This contract's too smart for its own good
November 7, 2017 7:00 PM   Subscribe

Approximately US$150M of Ethereum was accidentally burned by someone mucking around with a multisig contract.

There is ongoing debate about whether to push a software update ("hard fork") which will undo the damage.

ELI 5:
A guy named Gav convinced people put all their money into a box. But none of them knew that the box would burn down if you just tossed it around enough. Then your 2-yeas-old little brother found the box. So the box burned down, all the money is gone and people are very very mad at Gav and your 2-year-old brother. They are also trying to figure out how to go to a parallel universe where all of this is just a nightmare and never really happened.

______________________________________________________________________________________

You missed the part where the grownups warned them not to play stupid games with their allowances but they just angrily called the the grownups "statists" and proceeded to obliterate their money.

Afterwards their peers told them this was the will of the free market and good for ethereum.
posted by Coventry (204 comments total) 18 users marked this as a favorite
 
Can we interpret this as a price tag to the fallacy of reification?

(This comment may be self-referential.)
posted by runcifex at 7:05 PM on November 7 [11 favorites]


I always wondered how people could simultaneously be good enough at writing software to build Ethereum and at the same time not know enough about the trial and error nature of the software development process to realize what was going to happen next. How does that even happen?

I have a report I wrote for work that uses multi-threaded processes to load different days of the report at the same time and then splices them together in a single thread to dump to CSV. Works great. I'm particularly proud of the error handling, which is smart enough that it's worked in spite of network outages and other stuff.

But.

After two years of continuous operation and a great many runs, a couple weeks ago, it put the header line (with the user friendly column names) on line 47. Once. In two years. It hasn't done it again. I would have never even guessed that the software could break in that way.
posted by quillbreaker at 7:18 PM on November 7 [62 favorites]


oh boy, what I wouldn't pay to know what people will say 100 years from now about the use of blockchain technology in the first 25 years of this century.
posted by the antecedent of that pronoun at 7:19 PM on November 7 [5 favorites]


"We do not speak of it to outsiders."
posted by TheWhiteSkull at 7:28 PM on November 7 [47 favorites]



I always wondered how people could simultaneously be good enough at writing software to build Ethereum and at the same time not know enough about the trial and error nature of the software development process to realize what was going to happen next.
They know what happens next is a huge influx of cash, including banks counting on being bailed out by the government if they make foolish investments.
posted by idiopath at 7:40 PM on November 7 [3 favorites]


And in fairness, everyone sort of expects that these errors will happen, and hard forks will be used to correct them when possible.
posted by Coventry at 7:44 PM on November 7


Do they, though? Ethereum Classic is still being mined and traded.
posted by ckape at 7:49 PM on November 7 [2 favorites]


Can we hard fork Bitcoin to undo MtGox?
posted by MikeWarot at 7:52 PM on November 7 [3 favorites]


"Code is law" only applies to unimportant people.
posted by Pyry at 7:55 PM on November 7 [14 favorites]


I thought the first hard fork pissed off enough people. Is the precedent now that they will just do it whenever?
posted by atoxyl at 7:59 PM on November 7


Can we hard fork Bitcoin to undo MtGox?

Not possible in that case... The contested funds had traveled too far. But in a case like this where the funds are locked it's totally feasible, and very likely.

Do they, though? Ethereum Classic is still being mined and traded.

Well, you don't have to go along with the hard fork if you don't want to...
posted by Coventry at 8:00 PM on November 7


Is the precedent now that they will just do it whenever?

In my view they'd be idiots not to. It definitely increases the value of Ethereum, that such destructive errors are undone when possible.
posted by Coventry at 8:02 PM on November 7 [1 favorite]


*continues jingling coins in pocket*
posted by infini at 8:04 PM on November 7 [11 favorites]


Ethereum really is a never-ending font of dumb, ain't it?
posted by tocts at 8:05 PM on November 7 [8 favorites]


So the value proposition is that code enforces contracts but also there's an informal and unofficial process with no rules that overrides the whole thing? That's patently absurd, and the only conclusion I can come to us that the contracts are a fig leaf over a scam.
posted by idiopath at 8:07 PM on November 7 [40 favorites]


Surely with this much money involved it's going to end up in court somewhere, somehow. Surely? I'm reading up on the legal aftermath of the DAO hack, and so far it seems like... nothing? No lawyer thought it worth their time to be paid in Ethereum? No financial advisor got too frothy on cryptocurrencies in a way that allowed them to be nailed for recommending it? Will the "aw shucks, oops!" defense in this case be enough to ward off legal consequences?

