The Cryptocurrency Conundrum: Why Bitcoin and its contemporaries have failed to convince me

It would have been pretty difficult to avoid hearing anything about Bitcoin in the past few months, given its jump from being a mere curiosity known only by technical enthusiasts to a potential investment that mainstream economists and journalists are watching avidly. Some of the advocates for Bitcoin and other cryptocurrencies say that they offer a completely different paradigm for currency transactions, while others are interested in the investment opportunities.

However, the recent bankruptcy and collapse of Mt. Gox, one of the premier Bitcoin exchanges, along with increased scrutiny on the nature of cryptocurrencies by various treasury agencies has caused the price of Bitcoin to jump around like a hyperactive kangaroo. I fail to be convinced of the long-term viability of Bitcoin or other contemporary cryptocurrencies, neither as an investment nor as a unit of currency. I will focus on Bitcoin here, since it is the cryptocurrency with the highest market capitalisation and correspondingly the most interest, along with being the basis for most other cryptocurrencies out there.

Admittedly, as a technical enthusiast, there are some details of cryptocurrencies and by extension, Bitcoin, that I find interesting. The idea that cryptographic protection is built into the protocol, thus stymieing attempts at counterfeiting, has merit particularly from the perspective of e-commerce. Commercial activities have taken off on the internet to an astounding extent, despite the decided vulnerabilities in current payment mechanisms, especially from the perspective of security. Having a secure, well-supported method of payment that is outside the commercial interests of any single party could be useful for improving the weaknesses that currently exist in internet commerce.

Unfortunately, the few advantages that Bitcoin can indisputably claim over conventional currencies are not enough to make up for the many things that can be held against it. These problems begin at the generation (i.e. “mining”) phase, spiralling out from there and include both the computational side and economic factors.

The generation of Bitcoin is done by a process called “mining”. Bitcoin mining effectively involves solving SHA-2 cryptographic hashes for a certain set of criteria, trying to find the most complex way of arriving at that result. I can already see a problem here. As far as I can tell, the only people who actually need to solve cryptographic hashes are security organisations such as the NSA and professional cryptographers. Bitcoin doesn’t fall under the purview of “professional” cryptography – it is simply rewarding computational make-work that has no relation to legitimate problems that distributed computing would resolve. In this regard, Bitcoin is no better than fiat currency, since you’re only trading off the trust of a government’s ability to pay its debts for the trust of computer cycles.

Actually, since I don’t trust computer cycles as a backing for a means of payment unless those computer cycles have been used for something useful, I have to regard Bitcoin as worse than fiat currency. It’s not like there aren’t plenty of things that could be done with those computer cycles either; everything from protein folding to Mersenne prime number solvers to running through the data of a large-scale scientific experiment could be done with the distributed computational power of computers currently used for Bitcoin mining, but instead, they’re being used to solve bloody cryptographic hashes. That’s one strike already for Bitcoin and we haven’t even got past the generation phase.

While we’re on the subject of mining, bitcoins used to be generated effectively by the CPUs of home computers, but as the difficulty of generating bitcoins has increased (as part of a process which I’ll talk about below), the mining process gradually transitioned towards the use of GPGPU techniques, then onto the current trend of application-specific integrated circuits (or ASICs). These ASICs, as the name implies, are not general-purpose computers, but are specialised for the purpose of Bitcoin mining. So, not only does Bitcoin mining involve the make-work job of throwing away computer cycles – and electricity, by extension – on solving cryptographic hashes, but it’s led to the creation of computers for which that is their raison d’être. Great work, Satoshi Nakamoto, whoever the hell you are.

To be fair, though, once you get past the mining stage, the nature of the Bitcoin protocol looks alright from the perspective of computer science – for a while, at least. Bitcoins are stored using a digital “wallet”, to which the user provides an address which takes the form of a long hexadecimal number. Payments can be made to other Bitcoin users by knowing their addresses. However, we hit a stumbling block here when it comes to using Bitcoin as a means of payment for e-commerce. Bitcoin has a one-way system for transfers, which for various reasons is not suitable for most purposes in the field of e-commerce. What about refunds, for instance? That isn’t covered very well within the Bitcoin protocol. Nor are transaction cancellations, which would have particularly interesting, if not especially desirable consequences regarding micro-transactions within smartphone or tablet apps, where an alternative to payment by credit cards would be rather desirable.

