Tag: blockchain

Bitcoin’s biggest flaw

Bitcoin’s biggest flaw

I love Bitcoin and there’s no denying that its arrival has changed everything, but I’d be lying to you if I said it’s perfect.  It has some flaws, in this article I’m going to illustrate for you what I consider its main flaw: by default all completed Bitcoin transactions, from the very first one up until the present, are publicly available information since its blockchain is a public “ledger.”

If you read my earlier article you might recall that I had said Bitcoin was private, which is true but only to a certain point.  Once you have someone’s public/receive address for their Bitcoin wallet you can use the blockchain explorer (https://blockexplorer.com) to see the total amount of Bitcoin ever sent to that address, as well as the current available Bitcoin balance, if there is any.

Here’s a real world example of the problem I’m describing.  Currently thepiratebay.org has published this Bitcoin address on their main page so people can send them donations in Bitcoin: 129TQVAroeehD9fZpzK51NdZGQT4TqifbG

Now if you search for that address on https://blockexplorer.com it’ll take you to this page: https://blockexplorer.com/address/129TQVAroeehD9fZpzK51NdZGQT4TqifbG

Now you can see every deposit ever made to that address, its date and time, and same for every withdrawal as well.  So at this moment thepiratebay.org has just over a quarter of a BTC sitting in their donation wallet while just under an even dozen BTC total has been donated to their address.

That’s a pretty obnoxious amount of info to have, isn’t it?  The address itself is nameless, just a bunch of random alpha numeric, but once you know who or what an address belongs to then the public blockchain offers too much information in my opinion. I know I wouldn’t want everyone I send Bitcoin to or receive Bitcoin from (especially as adoption increases and those who you give to and recieve from are from IRL instead of from online) to be able to access any personal financial data with that much accuracy and depth.

Of course being Bitcoin means it (hopefully) isn’t the full story as far as our complete finances go, but it’s still more information than you’d want out there if you’re using Bitcoin on a daily basis.

If you’re aware of the coming of a possible Bitcoin hard-fork and wondering why this article isn’t about that, it’s because even after the hard-fork is over and done with this will still be a significant problem for Bitcoin.

 

If buying a hotdog at a ballgame means the vendor can see your account balance, Bitcoin isn’t going to work for everyone.

Ethereum is overpriced garbage

Ethereum is overpriced garbage

There’s been a lot of buzz about a cryptocurrency called Ethereum (ETH) potentially replacing Bitcoin. While Ethereum may indeed soon temporarily overtake Bitcoin in terms of market capitalization, it will never replace Bitcoin.

If you’re an Ethereum fanboy or even just considering “investing” in this presently overpriced (ETH is $270 currently) garbage then please stick around and allow me to illuminate you.

-Market capitalization-

For starters, should Ethereum’s market capitalization ever surpass Bitcoin’s this would NOT mean that the Ethereum price would come anywhere near the Bitcoin price. Observe:

In the screenshot just above it’s all spelled out: supply * price = market cap.

So for Bitcoin: 16,422,412 BTC * $2,421.06 = $39.76 billion market cap.

And Ethereum: 92,956,716 ETH * $269.60 = ~$25 billion market cap.

So here’s what Ethereum’s price per ETH would be with a $45 billion market cap, a market cap slightly larger than BTC’s: $484.10.

So for ETH to be the same price as BTC is right now, Ethereum would need a market cap of $225 billion. I’m not saying that a market cap that high is impossible for ETH to ever reach, but I really doubt it ever climbs half that high for reasons that I’m about to explain.

By the way, did you know that technically Ethereum isn’t even a currency? It’s just a token used to run various computations on a decentralized virtual machine. If BTC is digital cash, ETH is digital “gas”.

-Ethereum is ultimately irrelevant-

So ETH’s current market cap of $25 billion means that collectively the human race has $25 billion set aside purely to run these scripts called “smart contracts” on this special decentralized virtual computer. If decentralized virtual computing is what gets you excited, just go build yourself a server cluster. Can you imagine the totally sweet server cluster that could be powered, maintained, and connected through hundreds of separate locations around the globe for $25 billion? Ethereum’s more realistic market cap should be something around $1 billion but honestly even $1 billion feels too generous. Too generous because I have yet to encounter a single real world use for Ethereum smart contracts that regular scripting/programing and cluster hosting is unable do MUCH better already. A single cluster hosted across multiple locations would provide perpetual uptime. Rather than be limited to “smart contracts” that must be written in Ethereum’s home grown scripting language called “solidity” you can write your code in whatever language you please. Compile yourself a true decentralized app, not a bunch of scripts written in pseudo-javascript that the ETH crowd tries to pass off as the same thing.

So if anyone reading this has any suspected real world uses for ETH/smart contracts that might outdo technologies that already exist and are prevalent, I’d love for you to share it with me in the comments below. I honestly can’t think of a single one right now, can you?

ETH fanboys will almost always answer the “what’s a real world function/use that ETH smart contracts can fulfill better than other existing technologies?” question by giving the obvious “it’s still the very early days” as a deflecting non-answer but seriously IF NONE OF US ARE ABLE TO FIND A SINGLE TASK THAT ETHEREUM COULD POTENTIALLY DO BETTER THAN WHAT’S ALREADY OUT THERE THEN ETHEREUM IS ULTIMATELY IRRELEVANT.

I totally get that turning a blockchain into a decentralized virtual computer is completely amazing because I’m in full agreement: it is amazing. No sarcasm, from the first time I read about it and even to this day I feel a bit of amazement at just how wild that concept is. Problem is there doesn’t seem to be any real world utility for it that isn’t already being fulfilled by more powerful/flexible/cheap/readily available technologies that’ve been around longer. It’s like the blockchain equivalent of “cool trick bro.” It really is a cool trick, really truly, too bad its also almost completely impotent when lined up with any similar technology solutions.

So if you love ETH and find yourself fighting the good voice of reason here then comfort yourself from these painful points by knowing that I have little doubt ETH will continue to increase in value a while longer (people are stupid after all), so please enjoy the ride while you can. Once some of those heavy ETH holders understand some of the simple points I’m making here (which will be inevitable once all the hype and press dies down and people actually start looking at it more closely), the ETH bubble is going to pop and pop hard. It’s inevitable because ETH revolutionizes nothing, there’s nothing truly helpful being added to the world by its use or creation.