bitcoin hodler gay science

or How I Learned to Stop Worrying and Love the Bear Market

This is part 1 of the “Hodler’s Gay Science” serie

Faith is always coveted most and needed most urgently where will is lacking; for will, as the affect of command, is the decisive sign of sovereignty and strength. In other words, the less one knows how to command, the more urgently one covets someone who commands, who commands severely—a god, prince, class, physician, father confessor, dogma, or party conscience.

With the recent crash in price, Bitcoin naysayers feel confident again and display a cocky “told you so” attitude. It would be almost intimidating if they had not already been telling the same story dozens of times over the last decade and consistently proven wrong.

But even if the bears are all out these days, fact is there are many of us that kept silent and didn’t even know when the price freefalled, nor did they care when they finally noticed shitcoins traders capitulating on social networks.

Why? Are we stupid or oblivious? How can we keep so calm, and seem so out of reach of everything? Could it be that we know something that you don’t?

I have been contemplating for some time now to write a short piece about why I’m interested in Bitcoin, and what makes me incredibly confident about it. Bitcoin have been running (almost) flawlessly for 10 years today, and you probably have no idea how much of a miracle it really is.

On the other hand, the illusion that is called “blockchain” and “crypto” and hailed by all experts and very intelligent people as the “next big thing” is finally falling apart after having engulfed billions of monkey money and produced absolutely nothing. All in all I felt the time was appropriate to throw together some ideas about Bitcoin, and try to make it clear why I’m here.

In this first part we will get rid once and for all of the “blockchain”, and hope it will stay in the trashcan of 2018.

Oh, and don’t think too much about the title, I’m not especially found of Nietzsche and it’s not particularly relevant to the topic either, I just think it sounds cool. All quotes are from the Gay Science, which is arguably his best work, and has nothing to do with LGBT: the “gay science” is just a poetic tradition of southern France that lasted from the Middle Ages until this day.

Bitcoin, not blockchain

Better an enmity from one block
than friendship held together by glue

“Blockchain” has been a bad joke played on banks, insurance companies, central bankers and even some states to make a quick buck out of their gullibility. How did they fall for that? Mostly because they have been trained like the proverbial Pavlov’s dog to throw money at every “technological innovation” that is sold to them every few years by consultants, as an expiation for consistently failing to solve the real technological inefficiencies that bloat their own business.

At the end of the day, “Blockchain” was just another old-fashioned asset bubble, that like every other bubbles has pretty much nothing to do with the asset whose price is inflated, and everything with the belief that some asset has to be inflated to grow an economy.

On another level, there has been a collective failure to look at things with a skeptical eye rather than that of a superstitious cargo cult believer. Because if you do that, 5 minutes are more than enough to realize “blockchain” will not solve any problem of yours.

A “blockchain” isn’t even a thing in the first place, Satoshi never mentioned it, while the CEO of Digital Asset Holdings (and ex-JPMorgan) Blythe Masters seems to be widely credited for coining the concept and igniting the whole movement.

Oh, she just stepped down in case you didn’t know. I guess she felt the wind turned recently.

What problem does Bitcoin solve?

In a nutshell, it conciles three features that were thought to be incompatible in a money: digital, double-spend resistant and without a central authority.

What is called the “blockchain” in Bitcoin is merely a part of what makes this possible. Here is an attempt at breaking up what “a chain of blocks” is really needed for:

  • blocks have a number, each is cryptographically linked to the previous one, creating an order and a temporality of its own, which is a lot better than having to rely on some kind of time-stamping to tell when a transaction occured. Bitcoin invents its own time in a way.
  • blocks are necessary to implement other features, Proof-of-Work, miner’s reward, and the mining difficulty adjustement algorithm, which are all vital components in Bitcoin.
  • It is likely that the cryptography used to link transactions and blocks together makes validation by full node a lot easier and less computer-intensive, or even possible at all (not quite sure of this one, if someone knows better I am interessed).

As a thought experiment, let’s imagine Bitcoin without blocks.

Transactions could still be linked together pretty much the same than today, but it means that every node would need to be there from the beginning without ever going offline, or else how could they catch up? It would be very easy to feed them false transactions that supposedly occured while they weren’t there.

Worse, even without going offline, if thousands of nodes suddenly appear with a different transactions history, as a “honest” node how can you be sure they don’t have the right version? Such a network would be very vulnerable to all kind of attacks, and will most likely rapidly fall apart without a central validator.

Thanks to Bitcoin’s blockchain:

  • you have a strong proof that every transaction that ever occured is coherent with the whole history as you know it,
  • you can easily check for the cumulated proof-of-work that gives you the “heaviest” chain (the one which consumed the most work to forge), which you have to assume to be the valid one,
  • you can trace every transaction back to a miner reward, and be sure there is no illegal money creation,
  • last but not least, the difficulty adjustement makes sure that stock-to-flow ratio is as constant as possible (ie. that the supply of newly minted bitcoins is constant regardless of the evolution of demand).

A “chain of blocks” is merely the way Bitcoin is organising its transaction history to allow for those more important features. It works in Bitcoin, but doesn’t make a lot of sense when it is isolated from the global Bitcoin architecture to serve other goals.

I said today we will get rid of “blockchain”, so as a new year resolution I decided to not use the term “blockchain” when talking about Bitcoin anymore, as it is now corrupted beyond redemption, and replace it by more descriptive alternatives like “chain of blocks” or “time chain”.

See you next week for the second part, where we will discuss what a Bitcoin is, why it is valuable, and some common nocoiners’ objections.

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