Let’s just consider the case of a parent who has just handed their child their smartphone and returns to find that the child has bought several hundred dollars of in-game purchases in some shitty freemium game. This sort of scenario can happen and has happened in several high-profile cases – and certainly, the parent isn’t going to want to keep all of those in-game purchases. Some people may say that the burden should be placed on the parent and if they didn’t want it to happen, they should have been more careful, but really, I can sympathise with the parent on this one.

I mean, let’s say your child is whining about something they want, which happens regularly. You’re busy trying to get some work done around the house or something and you just want a break from the moaning going on in your ear. So, you hand your smartphone to the child hoping that they’ll find something that will shut them up for just one moment. Unfortunately, you forgot to sign your account out of the smartphone’s store and of course, Murphy’s Law will dictate that the one time you forgot to sign out will be the time when the child wants to make his way through the catalogue of crappy in-game purchases. By saying that you should be more careful as to let your child mess around with your phone, you could just as well insinuate that you should be more careful as to have children in the first place and that argument doesn’t tend to go down well.

Bitcoin is even more vulnerable than credit cards to this sort of scenario; credit cards usually have limits, whereas somebody with a Bitcoin wallet could spend the lot and all you’d have would be the recordings of the transactions on the address. Good luck getting your money back as well, since these transactions can’t be cancelled when it turns out that you’ve made a mistake – or that the product that you ordered is late or whatever problem you’re having. Not a very good thing for a currency, wouldn’t you think?

Returning to a point which I made above, Bitcoin mining has become more difficult as time has progressed, which has prompted the use of ASICs. Part of the reason why Bitcoin mining has become more difficult is because of an inherent detail of the protocol and of Bitcoin in general – there is a finite number of bitcoins that can be generated. Only 21 million bitcoins will ever exist, generated at a steady rate per week – which requires the generation of bitcoins to be more difficult as more computational power is used to generate them – and the rewards will diminish with time. Danger, Will Robinson! Talk about an economic faux-pas: what we’ve fallen into here is an inherently hyper-deflationary currency.

Inflation and deflation are not two sides of the same coin, but both are considered to be deleterious to some extent in an economic system. However, mainstream economists tend to consider inflation less harmful than deflation and fiat currency systems that are in use today have a small, but usually controlled rate of inflation. The reason that economists prefer inflation to deflation is that such a scenario encourages people to buy things since the value of their money will decrease rather than increasing with time, along with being more helpful to debtors rather than creditors – a debt made for a certain amount in a deflationary system will continue to accrue value, which discourages entities from taking out debts in the first place. When those debts would be used to catalyse the growth of a new business, then there becomes a case where deflation becomes harmful to economic growth. The once-vaunted Japanese economy, which looked set to take over from the United States of America as the world’s biggest economy in the 1980s, has suffered from deflation since the early 1990s. With Bitcoin, you would therefore use a system which actually incorporates deflation – and at a huge rate – into its very form of being. I’ll leave you to draw the conclusions.

Another problem for Bitcoin from an economic perspective is its volatility. As I’ve said above, the price of Bitcoin jumps around from day to day like a hyperactive kangaroo, and sometimes, hundreds of dollars per bitcoin can ride on various decisions by speculators and treasury agencies wary of the potential effects of Bitcoin alike. The recent collapse of Mt. Gox sums this up nicely; in the last month, the price of bitcoins has jumped between more than $700 per bitcoin to a trough of less than $480 on February 25th, when Mt. Gox went offline, before promptly jumping back up to more than $600. Bear in mind, this was in a single month – if the dollar went haywire like that, there would be hell to pay! Would you really risk spending money with the potential for it to add another half again onto its value, or receive it with the risk of it almost halving in value? If you would, you’re braver than I am – or infinitely more foolhardy.

