Bitcoin – A Geek With Guns

Bitcoin Bad, War Bucks Good

The trick to discrediting a new idea or technology is crafting a criticism onto which supporters or people at least open to the idea or technology will latch. A lot of effort has gone into discrediting cryptocurrencies, but most of them have fallen flat because they haven’t spoken to supporters or people open to the idea of cryptocurrencies. However, what I will call the energy scare seems to be gaining some traction. A short while back Mozilla announced that it would stop accepting proof-of-work cryptocurrencies ostensibly for environmental reasons. Now Wikimedia has made a similar announcement:

Wikimedia, the non-profit foundation that runs Wikipedia, has decided to stop accepting cryptocurrency donations following a three-month debate in which the environmental impact of bitcoin (BTC) was a major discussion point.

I’ve previously touched on the energy use of Bitcoin and how it compares to the US dollar. However, since the topic is being brought up again, I feel the need to make some more criticisms of the current critics of Bitcoin.

Mozilla and Wikimedia may not accept your Bitcoin, but both will happily accept your United States dollars. This is baffling because both organizations cite environmental reasons for not accepting Bitcoin, but the United States military is one of the largest polluters in the world:

Research by social scientists from Durham University and Lancaster University shows the US military is one of the largest climate polluters in history, consuming more liquid fuels and emitting more CO2e (carbon-dioxide equivalent) than most countries.

Why does this matter? Because one cannot claim to oppose Bitcoin for environmental reasons while also not opposing United States dollars for the same reasons. The United States dollar is inseparable from the United States military because the latter is necessary to maintain the value of the former:

The world relies on the U.S. dollar and U.S. treasuries, giving America unparalleled and outsized economic dominance. Nearly 90% of international currency transactions are in dollars, 60% of foreign exchange reserves are held in dollars and almost 40% of the world’s debt is issued in dollars, even though the U.S. only accounts for around 20% of global GDP. This special status that the dollar enjoys was born in the 1970s through a military pact between America and Saudi Arabia, leading the world to price oil in dollars and stockpile U.S. debt. As we emerge from the 2020 pandemic and financial crisis, American elites continue to enjoy the exorbitant privilege of issuing the ultimate monetary good and numéraire for energy and finance.

The dollar is backed by one thing: military might. Its value cannot be separated from the United States military anymore than Bitcoin’s value can be separated from the energy usage of its miners. Bitcoin’s current contribution to global pollution is a tiny fraction of the current contribution of the United States military. Therefore, if an organization wants to encourage the use of more environmentally friendly currencies, it would dump the dollar before Bitcoin.

But the here and now isn’t the only consideration. Let’s consider the future. Bitcoin miners have been transitioning towards renewable energy for quite some time. The United States military on the other hand has made no efforts towards doing the same. While Bitcoin miners are already working to become more environmentally friendly, the Commander and Chief of the United States military is only talking about how the military needs to become more environmentally friendly at some undetermined future date.

In conclusion the claims made and actions taken by Mozilla and Wikimedia are disingenuous at best. If either organization has real environmental concerns about the currencies they accept, they have a funny way of demonstrating it.

Full Faith and Credit

A common criticism made against market based currencies (for example, precious metals and cryptocurrencies) by advocates of fiat is that market based currencies aren’t backed by the full faith and credit of any notable governments. The implication is that governments are the best shepherds of currency. Is this really true though? A quick look at the historical performance of government fiat indicates that it isn’t.

The dollar is currently experiencing a high rate of inflation. While official numbers state an inflation rate of approximately eight percent, the real rate is likely significantly higher. Compounding this issue is the fact that these numbers aren’t unprecedented. The linked article notes that this is the highest rate of inflation since 1982, which wasn’t that long ago in the grand scheme of things. If you look at the performance of the dollar since 1800, you’ll find that 22.52 2022 dollars are needed to equal the purchasing power of a single 1800 dollar.

