I have, for a long time, been deeply cynical about Bitcoin. There are good reasons to be so.

The first is the so-called production process. Not only is it profoundly environmentally undesirable, what really worries me is that no one actually knows who gets the literal accounting credit (or profit) from the process. We know a supposed asset is created. But who by? And at what profit? The unanswerability of that question is, for me, deeply troubling.

The new bitcoin are paid to the miners. Each bitcoin – this is what the ledger is, the blockchain – is a record of every bitcoin ever paid to anyone.

18 thoughts on “Weird”

  1. I have, for a long time, been deeply cynical about GOLD. There are good reasons to be so.
    The first is the so-called production process. Not only is it profoundly environmentally undesirable, what really worries me is that no one actually knows who gets the literal accounting credit (or profit) from the process. We know a supposed asset is created. But who by? And at what profit? The unanswerability of that question is, for me, deeply troubling.

  2. I guess all those adherents of Cryptocurrency will be running to liquidate their holding to invest in Murphy’s ‘Green’ bonds when they hit the market. Obviously there won’t be a choice in the ‘Brave New World’ the potato has envisaged for us…

  3. He seems too arrogant to realise that there is a difference between “no one knows” and “I don’t understand”.

  4. Because a thing seems difficult for you, do not think it impossible for anyone to accomplish.
    Marcus Aurelius, Meditations (Book VI)

    Not part of the Spud’s bedtime reading, I suspect.

  5. It would be deeply troubling to me if my 14 year old daughter could not answer these questions after a year of rudimentary business studies at school.

    For a qualified accountant and “academic political economist” not to be able to answer them is, to use a Murphy cliché, quite “staggering”.

  6. Bloke in North Dorset

    “ It would be deeply troubling to me if my 14 year old daughter could not answer these questions after a year of rudimentary business studies at school.”

    If it was my son, It is not that whether he knew or not, but that if he didn’t know he would go and find out, rather than proclaiming nobody knows.

    Although come to think of it at 14 he was still in knuckle dragging mode.

  7. I can see P³ hating crypto..

    Finding one token ( they’re already created, by design..) is simply a treasure hunt. No more, no less. He’s ….not good… at actual digital technology, and could never, ever compete in the Hunt.

    The “accounting” bit is automatic and included in the blockchain, so that makes most of his claimed profession superfluous.

    Actually designing a crypto system ( say, for his MMT/sustained accounting babble where everything and everyone needs to be Traced, Tracked, and Taxed.) takes a level of Math he has shown a distinct lack of aptitude at.
    Liberally so, so he’s well out of his depth and quite superfluous there as well…

    I could go on, but… yeah… he’s bound to like cryptocurrency.. 😉

  8. I’ll be the first to admit that I really don’t get bitcoin, but if a block chain record shows every bitcoin that’s been mined or paid, how is it that people can lose their bitcoins if they lose their digital wallet? Can’t the block chain record show that they have bitcoins in their name and that they haven’t spent them, so they still have them?

  9. The gap is that yes, it’s known where a bitcoin is, in what account, what wallet. What’s not known is who owns that wallet.

  10. @TD The blockchain tells you they should exist *somewhere* in someone’s posession, and the transactions, and…

    But if you lose your wallet ( physical media or cloud gets broken, or oldfashioned theft..) or password there’s not a chance in hell you can get them back.
    The tokens cannot be re-issued, and the blockchain cannot be “reversed”. Only thing that can be done is tokens being invalidated, but that creates trouble down the line since you’re often working/paying with a fraction of an original token, and you can’t invalidate part of a token… At least not with the system as it currently works.

    It’s like losing a wad of tenners to the wind.. Good luck getting those back..
    Or losing the keys to a safe from a company which prides itself on not making spare/replacement keys…

  11. @td

    Bitcoins are not held in anyone’s name, they are associated with an address and a private key to access them

    The Blockchain records every transaction between those addresses
    but doesn’t care who those addresses represen.Tracking those addresses and the transactions associated, some of which pop up in the real world where cryptocurrency is accepted for tangible things,is possible but extremely resource sensitive.

    The sort of things governments might try

    The private key is held in the wallet, it only exists there so lose your wallet and you have lost your access

    Of course if someone steals your wallet they gain access to your private keys as well, hence the importance of holding currency offline in cold wallets when you don’t need instant access

  12. Thanks for the explanations. I think I’ll just stay away from bitcoin as I just don’t get it.

  13. @TD

    I agree.

    For a lot of people Bitcoin is an investment rather than a means of exchange and as a wise man once said “don’t invest in something you don’t understand”.

  14. As an investment it is most certainly volatile. As a means of exchange wouldn’t it be a bit like accepting a payment from someone in a foreign country whose currency’s value is also at risk of considerable volatility? People hedge their foreign currency receivables or payables all the time, so I assume there is or will be some mechanism for similar hedging of bitcoin.

    Funnily, I know a kid who while in high school a few years ago did some web design for someone and was paid in bitcoin, and of course, he’s since lost the key. It wasn’t much at the time but it might be quite a bit if he ever finds it again.

  15. @Andrew C. & TD

    The definition of money is
    1) Means of exchange (I accept £ notes for goods)
    2) Unit of account (This potato costs £0.2, this cheese costs £1)
    3) Store of value (I can hold a £ note as a store of value and exchange it for goods in the future)

    Without 1), the store of value is suspect as a currency. However, gold is used as a store of value and is generally not used for 1) & 2) – gold can be used as a means of exchange, but it’s unusual.

    With Bitcoin, it can be used as 1) and there used to be goods priced in bitcoin, but because of the extreme volatility and the slow settlement rate (due to the design of the code the updating of the blockchain took time), stores stopped accepting it as a means of exchange and pricing goods in it. There has been improvement in the code, but bitcoin is not the best of the crypto currencies. It has however become a de facto standard that everyone coordinates around.

    In the fullness of time crypto assets not under the control of government might become a store of value, a unit of account and a means of exchange. Why? Because of the enormous debt burdens that countries owe and their aging populations, rampant money printing and thus inflation is a likely end game. Hence the interest in crypto.

  16. The blockchain is 100% transparent so you can see what wallet the coins were mined into and the way they were moved around between different wallets. You don’t however get to find out who owns the vast majority of those wallets. To further cloud things people can and do have multiple wallets between which they can freely move all or some of the coins to cloud the how the coins were obtained when a wallet holders sells them.

  17. Dear Mr Worstall

    I recently read a story about a chap who chucked out a hard drive with Bitcoins on it. He reckoned they were now worth hundreds of millions and wanted to share a portion with the local authority to dig the hard drive out of the tip.

    I thought there was something deliciously ironic about mining a tip for Bitcoin.

    DP

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