The "it's distributed, so no nation-state can rule us!" defense seems as likely to fly in the long run as the similar Bittorrent defense did.
posted by clawsoon at 8:07 PM on November 7


I now know what it feels like to travel to the future and have no idea what is going on.
posted by vorpal bunny at 8:08 PM on November 7 [55 favorites]


These tulips ... they burn?
posted by panama joe at 8:11 PM on November 7 [51 favorites]


So this is the same Parity piece of software that was involved in this a few months ago?
Around 12:00 PST [on July 19th], an unknown attacker exploited a critical flaw in the Parity multi-signature wallet on the Ethereum network, draining three massive wallets of over $31,000,000 worth of Ether in a matter of minutes. Given a couple more hours, the hacker could’ve made off with over $180,000,000 from vulnerable wallets.

But someone stopped them.

Having sounded the alarm bells, a group of benevolent white-hat hackers from the Ethereum community rapidly organized. They analyzed the attack and realized that there was no way to reverse the thefts, yet many more wallets were vulnerable. Time was of the essence, so they saw only one available option: hack the remaining wallets before the attacker did.

By exploiting the same vulnerability, the white-hats hacked all of the remaining at-risk wallets and drained their accounts, effectively preventing the attacker from reaching any of the remaining $150,000,000.

Yes, you read that right.

To prevent the hacker from robbing any more banks, the white-hats wrote software to rob all of the remaining banks in the world. Once the money was safely stolen, they began the process of returning the funds to their respective account holders. The people who had their money saved by this heroic feat are now in the process of retrieving their funds.
That is the plot of a silly Western.
posted by clawsoon at 8:18 PM on November 7 [78 favorites]



So the value proposition is that code enforces contracts but also there's an informal and unofficial process with no rules that overrides the whole thing? That's patently absurd, and the only conclusion I can come to us that the contracts are a fig leaf over a scam.


Yes, but you need to get buy-in from a plurality of the other users, or else your fork will wither away into worthlessness.
posted by qxntpqbbbqxl at 8:25 PM on November 7


> what people will say 100 years from now

Stay optimistic about there being anyone left to ponder such things.
posted by I-Write-Essays at 8:27 PM on November 7 [18 favorites]


So the value proposition is that code enforces contracts but also there's an informal and unofficial process with no rules that overrides the whole thing?

Wait, wait, wait: it gets better. The whole marketing angle of Ethereum is "code is law", that everything you wrote up to "but" is how governments will be broken of their fiat currency fascism and total transparency will rule the day. Except when their code turns out to be less deterministic and bug free than JavaScript, at which point, the ruling cabal will totally just retcon the blockchain with a "nothing to see here!"

Ethereum's whole stated purpose for being, "code is law", has now been twice retconned, and here comes a third. This is one of those moments when I don't know who's scamming who: the devs who created something that suckers are actually throwing hundreds of millions into, or the bemused hackers using ethereum as a money-filled punching bag. Probably both.
posted by fatbird at 8:40 PM on November 7 [17 favorites]


"Dunning-Krugerrands" remains one of my favorite neologisms.
posted by mhoye at 8:43 PM on November 7 [92 favorites]


"bugs are law." is how I read this whole thing.

Except when they want a do-over; which is apparently happening again.

The amazing-balls thing about this potential new fork, is this isn't even an uber-haxor that fucked everything up, just some dude that wrote some code that made an oopsy.

In other news, I just read an article a couple of days ago about how another large shop has decided to do away with QA and instead have developers entirely responsible for testing their own code.

I'm investing in popcorn futures.
posted by el io at 8:53 PM on November 7 [17 favorites]


This whole bitcoin/etherium/cyber-currency thing is very entertaining to me. Like, the very basis of cyber-currency is that money is imaginary and yet, it seems to attract the modern-day equivalents of “ the gold standard is the only true money” dipshittery.
posted by Big Al 8000 at 9:05 PM on November 7 [16 favorites]


That is the plot of a silly Western.