We need to note here what Mt. Gox actually stood for – it was originally an initialism for “’Magic: The Gathering Online’ Exchange”. No, you’re not reading that wrong – it was originally a site for the exchange of cards from a fantasy collectible card game. Actually, no, I have that slightly wrong – it was originally a site for the exchange of digital, virtual cards from the online version of a fantasy collectible card game which only exist at the whims of Wizards of the Coast. This is what I find to be one of the most terrifying things about any ideas of moving to Bitcoin as a currency – putting your money into the hands of a bunch of nerds who have no real clue about anything but the mathematical tendencies of economics and have probably convinced themselves that their computer science experience gives them insights into the economic world while only understanding that small portion of it. That, to me at least, seems like a big mistake waiting to happen – and I say that as a nerd with no real clue about anything but the mathematical tendencies of economics who has convinced myself that my computer science experience gives me insights into the economic world while only understanding that small portion of it.

Another group of people who are very vocal on the issue of Bitcoin and who are correspondingly very worrying are the Randite libertarians who have embraced Bitcoin and its decentralised nature. Randites are particularly annoying to deal with, because of their odious selfishness-led philosophies and their propensity to believe any sort of ludicrous fantasies as long as they work against the aims of organised government. It doesn’t help that the very founder of their Objectivist ideals was a hypocrite who railed against government assistance, yet seemingly felt no shame in using it herself, nor does it help that Alan Greenspan, who, as Chair of the Federal Reserve, presided over the biggest recession since the Great Depression, is a self-confessed Randite. I think that’s the piece of straw that broke the camel’s back on that issue, although interestingly, even Alan Greenspan doesn’t think that Bitcoin is a good idea. You’d think he’d have first-hand experience of a financial bubble, wouldn’t you?

The Listicle – An Unfortunate Trend Towards Throwaway Journalism

2013 has had a myriad of throwaway trends, many of them spurred on by social media, ranging from Gangnam Style and the Harlem Shake (remember that?) to a series of phenomena described by increasingly cringeworthy names like Bitcoin (which, incidentally, I regard as nothing more than a tulip panic for Randite libertarians who get off to their copies of The Fountainhead), twerk and selfie. These trends seem to have something in common, namely their transient nature. There’s nothing necessarily wrong with transient trends, although most of them just seem extraordinarily silly to me and just seem like the sort of thing to bring up in twenty years’ time just to embarrass you in front of your children. However, there’s another trend that has taken grip during 2013, one that has far more potential of going beyond impermanence and one which indicates a worrying and unfortunate descent in people’s reading standards.

This trend is, as with so many others of 2013, described by a deeply unsatisfying name – the listicle. Lists have been a component part of journalism for quite some time now, but outside of internet-focused writing, tend to be reserved for when a writer needs an easy way out near the end of the year, such as “The Top 10 Thingamajigs of 2013”. They aren’t always particularly satisfying or fulfilling reads, but they’re quickly-read, quickly-written, condensed forms of writing. The listicle attempts to shoehorn this style into an article format – and that’s when the problems start.

The listicle pre-dates the term, being the chief output of flashy magazines like Cosmopolitan and websites like Cracked. I once read a great deal of the contents of Cracked, who at least usually fill their articles with enough content to merit the “article” part of the listicle. Such writing is again not particularly satisfying nor fulfilling. It’s more like the McDonalds Extra-Value Meal of the writing world – quickly made, quickly digested and leaves you craving more about half-an-hour afterwards. I believe it to be a lazy stop-gap in place of proper articles, but the trend has been there for quite some time without showing any signs of stopping and in some rare cases, these listicles are treated as an authority on a subject – for example, Rolling Stone‘s Top 500 Songs of All Time.

