The Trouble(s) with Bitcoin

Bitcoin prices have been on a tear recently, with prices above $50,000 USD. There are times when I regret not mining a few coins when I first heard about it, at the point where it was possible to do it on a home PC. Now it's out of the question, although that's not just because the coins have gotten exponentially harder to mine. That computational difficulty comes with a cost; the energy used world-wide to mine cryptocurrencies now exceeds the energy usage of some medium-sized countries. 

It isn’t easy to figure out exactly how much electrical energy these ‘idling cars’ are consuming, but even the lowest estimates are eye-wateringly bad. Cambridge University seems to have done the most legwork in figuring this out, and at the moment, the annualised power consumption of bitcoin mining is 128 terawatt hours. In 2019-20, every single thing plugged into Australia’s largest main grid consumed 192.

Given the threat of climate change, it's possible to make the case that use of Bitcoin is immoral as it threatens human survival.

There are other problems, directly related to the Bitcoin distributed ledger. For one thing, it's large (about 100 GB) and getting larger. Perhaps more fundamentally, the architecture of the ledger has a fundamental flaw – it depends on people not using it for things that it wasn't designed for. 

Some years ago, people started noticing all sorts of things embedded in the Bitcoin blockchain. There are digital images, including one of Nelson Mandela. There’s the Bitcoin logo, and the original paper describing Bitcoin by its alleged founder, the pseudonymous Satoshi Nakamoto. There are advertisements, and several prayers. There's even illegal pornography and leaked classified documents. All of these were put in by anonymous Bitcoin users. But none of this, so far, appears to seriously threaten those in power in governments and corporations. Once someone adds something to the Bitcoin ledger, it becomes sacrosanct. Removing something requires a fork of the blockchain, in which Bitcoin fragments into multiple parallel cryptocurrencies (and associated blockchains). Forks happen, rarely, but never yet because of legal coercion. And repeated forking would destroy Bitcoin’s stature as a stable(ish) currency.

The botnet’s designers are using this idea to create an unblockable means of coordination, but the implications are much greater. Imagine someone using this idea to evade government censorship. Most Bitcoin mining happens in China. What if someone added a bunch of Chinese-censored Falun Gong texts to the blockchain?

In the long run, this may turn out to be what causes the Bitcoin bubble to burst.