There is a big hustle going on right now over blockchain-based systems, most notably digital cryptocurrencies. It is as if the public just became aware of the word “blockchain”, saw that Bitcoin posted some crazy value gains, and decided “Oh? It went up? That means it is going to be a safe bet that it will go up forever!” and just hopped in with both feet.
Despite blockchain’s inherent scalability problems…
Despite the totally insane energy cost behind every single transaction going forward…
This has, of course, attracted the attention of The Sneakies. The Sneakies are people who realize that running a confidence game on a single person is moderately difficult, but running one on a large population that doesn’t really have the time or interest to dig into the details is quite easy — especially if you have a piece of cake in one hand, and even easier if they are panicked about something at the same time. Fear and hope are a powerful combination when aligned.
Since about 2014 an interesting proliferation of digital currencies (most being cryptocurrencies, but some even being created by banking consortia — har har!) has occurred. Some try to attract attention by spreading FUD about Bitcoin (not that the things they say about Bitcoin are inaccurate, but the same criticisms usually apply to the newly proposed currency as well), some try to attract attention using a “proof-of-work” system analogous to the original Bitcoin algorithm (“Get in now on the ground-floor!”), some try to leverage pre-existing FUD about Trump or the Euro or whatever. Most use a subtle combination and target a specific demographic (Antifa sympathizers, Randite Objectivist libertarians, Neo-Commies, Neo-Nazis, retirees and other “near-deads”, veterans, even Neo-Pagans).
Catching a trend? This is how trends that become confidence scams start to look.
Are cryptocurrencies the future of lightweight value exchange? Yeah, probably something like that. But we already have something more concrete backed by violence: actual currencies that can be electronically divided, transferred and calculated at a much lower cost to energy.
So what will happen? The early miners are punching out now — because while the run has been great and Bitcoin & co will be worth more than $0 even after the market correction, nobody knows when the correction will come. Full disclosure: I’m holding some Bitcoin. Mostly stuff I mined a few years ago. The value is sort of preposterous at the moment. Will I cash in? Maybe — but who knows what sort of pain that might cause me with tax services? It might not even be worth it unless I’m prepared to be shady about things.
But the scammers are starting to cash in, and it won’t be too much longer before one of two things happen:
- Scary but predictable: The Bitcoin “whales” cash in and the market collapses, causing a race to the bottom (like a short-call on everyone who has been betting against the Yen, Dollar, Pound and gold)
- Crap your pants scary and unpredictable: A quantum breakthrough or algorithmic development makes the entire blockchain transparent and manipulable — POOF!
I’m not saying these sort of efforts are a bad idea, just that they are unrefined and this is unexplored territory.
Also, as a parting thought… Every piece of software used for running crypto wallets, miners, etc. right now is rushed into production with little to no validation or security testing whatsoever. Maybe that isn’t the best way to safeguard something many non-techhies are hoping to be The Next Big Thing. Many of these platforms require Oracle’s Java, for example, and cannot even run on IBM’s JVM or the OpenJDK. Maybe that’s also not a good plan. That’s like having all your eggs in one big basket inside another basket of baskets. Whoops.