Here’s some simple questions Bitcoin fans don’t like hearing about the tech behind Bitcoin, as well as a bonus question…
by Half Dollar
Tech Questions Bitcoin Fans Can’t Answer (But WE DO And In Plain English)
What happens when the ledger becomes so bloated that it can’t process the transactions fast enough?
There is a reason why Gmail automatically deletes trashed emails after so many days. All that data requires hard drive space and processing power to retrieve it.
Imagine helping Donald Trump set up his email account in 1999, and he tells you, “Thanks, if I ever become President, I’ll give you a million bucks for bringing me up to speed on this new technology”. As luck would have it Donald did become president, but trying to verify the email he sent you saying thanks and his offering, well, that’s very costly and time consuming because it was 18 years ago and needs to be traced back, found and authenticated.
Imagine if the very first email ever sent was the start of an one email transaction. Only 25 million emails can ever be sent, so every other email sent has to be a a “reply to all” and a “forward to” with every prior email from whichever one email of the original 25 million it originated from.
There’s a bunch of emails out there too. All the spam, phishing emails, all those cheesy e-cards, everything. It’s arguable whether that data in our hypothetical email chain is going to fill up faster than hard drives can even be made (IMHO there will be a storage capacity issue and limit at some point), but just the time needed to process the emails and render them is going to be enormous. Plus it’s encrypted, which is even more processing power than just regular old plain text.
Thinking of it differently, there is a reason why businesses throw away paper files after so many years. Not only do files pile up and create storage space issues, but the more space the files use, the more time consuming it is to go back and find a specific file needed. Again, in my opinion, just like the physical world, there will be a storage space issue in the world of computing. Sure, to many people it’s a “cloud”, but that cloud is in fact made up of actual, physical hard drives.
What makes Bitcoin’s redundancy so special?
Nothing. Redundancy is nothing new. In the computer world, there is something called RAID. No, it’s not a computer bug killer like it’s aerosol cousin, but rather, it’s a way of storing data on hard drives. See, with RAID, you can set up multiple hard drives on a computer to mirror the data (as in making a back-up) or sharing a little bit of data from each disk on every other disk (also a type of back-up). In other words, if one hard drive goes down, you simply add another one and the disk rebuilds itself based on the back up. Bitcoin fans make everybody want to think that their back-up and sharing of the same data in multiple locations is some cutting edge new technology. It’s not.
What’s so special about Bitcoin’s network?
Nothing. Imagine driving to work. There’s a broken-down vehicle in the middle of the road, but since you know the streets, you just go around it to reach your destination. In networking, just like in a city, redundant routes lead to the same place.
Then there’s the issue of when a Bitcoin server goes down. Again, this is nothing new. Another server with the ledger will be available to verify, and when the downed server comes back up, it’ll just catch up on what it missed. This is like if one YouTube server goes down, there are a bunch more to fill in the void and most likely entire server farms are just standing by at the ready in the event of one going down. That’s something called a hot-site. Nothing new, nothing special.
What happens when current hardware becomes obsolete?
It will, and since super-computers and server farms are necessary for any serious mining operation, the equipment will wear out, and fast. Imagine a company renting a factory, putting in a massive server farm and then constantly “mining” Bitcoin. In one year a different company rents a different factory and begins mining with the newest whizz-bang equipment. The first company is mining with a Ford Model A and the new company is mining with a Lamborghini Aventador. The first factory is now getting crushed by the competition and is no longer competitive. Both companies are in a technological arms race against each other.
Then there’s individual hardware. Notice what’s happening to USB? It’s changing. In fact, a Macbook Pro doesn’t even have a regular USB port anymore. Some people store their Bitcoin offline in a USB Hardware “wallet”. If Bitcoin is a “store of value” but it can’t be used because it’s too hard to find a USB port, then what good is it? I can’t carry around my 1986 Phil Collins No Jacket Required cassette tape and hope to play it in a 2017 Ford F-150. The technology is obsolete, and so if I’m in a pinch, I for whatever reason, I can’t get to or send my Bitcoin. Furthermore, Hardware is meant to be used and not just sit there.
What happens when the environmental costs of mining Bitcoin become prohibitive?
You’ll hear, well, “new tech will come along to fix that”. Not so fast. The energy used to mine Bitcoin is constantly increasing, and as each coin is subsequently harder to mine than the one before it, it requires even more resources to mine. This is a lot of energy used to do all the processing required to mine. In addition, there is a crap-ton of energy being used to cool all that data processing. Processors and graphics cards must be cooled, and the cost to do so is rising with the cost of the mining itself.
Non-tech bonus question: What is the U.S. government going to do when all the Bitcoin Milliionares who made 1,000% on Bitcoin and were smart enough to cash out into fiat dollars don’t claim the gains on their taxes?
Rest assured that Uncle Sam wants his cut, and since we know that Bitcoin is not anonymous and can be tracked, and since Coinbase is cooperating with the IRS, that might be something to consider.
Bonus-bonus question: What is the weight and measure of one Bitcoin?
The weight and measure of one Bitcoin is “undefined”.
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.