When people think of Bitcoin, they often think of its short term ups and downs. Critics use its sometimes wild short term fluctuation in value as an argument against it. But if you look past its short term performance and instead look at its long term performance, you’ll notice that it has increased in value dramatically. When Mt. Gox (remember them) came onto the scene in 2010, one Bitcoin was worth $0.07. As of this writing, not quite twelve years later, one Bitcoin is trading at approximately $44,428.81. Meanwhile, in the same span of time a single dollar has inflated to $1.30. Had you invested in dollars in 2010, you would have lost almost a third of your purchasing power. Had you invested in Bitcoin in 2010, you would have gained a tremendous amount of purchasing power.

Bitcoin isn’t the only market based currency that increased in value over the last 12 years. Let’s take a look at gold. At the beginning of 2010 a troy ounce of gold was worth approximately $1136.40. As of this writing a troy ounce of gold is worth $1,934.43. That’s nowhere near the same increase in value as Bitcoin, but it’s still a sizable increase. As with Bitcoin, had you invested in gold in 2010, you would have gained purchasing power.

The dollar isn’t the only government backed currency that sucks. Since 2010 a single euro has inflated to €1.20 , a single ruble has inflated to ₽2.09, and a single Canadian dollar has inflated to $1.24. Even the Swiss franc has inflated, albeit only to fr.1.01 (making it the least terrible fiat store of value on this list).

It seems that the full faith and credit of a notable government is actually detrimental to a currency. Unless, of course, you like losing purchasing power over time. But if that’s your thing, I suggest just sending your unwanted purchasing power to me. I’ll happily take it.

Maintaining a Currency

I like the idea of cryptocurrencies for several reasons. With the exceptions of ones started by governments or their cronies, they exist outside the direct control of governments. If designed properly, they can also enable anonymous transactions, which hinders the efforts of governments to use transaction information to oppress individuals. However, there is a lot of criticism aimed at cryptocurrencies. Some of the criticism is valid, but much of the criticism is idiotic when considered in the context of currencies in general.

One of the most common criticisms I see regarding cryptocurrencies is their energy consumption. Consider Bitcoin. There is a website dedicated to tracking the estimated power usage of the Bitcoin blockchain. As of this writing the site estimates the blockchain’s energy consumption at 73.12 TWh, which it says is roughly equivalent to the power usage of all of Austria. Consuming the power usage of an entire country to maintain a blockchain appears horribly inefficient… until you compare it to the resources used by other currencies.

Consider the United States dollar. It’s easy to make the mistake of assuming the dollar is a comparatively efficient currency since pieces of paper with pictures of dead tyrants don’t consume electricity. But there’s so much more involved in manufacturing an maintaining dollars. To start with you have the obvious raw materials needed to manufacture dollars. Ink, paper, printing machinery, etc. are needed to make every dollar. Not only is printing machinery used to print dollars, it also requires routine maintenance. Once the dollars are printed they must be stored so you need warehouse facilities. But not any warehouse facility will do. Being a highly sought after good, dollars must be stored in a warehouse that is secure against thieves. These secure storage facilities require hardened materials, security devices, electricity, manpower, etc. Then you have the issue of transporting dollars between storage facilities, which must also be done in a secure manner (armored trucks aren’t exactly fuel efficient vehicles).

The resources needed for manufacturing, storing, and circulating dollars is only a small percentage of the overall resources needed to maintain dollars. A fiat currency quickly becomes worthless if nongovernmental counterfeiters are able to practice their trade unhindered. There are two majors steps to thwarting counterfeiters: hardening the currency itself to make counterfeiting more difficult and punishing counterfeiters once they’re captured.

A dollar can have a lot of built-in security measures. Each of these measures requires resources for both development and implementation. Research and development is needed first to come up with measures that make dollars harder to counterfeit, then manufacturing machinery capable of implementing those measures must be developed, purchased, powered, and maintained.

