"The jolliest laught is the last laugh"
Everybody and their wives are talking about bitcoins and blockchains. "It is the best thing since the internet, it will give the finger to all banks, governments and other leeches", etc etc. I admit I was negative about bitcoins from day 1, but moved by all this exalting hype I took the time and studied the blockchain technology behind it. The more I read, the stronger my conviction about this nonsense became. Yes, the exchange price of XBT does not agree with my opinion momentarily, but let's wait and see when this bubble will pop. Even if blockchain technology was spotless, what kind of reasonable cause could explain a rise in price of 400% within a year? Of something that isn't really anything tangible? Gold at least could be melted and turned into bling, but what can you do with bitcoins? The XBT price rise is just a classic bubble.
All bitcoin technophiles should first read about blockchain basics (try it, it's a simple to follow video). It isn't rocket science, it is a simple hash based system that ensures that transaction data cannot be manipulated by up-to-no-gooders. But the devil is in the details. It is very noble to talk about a system that remains reliable and accountable without intervention of any authority (other than the consensus of miners at large), but how does it work in practice? "Simply" by keeping all transactions ever (!) in a gigantic database of anonymous exchanges.
I maintain that whole idea of this blockchain database (distributed ledger) is enough to destroy any long term prospects of bitcoin feasibility. People were worried 2 years ago that the database was growing fast to 40GB. Two years later it has quadrupled in size. And imagine at present bitcoin is not used as it was meant to be (i.e. to buy and sell stuff). People are either keeping it as investment, or it is used for criminal activities like ransomware. Had it been used for everyday money, this database would go through the roof. Every miner and every wallet holder must store this entire database somewhere and keep it aligned with other anonymous distributed copies of it. How is that going to work out in the long term?
If that's not enough of a death blow, the anarchic system of mining (verifying) transactions means that the database is not a unique straight line but contains lots of parallel strands that somehow need to be straightened out by consensus. Last but not least there's a fundamental limit of transactions per second that can be handled by the mining infrastructure that is orders of magnitude below what visa and mastercard, our real world money, can do. So much for the long term prospects of bitcoin.
How is the bitcoin mining algorithm related to the database size? I couldn't find a clear cut explanation. If it scales in proportion O(n) then obviously we have another major practical impediment, but even if we assume at best that the complexity is independent of the total blockchain, still we are left with the dead weight of a total transaction history. It's like you are trying to make a video of every moment in your life — it's bound to break any container.
I could go on and on with major flaws (e.g. bitcoins are ultimately going to run out so who will mine the future transactions and with what incentive?) but the picture should be clear. Bitcoin and any other similar idea is technically infeasible. It isn't a matter of better computers coming to the rescue. The basic idea is doomed and limited to small scale implementation at best.
Everybody loves a quick buck but if you own bitcoins my advice is to dump it quickly. Every other day you read about a fundamental split in the core bitcoin team. Governments are rushing in to control bitcoin. This boat is going down ...
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