Bitcoin at ten

The Bitcoin Genesis Block was mined today ten years ago.

As a cryptocurrency bitcoin has been highly volatile – those buying at the top of the market in late 2017 have massive capital losses going forward. Those who bought in ten years ago are still sitting on massive capital gains.

The real story here isn’t a new investment asset class or a new competitor to fiat currency but rather the institutional and organisational disruption the underlying technology will bring.

My RMIT colleagues Chris Berg, Jason Potts and I have a new working paper – Capitalism after Satoshi – that explores our ideas in this space.

What are the long-run economic and policy consequences of wide-spread blockchain technology adoption? We examine the structural economic effects of this institutional innovation as disintermediation in markets, dehierarchicalisation of organisations, and growing private provision of economic infrastructure for exchange, contracting and coordination. We predict that these institutional economic dynamics undercut the historical rationale for much modern economic policy, originally formulated to enable capitalism to cope with market power, to control hierarchy, and to furnish public infrastructure for trust. We argue that capitalism built on distributed ledger technology requires different economic policy settings to industrial capitalism, based on centralized ledger technology. We formulate the institutional logic of this dynamic co-evolutionary model, and discuss policy settings for an economy coordinated with blockchain infrastructure and associated distributed digital technologies for economic coordination (Web3, Industry 4.0). We find that much modern economic policy will be differently instantiated (e.g. hard-coded in platforms) or variously no longer necessary (because of new institutional solutions to problems of trust and coordination). We argue that the institutional innovation of blockchain engenders a new post-industrial economic era that requires new policy rules. This paper seeks to explain why this change will occur, and to explore a new framework for economic policy adapted to economic infrastructure built on distributed ledgers.

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13 Responses to Bitcoin at ten

  1. Mak Siccar

    I wonder if gubbermints will use information such as this to constrict, thwart and nobble cryptocurrencies by legislation to ensure that they maintain control using their fiat currencies.

  2. Craig Mills

    Yes, yes and yes.
    I enjoyed (a long time ago) Wm rees Moggs ‘The Sovereign Individual’ that looked at structures of ‘governance’ and their evolution over the centuries as : evolving faster with time : inexorably over the long run removing fiat power structures : making ‘social’ policy ‘harder’ such that the Nation state eventually will cease

  3. None

    Post industrial. Because we don’t need to make things anymore.

  4. Diogenes

    On the other hand
    https://www.theregister.co.uk/2018/11/30/blockchain_study_finds_0_per_cent_success_rate/
    Though Blockchain has been touted as the answer to everything, a study of 43 solutions advanced in the international development sector has found exactly no evidence of success.

    Three practitioners including erstwhile blockchain enthusiast John Burg, a Fellow at the US Agency for International Development (USAID), looked at instances of the distributed crypto ledger being used in a wide range of situations by NGOs, contractors and agencies. But they drew a complete blank.

    Or

    https://www.theregister.co.uk/2018/10/24/oz_spent_700k_to_decide_that_blockchain_isnt_worth_the_hype/

    The Digital Transformation Agency (DTA), Australia’s answer to Blighty’s Government Digital Service, received the research windfall in the federal government’s May budget, with a brief from ex-prime minister Malcolm Turnbull to help, er, Dunning-Kruger Australia’s government.

    A squadron of thought-bubbles took flight. In May, DTA chief digital officer Peter Alexander told the Australian senate committee blockchain was under investigation by the Australian Securities and Investments Commission (for corporate regulation); the Department of Home Affairs (tracking immigration records); and being looked at for Centrelink welfare payments. There were also mooted applications in cargo management, trade settlement, or to guarantee the provenance of open data.

    Then came a push from vendors that makes living in a cave sound attractive. “I personally had 15 companies come to see me and talk to me about blockchain, the opportunities of blockchain and how it could solve every problem that we might have,” he said (except, El Reg supposes, the problem of making the vendor presentations stop).

    After toiling in the mine for six months trying to extract ore from endless “blockchain can do this” claims, Alexander yesterday morning reported back to the senate committee: it’s not worth the effort.

    “Our position today, and this is an early write-up, is that blockchain is an interesting technology that would be well worth being observed, but without standardisation and a lot more work, for every use of blockchain that you would consider today, there is a better technology,” he said.

  5. Rohan

    Mak Siccar
    #2897624, posted on January 3, 2019 at 12:35 pm
    I wonder if gubbermints will use information such as this to constrict, thwart and nobble cryptocurrencies by legislation to ensure that they maintain control using their fiat currencies.

    I predict that if governments roll over and accept it, they will use it as a compliance tool. As every transaction is known to everyone, then anybody including the government can look into every individual. There will be no black economy. There will also be no privacy.