Then you have the task of punishing captured counterfeiters. The first step in this process is writing and passing legislation, which can be an incredibly inefficient process. The legislation itself is meaningless though, it merely authorizes the allocation of resources for law enforcers. Dollars are probably the most common target of currency counterfeiters, which means the amount of law enforcement effort needed to find and capture counterfeiters is significant, especially when you consider the fact that such efforts must be global in scale. Once captured the counterfeiters must then be tried and, if found guilty, imprisoned. The court system isn’t designed for efficiency and prisons, like the previously mentioned secure warehouses, require a lot of resources to build, operate, and maintain.

What I’ve presented is an incomplete summary of the resources needed to maintain a fiat currency. It’s easy to see that they’re not a resource efficient as many people suspect. Criticizing cryptocurrencies for being inefficient without comparing such inefficiency to their biggest competitors, fiat currencies, is disingenuous and meaingless.

Weaponizing Dependencies

How I miss the halcyon days of the Internet when perceived slights were commonly forgotten after a short period of inconsequential shitposting. Today perceived slights often result in real-world consequences. The most recent example of this is ThotAudit, the result of a bunch of pathetic sexless whiners perceiving women slighting them. In response to their inability to get laid, they have decided to sic the Internal Revenue Service (IRC) and third-part payment processors on online sex workers:

The campaign is called the “ThotAudit,” in reference to the derogatory term “thot,” which stands for “that ho over there.” It began over the Thanksgiving holiday as a grassroots effort to intimidate sex workers and women who sell access to private pornographic social media accounts by reporting them to the Internal Revenue Service for tax evasion—without evidence of wrongdoing. But it quickly morphed into a battle over who has the right to make money on the internet.

The harassers are taking advantage of user reporting tools made available by companies like PayPal, Venmo, and CirclePay, in an attempt to force their targets offline and freeze their finances. The tactic has far-reaching implications beyond adult entertainment. Foreign governments and other groups have abused the policies to silence opponents on platforms like Twitter and Facebook for years. Attacking through the payment processors is a new wrinkle on that approach.

What kind of lowlife piece of shit sics revenuers on people? I mean, come on! That’s below the belt, guys!

Back to the story at hand. There are two aspects that I want to discuss in this post.

The first is the extent individuals will go to avoid acknowledging and accepting their faults. When I was young, I wasn’t exactly drowning in pussy. I didn’t blame women for that though. I acknowledged and accepted my faults, namely my socially awkward nature. I worked to overcome those faults. By the time I hit my mid 20’s, I was still socially awkward but I was at least capable of schmoozing a room full of people and was capable of gaining the attention of members of the opposite sex. While I’m still a bit socially awkward today, I have a smoking hot wife and have little trouble meeting new people and entertaining people at a party (entertaining people is commonly seen as an attractive quality and thus a skill worth cultivating).

The key to my transformation was accepting my flaws and working to overcome them. Most people who call themselves incels suffer from a lack of self-awareness and an unwillingness to overcome their faults. The reason they’re not getting laid isn’t because women are conspiring against them, it’s because they have a number of flaws that make them unattractive. Instead of working to improve themselves, they’re taking actions that make them even less attractive. They’re actually going so far as to exacerbate their faults to avoid acknowledging their faults.

The second thing I want to discuss is something I harp on a lot, the dangers of being dependent on third-parties. Those making themselves part of ThotAudit are trying to convince third-party payment processors to stop processing payments for targeted online sex workers. By doing this, they’re destroying the livelihood of those workers. However, this tactic is only feasible because those workers are dependent on third-party payment processors. The fewer third-parties you depend on, the fewer dependencies exist that can be weaponized against you. While it’s trendy to recommend cryptocurrencies for sex workers, that’s not the only option. Online sex workers could try pooling their resources and establishing a payment processor for their industry, which is a suggestion I made to gun stores that were being blacklisted by third-party payment processors. You might not be able to control the infrastructure yourself but if you have to rely on a third-party, it’s better to rely on one that specifically caters to your industry. After all, if your business is porn, Tumblr might cast you overboard but Pornhub probably won’t.

