Anyone who's not so efficient won't be able to compete.

The fact that bitcoin's mining cost is becoming dominated by hardware rather
than energy is a very positive development, in my opinion.

~~~
wmf
Right now the ASIC vendors seem to be capital-constrained and are not
producing enough ASICs to meet demand. At equilibrium we should expect that
the cost of mining will equal the rate of BTC generation and a significant
fraction of the cost of mining will be power.

~~~
DennisP
Probably. On the other hand if chips get as optimized as they can get aside
from further advance of Moore's Law, and they're produced in mass quantities,
maybe people will start using them as heating elements in home water heaters.

A lot of the emerging currencies are focusing on memory-constrained hashing
algorithms. RAM has price/energy ratios similar to what I mentioned for ASICs,
and is already in mass production and about as optimized as major industry is
able to make it.

------
geuis
I really love this article. The author puts so many solid points forward.

I would like to offer a possibility about Stross. Hasn't anyone considered
that he's simply trolling? I've read all of his books and even met him once in
SF. It seems much more likely to me that he is playing a game here and his
recent comments do not reflect his actual thoughts.

------
wyager
The "wasting energy" argument is idiotic.

The amount of energy "wasted" by the Bitcoin network will always be
approximately the amount of energy that can be bought with the Bitcoins mined
in a given period.

If the cost of energy is higher than the value of the Bitcoins the miners
earn, miners will stop mining.

Some miners don't care about cost (people who get free electricity) but they
are not a significant factor.

Miners also have to cover the cost of their hardware, so they want to leave a
significant margin for profit.

The cost of power for the Bitcoin network is very small compared to worldwide
power usage.

~~~
bagels
The unstated and assumption here is that the recipient of the bitcoins is the
same as the person who bears the cost of mining them. Stealing computing
resources is one way for this assumption to be violated.

I don't know though, that this amount of theft is significant compared to the
bulk of resources spent on bitcoin.

Bitcoin mining, from my cursory research however, doesn't really consume much
electricity compared to the aggregate of all usage across the world, as you've
stated.

~~~
msandford
If you could let me know where I can get illicit access to ASIC miners I'm all
ears. From what I can tell those fucking things are guarded by all who own
them in a severe way.

EDIT: I'm not actually interested in stealing time on people's ASICs to mine
bitcoin. I just think it's effectively impossible to do so. But I'm genuinely
curious to know if there's a plausible attack vector.

------
DennisP
The argument about deflation is moot, since Bitcoin isn't the only digital
currency. At this point there's a website that lets you create your own with a
few clicks.

Rather than a single deflationary currency, what we have is a lot of
privately-issued competing currencies. Hayek advocated a system like this,
arguing that it would result in stable prices and economies without need of a
central bank.

------
NateDad
What's funny is that this article pretty much exactly mirrors my comment on
the Stross article:

[http://www.antipope.org/charlie/blog-static/2013/12/why-i-
wa...](http://www.antipope.org/charlie/blog-static/2013/12/why-i-want-bitcoin-
to-die-in-a.html#comment-1837445)

------
yetanotherphd
proof of work is inherently wasteful in a way that other systems are not.

Exactly how wasteful they are is yet to be determined. This depends on how
much value a successful attack on the blockchain could be to an attacker. The
greater the value, the greater the cost of the proof-of-work system needed to
prevent it.

