Bitcoin The insoluble problem of decentralization
Where to start publishing? Well, let me immediately express the main idea, and then I will try to prove it. If you don’t like it, rewind immediately to the end of the text and read the last sentence.
Decentralized cryptocurrency technologies are doomed to die out due to the fact that with an increase in the number of users, they lose to centralized technologies for energy efficiency. Bitcoin and any of its variations have no future - all these systems, upon reaching certain sizes, become either unprofitable for the participants of the system, or cease to provide reliability, and most likely both.
Bitcoin does not have to be “killed" by government prohibitions. There is a significant flaw in the decentralization system itself, due to which the “bright future” of those who believe in a new world fair system is postponed indefinitely.
This is a rather unexpected conclusion for myself, because a few months ago I myself defended the benefits of bitcoin with foam at my mouth and described the prospects that it opens. Now I don’t understand why during all this time I have not come across a banal analysis and comparison of different systems by their total energy consumption. However, the figures see everything, but few interpret them correctly. But let's talk about everything in order.
A bitcoin network is a set of computers, each of which is associated with one or more others. A transaction generated on one computer is sent to the “neighbors”, who verify the correctness of the ECDSA signatures in it and forward it to their “neighbors”. Thus, a transaction reaches all nodes in a matter of seconds. For now, I will not touch on the topic of mining as an issue of new bitcoins. It is enough to mention only that for the existence of a network full nodes must exist that have the entire transaction history. Full clients can be connected by “light” clients who do not have the whole story.
What happens when the number of network members increases? The number of transactions is increasing. Do you remember that each transaction is distributed across all full-nodes of the network? And should every full node verify ECDSA signatures? This is a complex and relatively slow operation, the existing bitcoin network still has a significant supply of power, but it has long been known that Bitcoin is not suitable for micropayments. Existing communication channels also have certain bandwidth capabilities. But the saddest thing is that doubling the number of transactions and increasing the number of users doubles the total cost of electricity by four! With an increase in the number of users, the total cost of network maintenance grows faster than in the "centralized" case!
Wait a minute! But after all, everyone knows that, unlike bank payments, bitcoin transfers are made with a negligible fee or even free! What kind of network service are we talking about? Do not be fooled. In this world, nothing is given to us for free - you have to pay for everything. The trick in any system is to pay later or to force another person to pay instead. How did it happen that nobody seemed to pay for the network? Well, why? Mavrodi most likely honestly paid for the office and electricity, while the rate of "candy wrappers" grew. For the energy spent by the miners, those who bought emitted bitcoins paid.
I apologize, comparing Bitcoin with the MMM pyramid can cause bewilderment and inadequate response. Mankind generally has some kind of manic desire for the construction of pyramids and centrally-controlled systems. The very introduction of currency as a single measure of the value of various items is the path to a more efficient and, therefore, more profitable exchange system participant.
Imagine subsistence farming and the collective farm market. Someone brought potatoes to him, some horseshoes, some clothes. The owner of the potato, of course, can write on his price tag "I will change a kilogram of potato for a pound of nails or a pair of shoes, but I do not need cabbage." But such "price tags" in themselves are unbearable expenses, therefore it becomes more profitable for market participants to agree on a "central point" - a universal subject of exchange.
Of all the options for choosing a currency in society, the option will prevail, the support of which, all other things being equal, will be the least expensive for society. That is why paper money replaced gold, and cashless payments slowly but surely crowded out cash circulation!
It's time to talk about mining. As you know, mining in bitcoin is a combination of actually two processes: the issue of new bitcoins and the confirmation of transactions in blocks. In principle, it would be possible to dispense with the issue reward for the blocks - but for this it would be necessary to install the client program on the computers of all who wish and distribute the initial issue (premine) to everyone. A more interesting question is why are miners forced to spend so much energy to confirm transactions in blocks? You should easily answer this question with the learned phrase: to ensure the reliability of the network. But isn't the Bitcoin community paying too much for it? A thousand miners convert energy to heat just to prevent the attacker from making a double-spending attack in principle,
An example that I cited earlier: for example, participants in the collective farm market must prevent the appearance of a bandit in this market who robs, steals, kills. There are two principal ways to do this:
1) to pile up in a pile near the gate, each will follow its neighbors. an attacker will not be able to get through
2) put a guard with a gun at the entrance
The first option is a decentralized bitcoin. The second is the existing world system. The option when a guard is chosen is called democracy. The option when a guard passes his gun to his son is called a monarchy. However, we will not talk about politics.
The Bitcoin community is like a group of people who offer to dig a common field with shovels, instead of picking up and leasing a tractor. In today's world, such communities are doomed.
So maybe it's worth paying attention to alternative cryptocurrencies to bitcoin? Are there cryptocurrencies with a scrypt function, are there any PoS based ones? My answer is no, these technologies have the same drawback: with the same reliability they are more expensive for the community than centralized systems, with the same maintenance costs they will be less reliable.
Should I give any conclusions at the end of the post? I think, readers of a habr are able to make them. Those who have a conclusion that coincides with my opinion will not need my conclusions. If the arguments about energy efficiency did not convince you, you don’t need my conclusions either.
