cultivate culture


Heads or tails: Approaching the fate of Bitcoin
June 6, 2011, 9:33 pm
Filed under: politics, society, technology

So apparently this already hit the tech world but this is the first time I and maybe you are hearing it. It hurts my brain. A currency of cryptographic keys exchanged on a peer-2-peer network (i.e. a DECENTRALIZED currency). Unclaimed keys are being exhausted as people scramble to crack them using the standard ‘check every possibility’ strategy whose efficiency depends on how much computing power you have. To gain possession of bitcoins (as the currency is called) people are spending REAL $ on buying super PCs (stuffed with GPUs!) to dicpher the keys because they think bitcoins will be worth something. Why do they think so?

The ability to crack a bitcoin key drops with the keys size because of the impractically large amount of computing power required to crack longer keys. In fact, there is a publically known practical limit to the amount of currency (about 21 million bit coins, a ceiling we are appraoching with diminishing returns and will eventually hit by 2140). Thus the bit coin CAN NOT BE INFLATED. It’s supply is fixed, kinda like gold, where the limited supply ensures demand and thus value, so long as everyone agrees they want shiny stuff. So long as people keep thinking that a DECENTRALIZED, UNINFLATABLE currency might catch on, and so continue to spend REAL $ to accumulate bitcoins, the value of the currency will grow.

Bitcoin value has risen one hundred-fold in the last 8 months relative to the USD, a fact that has scared the banks and even the technocrats themselves into calling it the most dangerous open-source project ever created. See this nice sum up  for the juicy details on why. “What? Me worry?” I say, “Pfff, these techy visionaries are so off the mark! The infrastructure required to sustain such a currency won’t survive the global crackdown, let alone the consequences of the failure of the bee stock.” You gotta look on the bright side 🙂 Then again, if you’re one of those anarchist traders, this is about as good as it gets.

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