The trouble with Bitcoin

(A first version of this page was written in 2015)
In the 19th century and until the 1930's there were big monetary instabilities. Economists found ways to stabilize the money by central banks. However the Bitcoin community still never heard about that problem and solution, and keeps blindly believing that the instability of the value of the bitcoin is just due to the fact it is not popular enough and it will naturally become stable by the magic of being popular, just because, as usual currencies are now relatively stable since a few decades, the very existence of the problem remains completely ignored by people who specialize in cryptography and have no clue about finance.

So, what is their belief ? That there would exist a stable amount of needed currency in circulation.
This is ridiculously false : whenever someone has a piece of currency, there is no reason to keep it, since, at best if we assumed its value to be stable, it would just follow the world's economic growth, which is lower than the average real interest rate one can get by investing this money somewhere, thus having in hand no more that piece of currency but something else : some stocks, an amount in a bank account which reflects a loan being done to a productive company... so, some convention of asset that is not itself the object of ownership like a piece of gold would be, but that is the ownership of something else, a share of real productive thing or company. These more productive forms of value ownership have the property that the expected total sum in circulation is zero, as positive amounts are the counterpart of some negative amounts, usually debts that companies will have to pay to the owners of positive amounts.
Now the expected virtue of a digital economy is that it will provide people more fluid means for anyone to immediately exchange any unproductive currency they would hold (with low expected real interest rates), into productive values (following the market-stable real interest rate). In these conditions, the limit of ideally needed amount of total value of unproductive currencies in circulation, such as bitcoins, is... Zero !
So, the ideal stable value of a bitcoin, as defined by the ratio of the total needed value of currency (ideally zero) by the number of units in circulation (some total number more or less determined by the bitcoin system), is, logically, zero too. In such conditions, expectations of stabilization of value in % per period of time, are very unrealistic.

Not only this, but also, consider the question : what do you think should happen every time someone creates a new online currency working a bit better than the previous one, in a way or another ? Some Bitcoin 2.0, working independently of the current Bitcoin. How can all the people now owning Bicoins, exchange them all into Bitcoins 2.0 ? Of course, the answers is that if all bitcoin owners try to exchange their coins into a new currency, they cannot do it but will just lose all the value they owned, because, with whom will they do that exchange ? nobody will buy them ! You can contrast this with the case of central banks which, no matter how ugly it looks to think that our money is controlled by central institutions, still have the remarkable advantage that, every time we need an update in the currency (such as switching from former national currencies into euros) they politely accept to collect all the old stuff and provide the new one in exchange. Something that won't happen with bitcoin since it is so wonderfully decentralized that nobody will be there to guarantee that its value does not fall to zero. Apart from this, well, experts in computer security are confident, they can guarantee to you : Bitcoin is absolutely secure. If you have bitcoins and you keep them carefully in your smartphone, if you do not accidentally break it nor put it into your bath, you do not forget it in a cloth that you put into the washing machine, no pickpocket takes it and it is not infected by any virus, then you can be sure, your bitcoins will remain yours. Oh yeah.

Now, just think about it : is it really serious to expect the world to adopt a system with the remarkable feature that, once widely adopted, it will require the whole world economy to collapse every time it will need a little update ?

Not that I like the idea of central control of anything ; actually I have my own solution of a decentralized online currency (uh, quite decentralized but still some centralized aspect is still needed for stability). But the point is that it needs completely different foundations than Bitcoin in order to avoid that trouble. Bitcoin is worthless. It is not a step in the right direction. It is a step 1 century backwards. We cannot build any serious online currency if trying to keep any concept in common with that shit, just like the light bulb was not invented by improving the candle.

On the hype about its rise of value

A rise of the market value of bitcoins is no sign of quality. The more it rises, the harder it will fall. I strongly suspect that a large part of the reasons that made it rise, is that a large number of the coins have actually been lost, their owner having lost their private keys and/or whatever data they needed to save to be able to use their coins. Some of the owners may even be dead, while no heritage system has been considered. This means the amount of bitcoins effectively in circulation may be much lower than official figures. The value of those lost, is the sum of all amounts which, individually each owner might have win if only he didn't lose his data.... but if all of these coins still really existed they would have been probably sold already, dividing by a larger nominal amount (number of units) the total value of actually circulating bitcoins (something relatively more modest), which may more or less be defined by a certain global demand.