"Hack the Internet!"
"Which one?"
"...all of it."
posted by Behemoth at 9:12 PM on November 7 [9 favorites]


what people will say 100 years from now

This is assuming that people will still speak using their lungs and vocal chords, as opposed to squirting invisible emotive wireless microtransactions at each other, because by the year 2100 blockchain has turned every interaction among any group of two or more humans into an excuse to move imaginary currency around.
posted by Strange Interlude at 9:19 PM on November 7 [13 favorites]


This is good for bitcoin.
posted by Going To Maine at 9:30 PM on November 7 [6 favorites]


This whole bitcoin/etherium/cyber-currency thing is very entertaining to me. Like, the very basis of cyber-currency is that money is imaginary and yet, it seems to attract the modern-day equivalents of “ the gold standard is the only true money” dipshittery.

Ah, but you see, my friend, the true flaw of the fiat currency is that it is backed by nothing but the empty promises of an untrustworthy bureaucracy, while these new currencies are backed by things of True and Lasting Value, such as an arbitrary amount of processor work, a guaranteed 43 kilobytes of cloud storage capacity, or a certificate redeemable for a visit to a participating dentistry professional!
posted by Copronymus at 9:38 PM on November 7 [29 favorites]


Surely with this much money involved it's going to end up in court somewhere, somehow. Surely?

I don't know about this situation, but a lawsuit has been filed against tezos alleging that it's an unregistered security. I think it has a good chance of winning.

I'm reading up on the legal aftermath of the DAO hack, and so far it seems like... nothing?

There was an investigation by the SEC which concluded that the DAO was an unregistered security, and presumably indicates that they will treat such instruments harshly in future. I sort of assumed everyone came out whole from the DAO and the subsequent hard fork (apart from the hacker), so there was no basis for complaint. But I wasn't really paying attention at the time.
posted by Coventry at 9:50 PM on November 7 [1 favorite]


I’m pretending that ethereum is not a cryptocurrency, it’s the classical element ether, and it makes reading all this very confusing magical realism.

I am not a tech person.
posted by Grandysaur at 9:53 PM on November 7 [22 favorites]


true flaw of the fiat currency is that it is backed by nothing but the empty promises of an untrustworthy bureaucracy

I think the true flaw is that fiat currency is backed by threats of violence. Although in the medium term I don't see how a stable organization can form around a cryptocurrency without some sort of defensive capabilities, either.
posted by Coventry at 9:53 PM on November 7 [2 favorites]


I’m pretending that ethereum is not a cryptocurrency, it’s the classical element ether, and it makes reading all this very confusing magical realism.

There's a fantasy novel in here somewhere. A wizard makes a new coin, unbeholden to the evil King. It comes from thin air to those who are willing to dig holes in the ground and then fill them back in, while performing math problems. The peasants frequently have trouble with the calculations, so this is a slow process.

There's a ledger floating in the sky. Held aloft by a series of magical blocks and golden chains. The ledger records who has coins, who has spent coins, and where each coin has traveled. It's invoked by both the spender and the merchant spinning around 12 times, cursing the gods each spin, and finally spitting in unison. This is said to be a more logical--and easier!-- form of commerce than the old way of simply handing your gold coins over.

The ledger is written and updated by fairies, chosen because they are supposedly untouched by greed. But fairies are often distracted. They sometimes entertain themselves by turning coins into donkeys, who run off braying into the woods. Or sometimes they take coins and throw them into the darkest lakes, hoping humans will chase after them and drown. Sometimes they will give coins away to a thief who offers the fairies a lovely piece of cake. At any rate, sometimes the coins vanish into the wind, never to be seen again by mortal men.
posted by Teegeeack AV Club Secretary at 10:42 PM on November 7 [86 favorites]


....nothing more decadent and depraved than a man in the depths of an ether(eum) binge....
posted by ergomatic at 10:48 PM on November 7 [3 favorites]


Teegeeack AV Club Secretary's thing reminds me of how my high school history teacher told us about how the original Wizard of Oz novel was an allegory about the silver standard.
posted by DoctorFedora at 10:50 PM on November 7 [6 favorites]


I think the true flaw is that fiat currency is backed by threats of violence.

