Oleg Andreev
Month
Disclaimer: in this post I’m not going to pretend that I don’t want to hurt anybody’s feelings.
Dear folks at Hacker News and around the web,
You sure like to discuss practical things instead of debating about abstract philosophy. When someone somewhere does some stupid thing, you are glad to find some optimizations and corrections to it. If the government tries to put a guy in prison for many years where he will be regularly raped, and then the guy goes mad and kills himself, you, of course, do not start questioning the whole situation. Instead, you want to optimize the flow of things. Fire this guy, change that law, complain here, petition there etc.
When anybody comes in and asks: why do you think it is better to fire this prosecutor and hire another (a “better” one) instead of just firing the prosecutor and not let that situation happen ever again in principle? What is the reaction of you, people? Your reaction is to downvote and let him know about all statistical models and wise books about how society needs to be organized to maintain rights, order, peace and, by the way, are you some kind of an crazy anarchist who knows nothing about how the “real” world works?
Ok, lets suppose we care about efficient organization. And models, and social sciences. I totally accept that and have no intention to disprove any of those. Because it does not matter.
How do you decide from a theory of something (lets say, a theory of evolution), that some people can put other people into jail? Also: how can you even study people’s choices (in economics and politics) without drawing a line (even a fuzzy one) between coerced behavior and free behavior? How do you know, what people generally tend to do or be, if somebody is constantly keeping a gun on the table?
Soon, unlocking the phones in US will be illegal. Do you know why it makes people angry? No, not because “It’s my property, dammit, I have a right to do what I blah-blah”. It is because of one-sided relationship. Nobody negotiated this decision with you. Some people somewhere talked about it and decided that. Some other people voted for some abstract ideas. Nobody made a written contract with anybody, and now you become evil person starting January 26 at 00:00 if you disobey. Did Apple or Google ask you how you feel about unlocking and made a contract with you? If yes, then you should obey agreement and protest the redundant laws. If no, then why did you enter the agreement? And if you think that agreement is void because you feel like it, then why do you complain when somebody writes the laws the way they like it? And if the contract sounds unfair and inevitable, then why is that? Isn’t it because you have no place to go and complain for real? Because courts and lawyers are part of a very expensive violent monopoly? So every silly EULA is not a negotiation, but a something like a threat of a very unequal fight in a very expensive court?
Asking yourself all these questions is the way to understand many problems that people ignore.
If you want to adjust existing laws and behaviors to make them more “efficient” for you or “society”, you are doing a very bad thing.
When you say “for copyright infridgement you should put in prison for 1 month instead of 35 years”, this is what you are saying in reality:
Many people accept these things, and I accept living with these people without feeling depressed too much. This is sad news, but it does not kill my soul. What really hurts is when people demonstrate sincere capacity for humility and love. When somebody kills himself because of bullying, and others feel depressed by it. And then they try to fucking adjust the murderous system to make it slightly less murderous. When you do that, you are a sick fucked up skin of a slave, not an independently thinking human being. First, prove the morality of what you are trying to modify. Then we’ll talk.
Next time, when something horrible happens, like a law saying “if you put a finger in your nose, we can impose a fine on you, and if you don’t pay, we will threaten to kill you”, then think about why is it good to even have a possibility of some people writing these things and some other people obeying them. Instead of discussing economical efficiency and how this will change the price structure and amount of unemployment around you.
There was a conversation on Twitter about this picture:
https://twitter.com/old_sound/status/291677199470297088
The guys did notice that not only this picture is funny for obvious reasons, but it also shows a general dismissal of latinos as a category. Which obviously shows that authors of such pictures are themselves racists.
So let me show what’s wrong here. The problem with racism is not in the racists themselves. They sure do harm, but they do not benefit from that. Racists of any kind alienate a significant portion of people creating a long-term economical and political problems for themselves. We all know how it works by numerous historical examples.
The root of any social problem is where the money is. In other words, who benefits? Well, that’s all kinds of political leaders: gangsters or government. They directly benefit by manipulating some crowd and making it spend their emotions on religion, racial differences, income classes etc. So whenever you feel that your feelings have been hurt by some racists, you know that there are evil people that want to smash together you and another emotionally-unstable person. If you think that by opposing racists you solve the problem, you are mistaken. By opposing racists you play the game that is designed to have just that: people attacking other people while someone else harvests obedience from them.
To win this game, you should not play it. There are racists, there are offended people. But what counts are actions: if you don’t wage a holy war back on your offenders, but protect real things: yourself and people around you on tangible grounds, not based on your race or religion, then you can avoid escalation and have a chance to show your enemies that the racism is just someone’s method to enslave them.
When you listen to a guy talking about Bitcoin, there are several things that come up frequently and that are not true. Unfortunately, even popular video on WeUseCoins.org says those things. So lets try to see what’s wrong.
1) “Bitcoin is a currency that is created by computers.”
As I explained in the previous posts, “mining” is absolutely secondary to Bitcoin. The most important thing is a decentralized history of exchanges that people can trust. That’s what makes Bitcoin interesting. You have much more freedom and much more protection to sign a contract with another human being. Without a single corporation, government, police and lawyers. And your contract will have to be acknowledged by everyone else contributing their own contracts. So all participating people are locking each other into mutual agreements in a very clever way, that nobody can escape them without paying for that. The word “currency” is absolutely a second part of the story. Since people normally want many different agreements, Bitcoin provides a numerical value on its contracts. Which makes it possible to trade them and use as a monetary instrument.