Reply to an answer I got about the update problem

(october 2017) Someone answered:
When you say that a simple update will collapse the system and will be impossible to replace old coins for new coins, that’s false. As seen with Bitcoin Cash, they fork the chain and give every user a duplicate of the numbers of coins they have on the new chain.
Maybe all this people are deluded and not smart but they are lots, and they all think bitcoin is the future. Even if bitcoin is flawed (the current system also is) I don’t think it’s going away unless some new awesome technology appears from nowhere and that doesn’t seem to be happening soon. Bitcoin is slowly replacing the current system.
My reply : "they fork the chain" Who ? The Good Lord Above ?
Remember : Bitcoin is designed in such a way that NOBODY is responsible for it. One time things may happen to be cared for by some people motivated to maintain the collective illusion that the principles are good. But the wind may switch away from this just as well.
His reply:
They have names, Roger Ver, Craig Wright, a chinese guy called Jihad… they are responsible for Bitcoin Cash, there are other guys on the other side, on the 5,5k coin… both groups have their own subreddit and stuff. Both grups are at “war” for who’s chain is better, and a 3rd group is going to fork again in november, I think.
Same thing if you buy stocks and that company fails… no one is gonna pay you back. The dilemma is to choose the right coin, but I think both coins BTC and BCH will work simultaneously. This guys are investing a lot of money to create mining rings, wallets, and other softwares.. I’m not an expert but the subject is way deeper than just saying “it’s not gonna work” because it’s working, lots of this guys are coming forward as kind of responsible for the success of each coin.
My reply: Indeed, lots of guys are coming forward, each responsible to make his own coin succeed at the expense of all others.... until new guys will be coming forward, responsible in the same way to make their own brand new coin succeed at the expense of all previous ones.... Actually they only don't want it to fail as long as they did not sell theirs. Oh yeah.
Bitcoin lovers who are responsible to make Bitcoin better. It's working only as long as no competitor appears that would no more be a Bitcoin lover... there are already tens of cryptocurrencies whose value is independent of bitcoin... You seem to have completely forgotten that a basic meaning of money is that of a convenient tool of reference to make payments and measure the value of OTHER THINGS. Most people using money neither think nor intend to be speculating on the value of a particular currency itself. Finding all right to encourage them to use a tool and then no more feel responsible for them if doing so they turn out to loose all what they have just because you choose to suppose them to agree with a game that nobody was supposed to know what sense it might be making and why, since, while the value of a stock is at least supposed to refer to the real value of a particular business, the heck knows what the value of bitcoin is supposed to reflect....
It reminds me, in my text the phrase "a game where the true conditions of victory has nothing to do with what it is officially claimed to be". So that is your Brave New World ?

Bitcoin dictates to waste the Earth's ressources

Long ago when I pointed Bitcoin's instability, people replied that it was only because of immaturity and limited adoption, so it would become more stable as time passes, it becomes mature and more widely adopted
Now that it is supposedly more mature and more widely adopted, see it falling : from sept.1 to sept. 15; from nov 8 to nov 12. Any better stability than before ? I don't think so.

My facebook post of December 8, 2017

Trying to extrapolate the recent rise of value of Bitcoin into future trends, it seems to be on a divergent curve about to reach infinity in finite time, which may be as early as the next couple of weeks. But the next value after +infinity is logically -infinity, which in logarithmic scale means zero. So, be careful ! Seriously, some time ago I explained some troubles I see with Bitcoin here and I did not change my mind since then. (Link to here)

Mining Bitcoins : a proof of work waste hack

What a crazy idea, from an economic viewpoint, that possibility to create coins from nothing, imitating the activity of gold mining in the cyberspace... mining gold might be seen as a productive activity insofar as gold might have some real value; however if the monetary role is its only "value" then there is a big nonsense here... I understand most people don't naturally grasp the depth of this nonsense as they have no natural sense of perfect logic and what it means for a concept to make sense, logically, so they can't see the problem... nevertheless the fact is that this whole idea of consuming energy to create cash is a huge nonsense. Its main role, in fact, is ideological : it just feels cool, popular, democratic, to proclaim that the right to mine coins is granted to anyone. The result ? Lots of money is spent mining bitcoins, thus converting a real value (energy) into an imaginary one that is going to vanish sooner or later anyway. A conversion far from perfect, as it is a matter of chance whether this work provides nothing (in most cases) or one bitcoin (with very small probabilities). Like if the only way to convert euros into dollars was to buy lottery tickets for 1 euro each, with each one chance over a million to win a million dollars. Already not as fair and democratic as it initially seemed.
But the ultimate result is even worse: it is no more worth spending one's own (or mutualized) energy to mine bitcoins, because of the unfair competition with those who undertake mining bitcoins not with an energy they pay themselves but with the energy of others: by creating viruses that will infect millions of machines to mine bitcoins for them. Thanks Bitcoin for financially promoting the creation of nasty, cpu-consuming viruses !

The Blockchain super-toy

One day my sister (who is very bad at computers) notified me of that super-toy which she heard about from the news.

My reply to her (translated to English) Yes of course everyone is talking about it. I'm laughing. A super very funny and fantastic toy and everyone is wondering: What the heck it will ever be for.

Once upon a time, there was a community of athletes in desperate need of a feat to accomplish to give themselves a reason for being and to feel proud of themselves. For years, some of them focused on the great ambition of finding a reliable method applicable with moderate effort by any good sportsman to achieve to make double back somersault : it would be amazing wouldn't it ? By dint of perseverance they ended up finding such a method, revolutionary. From then on they undertook to develop new sports schools to teach this method to thousands of new generation sportsmen. As a result the world got overflowed by thousands of sportsmen to whom the only remaining obsessive concern to which they will devote the rest of their life is the research on this vital question: but what the heck this ability to make a double back somersault can finally be useful for ? Replace "sportsman" with "programmer" and "method for double back somersault" by "blockchain ".
So, people continuously think upside down : instead of trying to understand the REAL needs and deduce from there the right design of the appropriate solutions, they start by trying to invent some hugely sophisticated hyper-specialized kind of "solution" to fictional, theoretical classes of "problems" and then remain in desperate need to invent a problem for which these super solutions may be solutions for. I further commented on this kind of insanity there: The science of changing the world : needed skills - Stop Mistaking Denialism as Wisdom.

This was written as part of a long exposition on the topic : On humanity's failures to steer itself properly
See also:
A discussion
News articles:
Founders of hacked crypto-mining site apologize over Facebook livestream
Steam ends support for bitcoin
Bitcoin mining consumes more energy than 159 countries
A British man says he accidentally threw away over $80 million worth of bitcoin.
Related pages of mine:
The cult of cryptography (incomplete draft)
Why I hate Avast
the biggest security hole of Facebook.