Actually it's mostly based on the goodwill and cooperation of millions of people. There's violence in there too, but it affects a vanishingly small number of people directly.
posted by Tell Me No Lies at 10:55 PM on November 7 [10 favorites]


So is this ethereum the same kind of pyramid scheme that is bitcoin?
posted by Laotic at 10:57 PM on November 7 [2 favorites]


or a certificate redeemable for a visit to a participating dentistry professional!

Sorry, no, not even that.
posted by OHenryPacey at 11:33 PM on November 7 [2 favorites]


The ledger is written and updated by fairies, chosen because they are supposedly untouched by greed. But fairies are often distracted. They sometimes entertain themselves by turning coins into donkeys, who run off braying into the woods. Or sometimes they take coins and throw them into the darkest lakes, hoping humans will chase after them and drown. Sometimes they will give coins away to a thief who offers the fairies a lovely piece of cake. At any rate, sometimes the coins vanish into the wind, never to be seen again by mortal men.

Can you tell us more about the cake?
posted by sebastienbailard at 11:39 PM on November 7 [10 favorites]


it's mostly based on the goodwill and cooperation of millions of people

Tell that to the colonized.
posted by Coventry at 11:51 PM on November 7 [1 favorite]


Fiat currencies exist and work pretty much the same in countries that haven’t colonized anywhere else. There’s lots of stuff even those governments do with the implied threat of physical enforcement (i.e., jail) but the main one that seems to really be required to make currency work is regulating the supply — in other words, preventing counterfeiting.
posted by aubilenon at 12:55 AM on November 8 [6 favorites]


We need clever cross-chain congrats, preferably zero-knowledge, so that the forks/rollbacks that fix this buffoonery have real losers and cannot be politically viable. Instead, we'll have forks/rollbacks where the population splits themselves into people who made or lost money on the deal, thereby helping show these schemes as fantasy money.
posted by jeffburdges at 1:34 AM on November 8 [1 favorite]


You missed the part where they're blaming Vit and his buddies for Gav's fuckup because they're too busy to understand what actually happened.

*scronches popcorn, grins*
*sips beer, chuckles knowingly*
This is like watching a sitcom about IT management
*scronch, scronch*
posted by fraula at 2:10 AM on November 8 [1 favorite]




So is this ethereum the same kind of pyramid scheme that is bitcoin?

BitCoin is many dumb things, but it’s not a pyramid scheme. It’s closest real world analogue is actually gold & it attracts exactly the same kind of anti-government weirdo ancap-libertarian nutters amongst the tech-bros of this world. Entertainingly, gold bugs & BitCoin true believers really don’t get on very well...

Ethereum is essentially BitCoin with a richer programming language than the one embedded into the BitCoin blockchain. The BitCoin language was deliberately hobbled early on precisely because the creators of BitCoin realised that embedding a full featured Turing complete programming language was a terrible idea. The creators of Ethereum took one look at BitCoin, said "hold my beer" & created a BlockChain based currency with an embedded programming language which is a massive pile of fail. It’s Javascripty, but without any of the good points of Javascipt and full of terrible traps for the unwary.

It made them a lot of money though, so I guess from that point of view it worked just fine - as ever in the real world, worse is better :(

Think about it: Both gold and BTC are easily divisible & difficult to replicate. Both represent sunk costs that cannot be recovered: Gold is the physical proof of the energy expended in mining the stuff, whilst BitCoin represents some portion of the energy expended endlessly hashing blocks in order to win the race to meet the current hash threshold.
posted by pharm at 2:51 AM on November 8 [11 favorites]


the main one that seems to really be required to make currency work is regulating the supply

Driving up demand by mandating that taxes are paid in the fiat currency is also a critical factor.
posted by Coventry at 2:56 AM on November 8 [6 favorites]


Recall that counterfeiting used to draw the harshest penalties, like boiling to death; it was considered to be an act of lèse-majesté
posted by thelonius at 3:27 AM on November 8 [2 favorites]


BitCoin is many dumb things, but it’s not a pyramid scheme. It’s closest real world analogue is actually gold

Yeah, no. Gold has use value in many applications, something BitCoin absolutely does not. The inherently deflationary nature of BitCoin does in fact make it rather akin to a pyramid scheme.
posted by Dysk at 3:36 AM on November 8 [10 favorites]


Also, if all that is required to violate the fundamental assumptions of the system ("code is law") is a loose community consensus, then holy hell does that open you up to some social engineering attacks, and wow does it discourage any outsider from entering into any kind of contract with anyone who has substantial standing in that community.
posted by Dysk at 3:38 AM on November 8 [7 favorites]


The use value of gold is fairly small beer compared to it’s monetary value. Compare the amount used in industry per year with the vast piles of the stuff in central bank vaults, or held as personal store of value by many people in parts of the world with less trust in their institutions than we have in the US/EU.