    I also predict that this is not going to be viable from a technical standpoint. You’re going to require a significant amount of memory for all this data if everyone is going to have 100% of the live blockchain database at home. Several orders of magnitude more memory than home PC with single 2 TB drive will allow. The shear number of financial transactions in general that occur on a daily basis worldwide is huge. You’d need to equip everyone with an extensive SAN array to cope with the shear size of the database. Good luck with that. A small SAN, with 24TB SAS RAID 0, which will be woefully inadequate for the task, will set you back at least $12-15k. If you go ESSD, then the cost will be considerably more. Want drive/array redundancy via RAID 6 or RAID 10 on your SAN array, then you’re going to nudge tripling that cost, maybe even more. All this will do is push the blockchain database into data centres. So while it’s distributed, it’s only in a handful of locations in each country. Then you have performance issues as the database grows, complex query destroying performance etc. Nightmare.

    Blockchain mining is essentially a brute force decryption algorithm. The same code that’s now being utilised extensively to hack CMS websites (WordPress, Joomla etc) and cloud servers. It has the potential to do a lot of damage to a business through either IP theft or attacks on reputation or gleaning of customer and financial data etc. Some of the data centres where these attacks originate, will also hold the Blcokchain database. What could possibly go wrong?

  6. Fat Tony

    That’s nice, but how will it run on intermittent “renewables”?

  7. Rohan:

    I predict that if governments roll over and accept it, they will use it as a compliance tool. As every transaction is known to everyone, then anybody including the government can look into every individual. There will be no black economy. There will also be no privacy.

    No black economy – that’s the crunch point there. How will politicians get their kickbacks?
    Shorten would love to do a 2c/day tax on every electronic transaction.

  8. Walter

    I am a retired engineer and fascinated by Blockchain and potential applications but wary of the computer power and energy required to process/solve the algorithms involved. Bitcoin (I am not an investor) is built around various computers “competing” against each other to solve transactions and record balances etc with the winner being rewarded with Bitcoin. There are estimates that computer processing centres using as much power as a small city are working on Blockchain solutions, this can’t be efficient or sustainable. Having a private Blockchain processing centre would seem to defeat the purpose ………

    Can it ever be a viable improvement on present systems, wouldn’t it be better to work on improving security of communications and data?

  9. John Constantine

    Will the only coal electricity generation left in australia end up being the peoples liberation army chicom owned plants, disconnected from the grid, exclusively mining bitcoin and offsetting their emissions with certificates printed, issued and accredited by the chicom secret police?.

  10. The mainstream media is finally starting to run the article about the Trump supporter college student who got kicked out of medical school at the University of Virginia to publicly debating with a far-left SJW communist professor. Here are two new ones:

    https://bigleaguepolitics.com/college-student-suspended-for-antagonizing-sjw-microaggression-lecture/?utm_source=srp002

    https://www.halseynews.com/2019/01/02/kieran-bhattacharya-kicked-out-of-school-for-questioning-sjw-lecture/

    Someone also took the time to type up a transcript of the events which happened: https://www.minds.com/blog/view/927181909976616960

    Reddit is freaking out about the story too, of course. 1000s of comments on these threads:

    https://www.reddit.com/r/ChapoTrapHouse/comments/absqb1/4chan_red_piller_gets_kicked_out_of_med_school/

    https://www.reddit.com/r/medicine/comments/abigoo/ms1_suspended_after_challenging_microaggressions/

    https://www.reddit.com/r/UVA/comments/ab1dy7/university_of_virginia_med_student_receives_1year/

    https://www.reddit.com/r/Drama/comments/abloyy/medical_student_burns_every_bridge_past_present/

    This story, known as MedGate, has the potential to create a mass public outcry against our far left college system, and thus cause real damage to the student debt loan bubble.

  11. Rusty of Qld

    Do the existing owners and controllers of creating all new money, our caring beneficial banks have any bit coin mining going on? Can’t see them allowing any young upstart to muscle in on the existing scam and beat them at their own game. They will have to squashed and they have the power of the state at their disposal to do it with.

  12. EvilElvis

    So to summarise the comments, a libertarian academic is pushing for a system that will reduce or kill the black economy while opening previously private information up to all and sundry including the soon to be Marxist government while being so energy intensive that it will not be feasible in our renewable powered future or will be exposed as a massive carbon emitter by competitors and banned.

    FMD.

  13. EvilElvis

    No black economy – that’s the crunch point there. How will politicians get their kickbacks?
    Shorten would love to do a 2c/day tax on every electronic transaction.

    Winston, politicians will be fine. The endpoint of a transaction still has to be payment or provision of a service or product. Lots of ways to rort that. Government grant laundering through unions and NGOs will continue unabated. Kickbacks aren’t always cash.

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