The Boolean Life
Things are either True or False. Or not.
Bitcoins: A modern Pharoah's pyramid?
By Olibe.nu

Good leaders always know to keep the populace busy. Idle minds breed trouble and that is why the Pharaohs built the pyramids.

People must be engaged in labour or the system would not work. This is discussed in George Orwell's book: 1984.

In the book, the chapter, 'War is Peace', of the forbidden book The Theory And Practice Of Oligarchical Collectivism describes what I'm trying to say.

War, however, is no longer the desperate, annihilating struggle that it was in the early decades of the twentieth centary

But what has this got to do with bitcoins? First of all, what the heck is a bitcoin?


According to the paper (pdf) Bitcoin: A Peer-to-Peer Electronic Cash System by Satoshi Nakamoto (a pseudoperson some say),

a bitcoin is an electronic coin which is represented as a chain of digital signatures.

It is a purely peer-to-peer version of electronic cash which allows online payments to be sent directly from one party to another without going through a financial institution.

Digital signatures provide part of the solution as each bitcoin owner transfers the coins to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin.

But the main benefits of this system is lost if a trusted third party is still required to prevent double-spending. A trusted central authority, or mint, checks every transaction for double spending. After each transaction, the coin must be returned to the mint to issue a new coin, and only coins issued directly from the mint are trusted not to be double-spent. The problem with this solution is that the fate of the entire money system depends on the company running the mint, with every transaction having to go through them, just like a bank.

Bitcoins is therefore a solution proposed for the double-spending problem using a peer-to-peer network. The p2p network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. This longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers.

A look through the paper (see link above) will show that the whole idea hinges on Section 4 which contains the Proof-of-Work. This currently involves scanning for a value that when hashed, such as with SHA-256, the hash begins with a number of zero bits. The average work required is exponential in the number of zero bits required and can be verified by executing a single hash.

This is where my problem with bitcoin lies. I have no problem with electronic cash which do without a central authority or mint (being Nigerian and shunned by PayPal would make anyone wish for other forms of e-cash). My issue is that, with all the computing needs of this world, the bitcoin p2p swarm spends its serious computing power on SHA-256 hashing some data and tacking it to the end of long chains!

It is just like mentioned in 1984:

The primary aim of modern warfare ... is to use up the products of the machine without raising the general standard of living.

Why was this? Goldstein (a character in the book) goes on to say:

Ever since the end of the nineteenth century, the problem of what to do with the surplus of consumption goods has been latent in industrial society.

The problem was how to keep the wheels of industry turning without increasing the real wealth of the world. Goods must be produced, but they must not be distributed. And in practice the only way of achieving this was by continuous warfare.

The essential act of war is destruction, not necessarily of human lives, but of the products of human labour. War is a way of shattering to pieces, or pouring into the stratosphere, or sinking in the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence, in the long run, too intelligent.

You might think that war was a far fetched solution.

War, it will be seen, accomplishes the necessary destruction, but accomplishes it in a psychologically acceptable way. In principle it would be quite simple to waste the surplus labour of the world by building temples and pyramids, by digging holes and filling them up again, or even by producing vast quantities of goods and then setting fire to them.

Or, I might add, SHA-256 hashing to build a Fort Knox!

But this would provide only the economic and not the emotional basis for a hierarchical society.

In the bitcoin system, the economics is addressed with the availability of incentives (see section 6):

By convention, the first transaction in a block is a special transaction that starts a new coin owned by the creator of the block. This adds an incentive for nodes to support the network, and provides a way to initially distribute coins into circulation, since there is no central authority to issue them. The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that is expended.

Coming back to the real world, the Proof-of-Work of bitcoins definitely does some work. It is cryptographic work which keeps the system sane like the gold bullions at Fort Knox are supposed to keep the Dollar's value as a certificate of real gold held somewhere. I think there are other constructive ways of going about the proff-of-work than the present.

Of course, the bitcoin swarm is not as powerful as Amazon's cloud or other commercial options (at least, not yet). But a little innovation can result in more helpful ways of harnessing this swarm. Perhaps contributed to the Tor network? Or solve the big media corporations problem with Bittorrent? Whatever it is, Big Brother and the Ministry of Peace waits.