I think the analogy holds up pretty well. If you think of BitCoin as digitally transmissible gold then lots of things about it make more sense than they would otherwise.

The inherently deflationary nature of BitCoin does in fact make it rather akin to a pyramid scheme.

BitCoin won't be deflationary for a while yet, even when you include deflation due to lost wallets and the like. Regardless, deflation does not make something a pyramid scheme: if you have something that people value and tomorrow there's less of it to go round then the value of the stuff that you hold will (all other things being equal) increase.

BitCoin valuations may be unhinged, but they’re not a pyramid scheme. (Although judging by the spam I’m currently receiving the Ponzi specialists out there have all jumped on the BitCoin bandwagon in order to push their latest systems to the gullible.)
posted by pharm at 4:02 AM on November 8 [1 favorite]


If you compare any of the estimates of the total quantity of gold mined to date with the totals held as assets, the idea that gold's use value is insignificant quickly starts to look dubious. We've put a lot of gold into use one way or another.
posted by Dysk at 4:06 AM on November 8


The difference between gold and bitcoin is that gold miners can't retroactively take your gold back with a hard fork.
posted by Pyry at 4:08 AM on November 8 [7 favorites]


The use value of gold is fairly small beer compared to it’s monetary value. Compare the amount used in industry per year with the vast piles of the stuff in central bank vaults, or held as personal store of value by many people in parts of the world with less trust in their institutions than we have in the US/EU.
You might be surprised. Last figures I took any notice of were ~10% of production goes to industrial use, ~40% is used purely as a store/proxy for monetary value (bullion etc.) - and 50+% is used in jewellery, which is sort of a combination of the first 2 plus an aesthetic value.
posted by Pinback at 4:11 AM on November 8 [3 favorites]


> I'm investing in popcorn futures.

Make sure that futures contract has a paper backup.
posted by ardgedee at 4:14 AM on November 8 [1 favorite]


No, I’m not surprised. Those are the figures I’m aware of.

The majority of the "jewellery" use by weight is really store of value in disguise: I know a few Indian families - some of them have several pounds of gold in the form of jewellery. Sure, it gets worn occasionally but if they were just buying attractive jewellery it wouldn’t be quite so ... substantial shall we say.
posted by pharm at 4:16 AM on November 8


pharm I have yet to see a good argument of why bitcoin is not a pyramid scheme and yours is not a good one.

The way I understand it, the inherently limited (and known) supply of bitcoin is fundamentally different from gold (which may be unlimited if we include asteroids).

At the beginning bitcoin was mined easily and had little value, but as supply dwindles mining is harder, unit value increases. This means that initial holders (at the top of the pyramid) see the value of their holdings increase as the tiers below work harder and harder to have a meaningful share.

As a savings vehicle, this is great for those at the top (i.e. longest in the scheme), but certainly depends on whether new mining activity will flow into the system.

Now if this is not how pyramids work then I don't know what is.
posted by Laotic at 4:19 AM on November 8 [9 favorites]


Even looking at just industrial use, you're at about 13% of all gold mined ever. That hardly seems insignificant. And your anecdotes about a handful of families are hardly an indication that a majority or even substantial proportion of jewellery is held as investment rather than brugsgenstand.
posted by Dysk at 4:22 AM on November 8


Oh, by the way, pharm seems to be forgetting that the creator of bitcoin mined 1 million bitcoins (out of the 20 million fixed total) himself, which now have a very real value of about $7 billion and as long as suckers come to this ponzi scheme that value will be increasing. I smell criminal intent, but like in any pyramid scheme, once you get in you have a very real need to convince others that it is not so and that on the contrary, they need to hop on.

