Friday, December 26, 2014

Crypto-currency as a basis for preservation

Although I have great respect for the technology underlying crypto-currencies such as Bitcoin, I've been skeptical for some time as to its viability as a product in the market both as a currency and as the basis for peer-to-peer storage proposals such as Permacoin and MaidSafe. The attraction of crypto-currencies is their decentralized nature, but if they become successful enough to be generally useful, economies of scale lead to their centralization. It was easy to get caught up in the enthusiasm as Bitcoin grew rapidly, but:
Bitcoin was the worst investment of 2014, as its value halved.
Bitcoin's hash rate had been growing exponentially since the start of 2013 but has been approximately flat for the last quarter, indicating that investment in new mining hardware has dried up.
The reason for investment drying up is likely that the revenue from mining is less than a third of what it was.
The Bitcoin market capitalization dropped from $11B to $4.4B.
Even if you don't accept my economies of scale arguments, these numbers should temper your enthusiasm for basing peer-to-peer storage on a crypto-currency.


David. said...

Another Bitcoin exchange gets hacked with about $5M-worth stolen.

David. said...

Yet another attempt to implement crypto-currency backed P2P storage: AFAIK MojoNation was the first - it was just over 14 years ago.

David. said...
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David. said...

OMG, now people are trying to use the block-chain to vote in elections.

David. said...

For more on the block-chain as a Solution to Everything, see Scott Rosenberg's piece There's a blockchain for that! Scott maintains some immunity against the hype, but appears to swallow the "block-chain is decentralized" idea whole.