So it is not created by computers. It is automated by computers, but it is created and maintained by real people who want to trade with each other peacefully and efficiently.
2) “Bitcoins are sent directly to other people without someone in the middle.”
Of course, Bitcoins go through someone. And this someone is a “miner”, who validates transaction, puts it into the block and spends a lot of electricity to make sure some random person does not attempt to spend money twice or fool everybody around. It is a miner who gets transaction fees and also unlocks bitcoins as a reward for the clearing service.
The difference with a banking system, of course, is that miners do not have guns and thus cannot impose additional arbitrary rules without paying for them themselves. There are many of them, so you always can choose the one you like more. And that choice is already automated and optimized, so you don’t have to worry about it.
3) “There are no prerequisites.”
Of course there are. There is a protocol which is harder than any law in the world. If you don’t play along, nobody will give you a penny. You cannot press or threat people to change the rules. You absolutely have to play by the rules to get a cake. And everybody has to do exactly the same. No man can come in and say “this idea is interesting, but I’d like to adjust certain things in my, sorry, in everybody’s favor” - won’t happen.
4) “The total amount is limited, so the value always grows and you get richer.”
That’s true that supply is limited. But it’s not true that this is a reason why value is growing. Supply could have been linearly growing all the time, and it still could be a good deal (it’s just the fees would be higher). Or maybe not. The only truth here is that “growins value” is nothing but people’s desire to use Bitcoin more than yesterday because it is more efficient/cheaper/cooler/whatever than other alternatives. If one day it’s not the case, then the value will “go down” despite of the limited supply. Remember that nobody would need Bitcoin in the first place if there were no thieves on the streets and in the Central Bank. Everybody can just write their obligations on a piece of paper. So if that day suddenly comes, then Bitcoin will become nothing but a useless numbers.
Also, if suddenly people start saving Bitcoins and not selling them for anything in anticipation of future growth, guess what would happen? Nothing. Until somebody needs to buy something. You are not not buying computer this year because next year it will be more powerful and/or cheaper. At some point you need stuff to be done, so it will be done. And if Bitcoin owners do not do anything useful to each other, there is no point in having them. That’s why speculation is hard and only few cold-headed people are doing it more or less successfully. Others are enjoying building stuff and making themselves and everybody around richer and happier.
When people ask about how bitcoins are created, you reply that they are “mined” by computing millions of cycles of the same algorithm until a certain result is achieved. Basically, you spend time + electricity to generate new coins.
Then they ask you is it true that you do not create anything of value? And you honestly say, well, yes. Electricity is wasted on generating random numbers without any practical use, so there is no “intrinsic” value being put in the resulting coins.
This is of course not true. I can also burn electricity watching YouTube all day, but that won’t make other people pay me. The truth is what “miners” do is validating and securing transactions. That’s their main job that others are willing to pay for. That’s why Bitcoin has value.
Why is unlocking new coins tied to the block creation (“mining”)? Because, it’s the only logical place to do that. If you have a method to generate money, then people are supposed to do that like crazy provided that someone still processes transactions (which is the only reason to have any interest in the currency in the first place). So if I say, you should do these calculations to get new money, but to make transactions do those other calculations, nobody would care. But when you combine those two things in one single process, then you have a system with a “positive feedback”: people get reward directly and immediately for providing services for themselves and anyone joining later on.
So the value of Bitcoin is not in the cost of electricity, but in the ability to make safe and quick transactions and having a limited money supply. And the miners are not digging money from nothing, they are doing a service to everyone and are being paid for that.
Bitcoin “mining” is a process of creating hard-to-compute chain of transactions to make sure nobody tries to spend money twice. It is important because the chain is not stored on a trusted server, but rather copied thousands of times among all the computers in the network. The resulting structure is called a “blockchain”, that is a chain of blocks of transactions. As it is nearly impossible to change the history of payments (and therefore cancel transactions or double-spend bitcoins), users stay confident that the history of transactions looks the same to everyone. This is the central part of the Bitcoin protocol: a solid and distributed mechanism to verify validity of payments.
People who spend electricity to create blocks are called “miners”. They are paid for their trouble by transaction fees (offered voluntarily by others) and block rewards that are source of the new bitcoins. There is a limited number of bitcoins and all of them are distributed among the first several million blocks available to everybody to “mine”. That’s why the process of building the blockchain is called “mining”.
However, the term makes sense only within the earliest history of Bitcoin when there were almost no economy and no transactions, but only a bunch of geeks computing almost empty blocks for reward that they were trading for fun and a couple of cents. If you tried to find any info on Bitcoin in 2010, you would find mostly the info about mining. Back then a pizza was sold for 10000 BTC (https://en.bitcoin.it/wiki/History) and the whole project looked like a game.
Today there is a much more interesting economy, daily transaction volume is almost $3 million and rapidly growing, more than 50% of all bitcoins are mined already and the per-block reward has already been halved in December 2012 (as defined by the protocol). Blockchain is used for real transactions — purchases, currency transfers, investment, bets and all other things we use money for. Miners are making very real money which is a strong incentive to carefully include and validate all transactions to keep the value of the system growing.
So today it is a good time to remind ourselves and everyone that the Bitcoin is not about “mining” money. It is about verifying payments in a very secure manner, without trust in any authority, very quickly and efficiently. Mining is just a temporary effect of bootstrapping the next era in human kind.