Unfortunately, as the listicle has obtained its name and become apparent to more and more people, standards have dropped even lower. One of the major offenders in this field is Buzzfeed. If Cracked serves out the journalistic equivalent of McDonalds, Buzzfeed serves out the equivalent of pet food – doled out in industrial quantities with only the slightest regard for quality and after a while, making you wonder whether it’s really acceptable to be digesting it at all. But yet, there seems to be very little shame in reading Buzzfeed articles; I see them all the time popping up in my Facebook feed. I’ve read some of them. They’re almost entirely devoid of actual substance, with maybe a blurb underneath each picture to provide the sole input of the writer into the piece of writing. The relation between the elements which defines a list is tenuous at best in a Buzzfeed article. The number of elements in the list often just seems to be drawn out of a hat and there isn’t even always a match-up between what the article title indicates and what the URL indicates. I’m starting to feel dirty for venturing into them at all.

Not everybody has the appetite for writing – or reading – extensive footnoted articles. I get that. I understand why there’s an appetite for the sort of listicles that Cracked delivers. Hell, I’ve read a great deal of them. It’s a lazy sort of writing, often without a proper conclusion, but as I said, not everybody wants to – or even can – write a substantial, serious article. On the other hand, I cannot excuse Buzzfeed for its sort of writing. Shamelessly lazy, devoid of substance and cynically simplistic, a Buzzfeed listicle isn’t worth the hard disc space it’s written on.

Of course, this sort of lazy, uninspired, unfulfilling writing extends past Buzzfeed – Buzzfeed is just the lowest common denominator in all of this. My worry is that this sort of horrid writing will continue to be popular, drawing in new writers who merely wish to hop on the bandwagon and have no respect or dignity towards their own work and who will conspire to dole out this pigswill masquerading as proper writing. It behooves me to be this conservative about a digital medium, but if this is the rubbish that we will continue to receive from internet journalism, I will continue to wish in vain for the death of internet journalism and the return of printed newspapers.

By this point, some people may be thinking to themselves, “You’re probably just envious because you’re not a good writer and your articles aren’t popular”. Actually, I already know that I’m not a particularly good writer, for a variety of reasons. That said, I consider it a point of pride that I have never written a ranked listicle – and I’m open to opinions as to whether my Probing The Inaccuracies articles count as listicles or are simply sub-headed articles.

Making Hardtack: A Random Interlude

Author’s Note: I recognise that my update schedule has been somewhat disrupted in the last month. I wasn’t even especially busy, but I lacked motivation and sufficient material for a post. This post is itself blatant filler, but indicates what I’ve been up to recently. When I get back to my technical interests, I do intend to return to my usual update schedule.

I have rarely sought to limit myself to a small range of interests. Aside from the obvious technological, scientific and mechanical pursuits that I regularly talk about on this site, I have also taken forays into subjects rather more diverse, such as politics and history, literature, cinema and art. One subject which I have perpetually taken an interest in is militaria, from the weaponry and equipment used by soldiers to the tactics used to win a war.

One of the most important aspects of successfully fighting a war, and one often glossed over by many media sources, is logistics; namely, making sure that your army has sufficient supplies to sustain itself, to fight and to manoeuvre. Theatres of war have been won or lost over logistics, the most famous examples being Napoleon’s invasion of Russia crashing to a halt as the Russian scorched earth strategy worked to deny La Grande Armée the resources of its conquered lands, and the subsequent invasion of the Soviet Union during the Second World War by the German military which was halted at Leningrad, Stalingrad and Moscow by similar scorched-earth tactics.

In a modern combined-arms military, logistics is crucial to ensure that all of the components of an army can move in concord. That doesn’t mean that logistics wasn’t important in the past, and one of the most critical parts of logistics now and in the past is ensuring that all personnel have enough food. As has often been expressed, “an army marches on its stomach”. However, military operations come with their own particular set of challenges when it comes to providing food. One of the chief challenges is food preservation, problems arising from matters such as the general deficiency of refrigeration in a modern army and the complete lack of refrigeration in the past, to the conditions that an army may be fighting in, such as fly-infested swamps and humid jungles.

