Bitcoin Blockchain

Summary: Cryptocurrency and Blockchain

The first Bitcoin was mined early in 2009, practically yesterday! A myriad of other cryptocurrencies have followed in its wake, and the underlying Blockchain technology has been applied to many non-currency domains. It can seem as though Bitcoin came out of nowhere, particularly given the anonymity of its creator.

Looking back, it now seems obvious that the world-wide culture and infrastructure for video gaming had a great deal to do with the rapid acceptance and spread of the digital currency:

https://www.blackliszt.com/2022/05/cartoons-and-video-games-evolved-into-bitcoin-nfts.html

In the gaming world, there's always someone in charge. Bitcoin is a digital currency that operates without any one person or group in charge. How it accomplishes this through the use of miners that are incented to maintain the integrity of the system is a real innovation. Here is what is novel and technically new about Bitcoin:

https://www.blackliszt.com/2019/02/the-novel-idea-at-the-heart-of-bitcoin.html

https://www.blackliszt.com/2023/04/a-primer-on-bitcoin-miners.html

I think most people would be surprised to realize that Bitcoin didn't invent the idea of a digital currency. Currencies in the video gaming world are digital, but perhaps more surprising to many is the fact that the vast majority of US dollars are completely digital, no less so than Bitcoin! This is explained in my most popular post on Forbes explaining how the US dollar is already digital and how a central bank digital currency would add nothing:

https://www.blackliszt.com/2020/12/we-dont-need-fedcoin-we-already-have-a-national-digital-currency.html

The core technology of Bitcoin and other digital currencies is called blockchain. Here are the basics of blockchain.

https://www.blackliszt.com/2018/02/blockchain-101.html

The common impression is that blockchain is a wonderful new technology that can solve all sorts of problems involving distributed data. Sadly this is not the case. Blockchain is an excellent solution for the purpose for which it was invented, and not much else:

https://www.blackliszt.com/2017/11/blockchain-a-sailboat-without-sails.html

Here's an example of a real-world problem of exactly the kind blockchain is supposed to solve -- that is already solved well with existing technologies.:

https://www.blackliszt.com/2020/12/could-blockchain-help-fix-my-car-that-was-destroyed-by-a-tree-branch.html

Here’s how the WSJ says that blockchain will solve the problem of stock transfers and why it can’t, mostly because blockchain has nothing to do with the hard part of the problem:

https://www.blackliszt.com/2015/11/the-magic-of-block-chain.html

There has been an explosion of investment in blockchain. Here is an example of how hyped but irrelevant technology can become a big financial winner:

https://www.blackliszt.com/2016/06/how-blockchain-will-deliver-value.html

Microsoft and Intel spell out the problems of blockchain:

https://www.blackliszt.com/2019/11/microsoft-and-intel-detail-the-deep-seated-problems-with-blockchain.html

Here is the pattern of ignoring the hacks of cryptocurrency that “everyone says” can’t happen because of blockchain’s “immutable ledger”

https://www.blackliszt.com/2019/02/crypto-currency-hacks-and-losses-mount-while-supporters-remain-silent.html

Here is an explanation of how those hacks of the crypto-protected and immutable ledger happen:

https://www.blackliszt.com/2019/03/how-can-an-immutable-distributed-ledger-have-assets-lost-or-stolen.html

Ethereum’s “immutable ledger” was re-written by a hack that “couldn’t” happen:

https://www.blackliszt.com/2019/05/blockchain-has-been-unchained-and-unblocked-and-its-broken.html

Here are the basics of Smart Contracts, the ability to write programs that run inside the blockchain, made famous by Ethereum:

https://www.blackliszt.com/2019/03/are-blockchain-smart-contracts-smart-are-they-contracts.html

Facebook created a new Smart Contract language, which is now maintained and extended by Aptos Labs. There are serious issues with it.

https://www.blackliszt.com/2019/07/facebooks-libra-crypto-currency-introduces-a-brand-new-smart-contract-language.html

Blockchains are increasingly run on cloud computing services, a “private blockchain.” If you understand why Bitcoin was novel by running with no one in charge, you can see why having someone in charge makes no sense for blockchain, and why conventional DBMS systems are vastly superior:

https://www.blackliszt.com/2019/03/if-you-like-private-blockchain-you-should-also-like-living-in-a-tent-instead-of-a-house.html

How is crypto-currency better than apps like Venmo, CashApp and Zelle (hint: except for criminals, it's not):

https://www.blackliszt.com/2019/09/facebooks-libra-cryptocurrency-and-the-p2p-apps-venmo-and-cashapp.html

A well-publicized event at the time was the missing emails of an official at the IRS. Everyone thinks they know how email works. Email is indeed simple compared to crypto. But nearly everyone, including all relevant officials, clearly were clueless about how email actually works! So how is it going to work out for something that is much more technically deep like crypto/blockchain?

https://www.blackliszt.com/2015/11/what-e-mail-teaches-us-about-bitcoin-blockchain.html

There has been a live roll-out in a group of countries of government versions of crypto-currency (CBDC, Central Bank Digital Currency). It hasn't worked out too well, and the people who tried to use it were hurt.

https://www.blackliszt.com/2022/03/dcash-government-cryptocurrency-shows-why-fedcoin-would-be-a-disaster.html

https://www.blackliszt.com/2022/03/what-is-behind-the-dcash-central-bank-digital-currency-disaster.html

https://www.blackliszt.com/2020/12/we-dont-need-fedcoin-we-already-have-a-national-digital-currency.html

Ransomware has exploded. In general, the criminal use of crypto has grown greatly. Crypto groupies go to great lengths to deny it:

https://www.blackliszt.com/2021/06/the-colonial-pipeline-cyber-security-disaster-in-context.html

https://www.blackliszt.com/2021/06/bitcoin-enables-criminals-to-thrive-while-promoters-deny-the-facts.html

https://www.blackliszt.com/2022/10/cryptocurrency-and-crime.html

There are ways to protect against ransomware that the industry largely ignores.

https://www.blackliszt.com/2023/05/how-to-protect-and-recover-from-ransomware.html

There have been quite a number of crypto crashes, including some in which large numbers of people lost lots of money. Perhaps the most famous of these was the demise of crypto exchange FTX, with criminal charges being brought against its founder, SBF. Here is an explanation of how the "wallet" provided to FTX customers that held all their funds was constructed, and how that meant that crypto that customers thought they owned was actually owned by FTX. This deception had a major role in FTX's crash.

https://www.blackliszt.com/2022/12/the-phony-wallet-of-ftx-and-how-it-enabled-the-corruption-of-sbf.html

The wonderful "distributed immutable ledger" couldn't protect people from the fact that they didn't understand that the crypto held in their FTX "wallets" wasn't theirs, in any sense of the word!

For more detail on cryptocurrency, see the book authored by Oonagh McDonald on the subject. I was her technical advisor:

https://www.blackliszt.com/2022/01/cryptocurrency-money-trust-and-regulation-book.html

 


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