Possible Theft Versus Guaranteed Theft

There are a lot of criticisms against cryptocurrencies. One criticism that I see come up periodically is that transactions can’t be reversed. If somebody manages to steal your cryptocurrency, there is no way to reverse the fraudulent transfer. Fraudulent electronic transactions in dollars, on the other hand, can be reversed.

That is a valid criticism. But I would like to point out something that is generally ignored by advocates of government issued money. Holders of dollars are being stolen from every moment of every day via purposeful inflation and there is no way to recover the purchasing power lost to inflation.

Cryptocurrencies can be stolen and if your cryptocurrency is stolen, there isn’t a damned thing you can do about it. However, government issued money is guaranteed to be stolen and there isn’t a damned thing you can do about it.

Legalizing More Thievery

Civil asset forfeiture is simply a euphemism for theft. Unlike most other forms of government theft, civil asset forfeiture doesn’t even have the thin veil of criminal or civil charges either being proven in court or confessed to by the accused to justify it. Instead civil asset forfeiture relies on the concept of guilty until proven innocent. If a man with a badge believes that your assets are in any way tied to a drug crime they can legally steal them and the only way you can get them back back is by proving they aren’t, which is an impossible task.

While there has been a lot of pushback in recent years to civil asset forfeiture by a handful of individual states, the United States Senate is working hard to expand it:

A new bill seeks to track your money and assets incessantly, will enjoin any business with government ties to act as a de facto arm of DHS, and would steal all of your assets — including Bitcoin and other cryptocurrencies — should you fail to report funds when traveling with over $10,000.

Under the guise of combating money laundering, Senate Bill 1241, “Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017,” ramps up regulation of digital currency and imposes other autocratic financial controls in an attempt to ensure none of your assets can escape one of the State’s most nefarious, despised powers: civil asset forfeiture.

The best thing about a law like this is that most people won’t know about it and therefore will fail to comply with it out of sheer ignorance. Since ignorance of the laws isn’t an excuse a law like this creates a huge number of new criminals for the State to prey on.

There are a lot of banking laws that people violate every day because they are simply unaware of them and the government loves to go after them. The Internal Revenue Service was going after people who turned their legitimate deposits over $10,000 into multiple smaller deposits to avoid filling out reporting paperwork. Legally this is known as structuring and the law that prohibits it was passed under the guise of catching tax evaders but most people are entirely ignorant of it so they violate it accidentally. Senate Bill 1241 aims to create a similar law that will likely be violated by innocent people who are simply unaware of the law, which will give the State an excuse to seize their assets. Best of all, if it happens under civil asset forfeiture, the government doesn’t even have to prove guilt.

Technology to the Rescue

One of the reasons that the State fails to maintain its control is because it’s competing with the creative potential of every human on Earth. Let’s take the drug war. The federal government of the United States has been dealt significant blows in its crusade against cannabis in recent years as individual states have legalized consumption of the plant either entirely or in approved manners. Hoping to regain some semblance of control, the feds tried to use their influence on the banking industry to make life difficult for cannabis related businesses. However, the centralized banking system isn’t as powerful as it once was:

Enter bitcoin, the cryptocurrency that consists of digital coins “mined” by computers solving increasingly complex math problems. At least two financial-technology startups, POSaBIT and SinglePoint Inc., use the cryptocurrency as an intermediate step that lets pot connoisseurs use their bank-issued credit cards to buy weed.

[…]

Once a customer decides on which marijuana product to buy, an employee asks if he or she would like to use cash or digital currency, Lai said. If the buyer prefers the latter, the Trove employee explains that the customer can use a credit card to buy bitcoin through a POSaBIT kiosk, with a $2 transaction fee tacked on.