Correspondingly, military rations often have to be designed with these limitations and challenges in mind. A type of military ration which persisted for many centuries up until the modern day was hardtack, a type of hard-baked biscuit or cracker designed to be extremely resistant to spoiling and resistant to breakage. Unfortunately, the very steps taken to ensure that the hardtack crackers resisted spoiling also made them unappetising and difficult to eat, especially when eaten for long periods of time, as was regularly the case before modern ration design starting with the C-rations of the United States during the Second World War and continuing today with the MRE (Meal, Ready to Eat) rations of the present-day United States military.

I was interested in seeing what these hardtack biscuits would actually taste like, and so I decided to bake a batch of them. The recipe that I used dates back to the American Civil War, although similar rations were reportedly in use with the British Expeditionary Force in the First World War and beyond. The recipe is extraordinarily simple, consisting of nothing else but flour, water and a small addition of salt for flavour. The simplicity of the recipe might have itself contributed to the popularity of hardtack with logisticians of the past; it is very easy to scale up the production of hardtack, even without machine tools or anything more sophisticated than a good oven and a few simple kitchen utensils.

The recipe is as follows:

420g/≈3 cups plain flour

250ml/≈1 cup water

2 teaspoons salt

1) Preheat the oven at a temperature of 180°C/350°F.

2) Add the water and salt to a bowl.

3) Add the flour in small quantities, stirring the flour into the water-salt mixture. As the flour is added, a thick paste will be produced. Keep adding flour until you cannot stir the mixture any more.

4) Knead the paste, which should be slightly sticky to the touch. If the mixture continues to be sticky after kneading, add more flour until you have an elastic, but smooth mixture remaining in the bowl.

5) Place the mixture onto a flat surface and roll out into a flat sheet approximately 1cm/½in thick.

6) Using a pizza cutter, cut the sheet into squares of dimensions approximately 7cmx7cm/3inx3in. Using a skewer, poke holes in the top of the squares in a grid of four holes on each side equally spaced. [See below for picture indicating how this should look.]

7) Place the squares on an ungreased cookie sheet. Place into the oven and bake for 30 minutes. Flip the squares over and bake for another 30 minutes.

8) [OPTIONAL] For enhanced preservation, continue to bake squares at 120°C/250°F for an additional 30 minutes.

The picture below shows two batches of hardtack that resulted from this recipe. The front nine biscuits were a preliminary first batch, which as can be seen are rather uneven in size and thickness. Most of these biscuits were too thick, and the result was that while the external shell of the biscuits was as it should have been, their centres more closely resembled a bread roll like a baguette; this may well be more appetising than the harder shell, but would be less inclined towards proper preservation, as fungal moulds could thrive on the moisture still contained in the mixture.


The back nine biscuits, on the other hand, were more evenly sized, had the proper thickness and altogether more closely resembled what hardtack was meant to be like than the first batch. The most obvious characteristic of the second batch was that the purported hardness of the recipe was not exaggerated by the sources I had used. A soldier with poor dentition would find it difficult, if not impossible, to eat a hardtack biscuit without resorting to things such as leaving them to soak in water or coffee, a process which would itself take quite some time, as the hard shell resists water penetration to the slightly softer core. It is also extraordinarily dangerous to attempt to eat hardtack with one’s incisors; using the premolars or molars is suggested.

Once I got past the preliminary difficulty of actually eating the hardtack, I did notice that the flavour wasn’t unpleasant. It tasted like a water cracker, except with a harder outer shell, and would be a sufficient and not-unpleasant sort of food for a short period, such as a modern-day hike. It is, however, a monotonous sort of food, which would be rather less pleasant over the weeks that a soldier of the First World War or American Civil War, for instance, may be forced to eat it, let alone the consistency that would be expected on a naval journey during the time of Admiral Nelson. As survival food for somebody conducting a short activity outdoors, it would be sufficient even today, but as food for a working soldier, well, let’s just say that I’d take an MRE or its equivalent any day of the week!