(Probably, this text should be in the hub “Bitcoin” / “Payment systems”, but I could not figure out how to do this)
I wanted to finish with a quote. The author you should know:
If you don't believe me or don't get it, I don't have time to try to convince you, sorry. [#]
Decentralized cryptocurrency technologies are doomed to die out due to the fact that with an increase in the number of users, they lose to centralized technologies for energy efficiency. Bitcoin and any of its variations have no future - all these systems, upon reaching certain sizes, become either unprofitable for the participants of the system, or cease to provide reliability, and most likely both.
Bitcoin does not have to be “killed" by government prohibitions. There is a significant flaw in the decentralization system itself, due to which the “bright future” of those who believe in a new world fair system is postponed indefinitely.
This is a rather unexpected conclusion for myself, because a few months ago I myself defended the benefits of bitcoin with foam at my mouth and described the prospects that it opens. Now I don’t understand why during all this time I have not come across a banal analysis and comparison of different systems by their total energy consumption. However, the figures see everything, but few interpret them correctly. But let's talk about everything in order.
A bitcoin network is a set of computers, each of which is associated with one or more others. A transaction generated on one computer is sent to the “neighbors”, who verify the correctness of the ECDSA signatures in it and forward it to their “neighbors”. Thus, a transaction reaches all nodes in a matter of seconds. For now, I will not touch on the topic of mining as an issue of new bitcoins. It is enough to mention only that for the existence of a network full nodes must exist that have the entire transaction history. Full clients can be connected by “light” clients who do not have the whole story.
What happens when the number of network members increases? The number of transactions is increasing. Do you remember that each transaction is distributed across all full-nodes of the network? And should every full node verify ECDSA signatures? This is a complex and relatively slow operation, the existing bitcoin network still has a significant supply of power, but it has long been known that Bitcoin is not suitable for micropayments. Existing communication channels also have certain bandwidth capabilities. But the saddest thing is that doubling the number of transactions and increasing the number of users doubles the total cost of electricity by four! With an increase in the number of users, the total cost of network maintenance grows faster than in the "centralized" case!
Wait a minute! But after all, everyone knows that, unlike bank payments, bitcoin transfers are made with a negligible fee or even free! What kind of network service are we talking about? Do not be fooled. In this world, nothing is given to us for free - you have to pay for everything. The trick in any system is to pay later or to force another person to pay instead. How did it happen that nobody seemed to pay for the network? Well, why? Mavrodi most likely honestly paid for the office and electricity, while the rate of "candy wrappers" grew. For the energy spent by the miners, those who bought emitted bitcoins paid.
I apologize, comparing Bitcoin with the MMM pyramid can cause bewilderment and inadequate response. Mankind generally has some kind of manic desire for the construction of pyramids and centrally-controlled systems. The very introduction of currency as a single measure of the value of various items is the path to a more efficient and, therefore, more profitable exchange system participant.
Imagine subsistence farming and the collective farm market. Someone brought potatoes to him, some horseshoes, some clothes. The owner of the potato, of course, can write on his price tag "I will change a kilogram of potato for a pound of nails or a pair of shoes, but I do not need cabbage." But such "price tags" in themselves are unbearable expenses, therefore it becomes more profitable for market participants to agree on a "central point" - a universal subject of exchange.
Of all the options for choosing a currency in society, the option will prevail, the support of which, all other things being equal, will be the least expensive for society. That is why paper money replaced gold, and cashless payments slowly but surely crowded out cash circulation!
It's time to talk about mining. As you know, mining in bitcoin is a combination of actually two processes: the issue of new bitcoins and the confirmation of transactions in blocks. In principle, it would be possible to dispense with the issue reward for the blocks - but for this it would be necessary to install the client program on the computers of all who wish and distribute the initial issue (premine) to everyone. A more interesting question is why are miners forced to spend so much energy to confirm transactions in blocks? You should easily answer this question with the learned phrase: to ensure the reliability of the network. But isn't the Bitcoin community paying too much for it? A thousand miners convert energy to heat just to prevent the attacker from making a double-spending attack in principle,
An example that I cited earlier: for example, participants in the collective farm market must prevent the appearance of a bandit in this market who robs, steals, kills. There are two principal ways to do this:
1) to pile up in a pile near the gate, each will follow its neighbors. an attacker will not be able to get through
2) put a guard with a gun at the entrance
The first option is a decentralized bitcoin. The second is the existing world system. The option when a guard is chosen is called democracy. The option when a guard passes his gun to his son is called a monarchy. However, we will not talk about politics.
The Bitcoin community is like a group of people who offer to dig a common field with shovels, instead of picking up and leasing a tractor. In today's world, such communities are doomed.
So maybe it's worth paying attention to alternative cryptocurrencies to bitcoin? Are there cryptocurrencies with a scrypt function, are there any PoS based ones? My answer is no, these technologies have the same drawback: with the same reliability they are more expensive for the community than centralized systems, with the same maintenance costs they will be less reliable.
Should I give any conclusions at the end of the post? I think, readers of a habr are able to make them. Those who have a conclusion that coincides with my opinion will not need my conclusions. If the arguments about energy efficiency did not convince you, you don’t need my conclusions either.
(Probably, this text should be in the hub “Bitcoin” / “Payment systems”, but I could not figure out how to do this)
I wanted to finish with a quote. The author you should know:
If you don't believe me or don't get it, I don't have time to try to convince you, sorry. [#]