The customer, who would now own bitcoin equal to the value of the purchase, can then redeem the currency in the store. Or the buyer can keep their bitcoin and use it anywhere else that accepts the currency. If the customer finishes the purchase in the store, POSaBIT, which pockets the transaction fee, then sends the value in U.S. dollars to Trove’s bank account.

Cryptocurrencies have been making the State red in the face ever since the first person realized that they could be combined with hidden services to perform anonymous online transactions. Now they’re disrupting the fed’s war on drugs in the physical world in states where cannabis has been legalized.

Cryptocurrencies are a technology gun stores should also be looking into. Banks have been closing the accounts of many businesses tied to the gun market. Technologies like Bitcoin and Ethereum could allow these businesses to circumvent the need for centralized banks by either utilizing an intermediary like the cannabis industry is starting to do or by being a direct store of wealth outside of a third party’s control.

What Could Kill Bitcoin

I greatly appreciate Bitcoin. By enabling pseudonymous transactions it has made many forms of commerce, specifically those deemed illegal by various governments, easier. It also offers an opportunity for individuals to conceal at least some of their wealth from the State. However, Bitcoin exists in a market environment, which means a superior competing product could come along at any moment and topple it.

When Bitcoin first came on the scene its community promised low transaction fees. They often compared the transaction fees of, say, Western Union to the miner fees of Bitcoin for sending money across the globe. At the time sending money via Bitcoin was significantly cheaper.

Fast forward to today. The price of sending Bitcoin has skyrocketed. If you want a Bitcoin transaction to clear in a reasonable amount of time you’re looking at a transaction fee of over $2.00 (as of this writing). Why is this? It’s because the Bitcoin network is running into a block size ceiling problem. This problem has created an environment where more transaction are being made then can be processed so convincing miners to process your transaction requires offering a significant reward. No problem, right? It’s just the market at work after all.

It’s true, Bitcoin’s current state is an example of supply and demand. Demand has exceeded the supply of miners so the price to get transactions cleared has increased. But markets are finicky things. If enough people decide that they’re unwilling to spend $2.00 on a transaction fee for a $5.00 coffee they’re going to look for a better solution. Bitcoin isn’t the only cryptocurrency in town so failing to address the block size ceiling problem will likely encourage consumers to find an alternate cryptocurrency.

Considering this you would think that the Bitcoin community is working diligently to solve the problem, right? As it turns out, not so much. Now a lot of the Bitcoin community is changing its tune. Instead of addressing the issue they are denying the fact that low transaction fees were a selling feature of Bitcoin not too long ago. In addition to denying the past they’re trying to explain how high transaction fess are acceptable. I highly doubt most consumers see the “wisdom” in paying a $2.00 transaction fee to buy a $5.00 espresso at Starbucks. And that’s the thing, for a cryptocurrency to succeed it needs to be useful.

I can hear some Bitcoin advocate saying, “But, Chris, Bitcoin will simply become the new gold while another cryptocurrency will become its silver!” Gold and silver run into a divisibility problem. You can only divide gold so far until it becomes difficult to use. Nobody is going to pay for a coffee using gold dust because it’s a pain in the ass. Instead they use a less valuable metal, silver, for smaller payments. Cryptocurrencies don’t have this problem. You can divide a cryptocurrency down to as many decimal places as you want and it’ll be equally easy to use. Whether a cup of coffee costs me 1 Bitcoin or 0.000001 Bitcoin doesn’t make a usability difference to me. This means that any cryptocurrency that takes over Bitcoin’s current task of handling small transactions will likely rise to dominance overall.

Governments have been unable to destroy Bitcoin but the unwillingness of its community to address technical problems very well could lead to its destruction.

