Last updated on March 12th, 2018 at 12:32 am
Bitcoin was a clever idea. Idealistic, even. But it isn’t working out quite as its developers imagined. In fact, once all the coin has been mined, bitcoin will simply reinforce the very banking system it was invented to disrupt.
At its core, bitcoin is just an extension of the old PGP, or Pretty Good Privacy encryption protocol.
In essence, bitcoin is money built and maintained by nerds, based on the premise that good nerds will outnumber the bad nerds.
…And that’s the system we’re stuck with today, with central banks issuing money, and banking conglomerates lending it to the public and verifying our transactions for a fee. All of our businesses are just subsidiaries of a banking system with a legal monopoly over our money.
Bitcoin was meant to cut out those unnecessary intermediaries, and replace them with computer cycles. The high processing cost of mining bitcoin–as well as an arbitrary limit on the total number of coin that can ever be mined–keeps the money supply scarce. But this means that instead of re-creating those high-velocity market monies of the Middle Ages, the abundant ones that worked like poker chips, bitcoin re-creates the market mechanisms of gold, a currency that invites hoarding and speculation while discouraging transactions. Oops.
The wealth disparity in bitcoin is worse than that of central currency, with 4% of users owning 96% of bitcoin. So much for breaking the banking monopoly; this is just hackers seizing the banking industry for themselves.
So what will really happen when all the bitcoin is mined? The people and companies currently authenticating transactions for coin will instead insist on service fees. The more processing power and electricity it takes to authenticate, the more they will want to be paid.
Bitcoin may have been meant to disintermediate the agents of trust who monopolized commerce and currency. Like the internet, it was meant to engender trust by connecting people directly to one another. But all it really did was substitute for trust in a new way–with computer cycles instead of a human or institutional middleman.
Eulogy made by Douglas Rushkoff