Today was my day downtown. After my mindful meditation session, I took the Dash B bus to Chinatown and had a delicious lunch of Beef in Black Bean Sauce at the Hong Kong BBQ on Broadway. As I ate my lunch, I read a long article in The New Yorker about cryptocurrencies. It was entitled “The Stuff Dreams Are Made Of” and was by Nick Paumgarten. I have held back from the subject because I used to be a computer programmer myself and know how tempting it can be to game whatever system I am designing to my advantage.
People are so mesmerized by the concept of a blockchain because it is something new and edgy. Therefore it exercises a powerful attraction, especially to people who are not quite conversant with the technology.
Do you know what a blockchain is? One can’t advance far into the subject without coming to terms with the concept. Here is a link to a graphic presentation from Reuters entitled “Blockchain Explained”: Click Here. I am familiar with hash codes in search algorithms, so I feel somewhat familiar with the ground. What disturbs me is that human nature keeps rearing its ugly head and leading to the system being easily scammed. Also, I am not happy about ransomware from hackers demanding payment in cryptocurrencies, because the transfer is untraceable by law enforcement.
I am always suspicious about economic activities that require more faith than I am willing to repose in them. There is such a marketing aspect to the whole technology that one feels one were being assailed by timesharing condominium salesmen, as I was when I landed at the Cabo San Lucas airport a couple years ago.
What if cryptocurrencies became more popular than the 1% share of the global financial services market they currently occupy. Even at the current level, blockchain software requires incredible computer power. According to the Paumgarten article:
This year, it is said, the Bitcoin network will use as much energy as the nation of Austria, and produce as much carbon dioxide as a million transatlantic flights. Mining rigs—computers designed specifically to do this work—are thirsty machines. Mining farms tend to sprout up where juice is cheap (typically, in proximity to hydropower projects with excess capacity to unload) and where temperatures are low (so you don’t have to burn even more electricity to keep the rigs cool). There are open-air warehouses in remote corners of sub-Arctic Canada, Russia, and China, with machines whirring away on the tundra, creating magic money, while the permafrost melts.
I can foresee Thomas Pynchon writing a sequel to his Bleeding Edge about this activity. It’s almost as if the subject of cryptocurrencies and the high priests who run them were made to order for him.
As David Chaum, one of the pioneers of cryptocurrency software, once said, “There’s never been, in the history of civilization, this much money aggregated as a result of doing nothing.”