Using Bitcoin in Venezuela

State socialism is quickly reaching its inevitable conclusion in Venezuela. The economy is in shambles. The nation’s currency, the bolivar, is in a state of hyperinflation, which makes buying even a loaf a bread with it difficult. While the Venezuelan government scrambles to maintain its control over the people the people are adapting. One of the adaptions they’re making is using an alternative currency, one that is effectively impossible for the Venezuelan government to control. That currency is, of course, Bitcoin:

Amid growing economic chaos, and the highest inflation rate in the world, some Venezuelans are swapping bolivars for bitcoins in order to buy basic necessities or pay their employees

The digital currency is free from central bank or government controls, and users in Venezuela see it as a safe alternative in an economy where the government has enforced strict foreign exchange controls, and inflation is running at an estimated 500%.

This week, Venezuelans rushed to unload 100-bolivar bills – the largest denomination – after the government announced that it would be withdrawn from circulation on Wednesday in what it described as a move against profiteering.

Mainstream economists have been decrying Bitcoin since it started becoming popular. Since the currency isn’t issued by a central bank the mainstream economists have declared it worthless. But the value of Bitcoin continues to rise. When I last checked it was around $800 per Bitcoin. Why does Bitcoin continue to succeed in spite of mainstream economists? Because mainstream economists are fools.

All of the things mainstream economists criticize Bitcoin for are actually important features. Not being controlled by a central bank means that a government can control it. Venezuela can’t just decide to withdraw Bitcoin or print more of it. The fact that there is a cap on the total amount of Bitcoin that will ever exist is also an important feature. Without the ability to print an infinite amount of Bitcoin no government can inflate it. The lack of inflation means that Bitcoin can be a safe method of preserving one’s purchasing power over time (a fancy way of saying savings). Bitcoin’s pseudoanonymity can protect users from the prying eyes of the State, which means it can be used in countries where the State would rather see people starve to death than utilize a currency it isn’t issuing.

Bitcoin’s popularity will likely continue to increase as more national currencies collapse. As its popularity continues to increase the technical limitations, the only valid criticisms against Bitcoin, will continue to be addressed and addressed more rapidly.

I’m Satoshi Nakamoto! No, I’m Satoshi Nakamoto!

The price of Bitcoin was getting a little wonky again, which meant that the media must be covering some story about it. This time around the media has learned the real identify of Satoshi Nakamoto!

Australian entrepreneur Craig Wright has publicly identified himself as Bitcoin creator Satoshi Nakamoto.

His admission follows years of speculation about who came up with the original ideas underlying the digital cash system.

Mr Wright has provided technical proof to back up his claim using coins known to be owned by Bitcoin’s creator.

Prominent members of the Bitcoin community and its core development team say they have confirmed his claims.

Mystery sovled, everybody go home! What’s that? Wright provided a technical proof? It’s based on a cryptographic signature? In that case I’m sure the experts are looking into his claim:

SUMMARY:

Yes, this is a scam. Not maybe. Not possibly.

Wright is pretending he has Satoshi’s signature on Sartre’s writing. That would mean he has the private key, and is likely to be Satoshi. What he actually has is Satoshi’s signature on parts of the public Blockchain, which of course means he doesn’t need the private key and he doesn’t need to be Satoshi. He just needs to make you think Satoshi signed something else besides the Blockchain — like Sartre. He doesn’t publish Sartre. He publishes 14% of one document. He then shows you a hash that’s supposed to summarize the entire document. This is a lie. It’s a hash extracted from the Blockchain itself. Ryan Castellucci (my engineer at White Ops and master of Bitcoin Fu) put an extractor here. Of course the Blockchain is totally public and of course has signatures from Satoshi, so Wright being able to lift a signature from here isn’t surprising at all.

He probably would have gotten away with it if the signature itself wasn’t googlable by Redditors.

I think Gavin et al are victims of another scam, and Wright’s done classic misdirection by generating different scams for different audiences.

Some congratulations should go to Wright — who will almost certainly claim this was a clever attempt to troll people so he doesn’t feel luck a schmuck for being too stupid to properly pull off a scam — for trolling so many people. Not only did the media get suckered but even members of the Bitcoin community fell for his scam hook, line, and sinker.