I predict this bubble will burst or the "supply" of bitcoins will need to be set to unlimited to avoid ponzi litigation.
posted by Laotic at 4:31 AM on November 8 [1 favorite]


I think it’s a reasonable assertion that the majority of the value of gold comes from it being seen as a store of value rather than as a useful commodity. That doesn't mean that it has no use value at all.

You can see this in the models used which include gold as a possible investment target: they value gold as an alternative to other monetary investments ($ bonds etc), and don't use the kind of industrial analysis you'd expect for an 'ordinary' commodity like copper or steel. Gold doesn't trade like a commodity - it trades like money.

Dysk: And your anecdotes about a handful of families are hardly an indication that a majority of even substantial proportion of jewellery is held as investment rather than brugsgenstand.

Buying of gold jewellery by Indian families (mostly in Kerala) is a thing. If you think they're buying all that gold just because it looks nice then I have a lovely bridge over the Thames to sell you :)

Laotic: Were the 90s internet firms pyramid schemes? They issued stock to 'early adopters' (employees, management, VC investors) which was then sold to outsiders at inflated valuations, but that didn't make them a pyramid scheme. (The whole of the 90s bubble had pyramidal aspects to it due to vendor financing by hardware companies, but that certainly doesn't apply to BitCoin.) You can (quite reasonably) argue that BitCoin valuations are a bubble & that current prices rely on a continuous influx of new buyers willing to pay the current price, but that doesn't make it a pyramid scheme.
posted by pharm at 4:35 AM on November 8 [2 favorites]


Right, but the fact that one community buys jewellery as an investment/value store does not imply that we can view all jewellery as an investment/value store.
posted by Dysk at 4:39 AM on November 8


I mean, unless you can show that most jewellery is held in Kerala.
posted by Dysk at 4:40 AM on November 8


I think the true flaw is that fiat currency is backed by threats of violence. Although in the medium term I don't see how a stable organization can form around a cryptocurrency without some sort of defensive capabilities, either.


Not quite the right way to think about it but well actually is. All big financial organizations have blockchain initiatives, the financial folks KNOW that some kind of strong encryption based tech is the way of the near future. But not exactly armies but a software currency backed by Federal Reserves and other central banks with appropriate legislative backing will have huge advantages to the essentially ledger system (dollars, pesos, etc) that the world runs on now.

So better the Fed than the Army as the enforcer and judge of "govcoin" but, well behind a Fed is an Army.

It will happen but another way of thinking about it is the big guys are letting the small fish (bitcoin, etc) work the bugs out of the system. When real value, trillions not these piddly billions are injected into a new instrument a bad bug could start wars. But some kind of crypto currency will be established soon.
posted by sammyo at 4:43 AM on November 8 [3 favorites]


multi-threaded processes
it put the header line ... on line 47
I would have never even guessed that the software could break in that way.


Really? As soon as I read "multi-threaded" my first thought, before reading the rest of the comment, was "ha ha oh man I bet something gets written out of order sometimes".
posted by dmd at 4:44 AM on November 8 [12 favorites]


Dysk: The majority of the jewellery *by mass*. But we’re obviously not going to agree on this - I think the argument stands up, you don't.

Laotic: I know perfectly well that "Satoshi" mined a million BTC. So what? If a company issues a bunch of shares to it’s owners and then proceeds to create more shares over time whilst selling them to outsiders who see them as worth buying because they can sell them for more in the future, then that’s completely normal. What’s the difference here? Purely that "Satoshi" managed to create a token which turned him into a multi-billionaire?

BitCoin may be a terrible, terrible thing, but it’s not a pyramid scheme.

(I note in passing that those BTC haven't moved ever & the current valuation of BTC effectively assumes that they’re lost for good. If "Satoshi" was Hal Finney as many people seem to think then presumably access to them died with him.)
posted by pharm at 4:45 AM on November 8


But not exactly armies but a software currency backed by Federal Reserves and other central banks with appropriate legislative backing will have huge advantages to the essentially ledger system (dollars, pesos, etc) that the world runs on now.

What huge advantages?

Honestly: I’d love to know what these supposed huge advantages are, because I just don’t see them.
posted by pharm at 4:48 AM on November 8


Dysk: The majority of the jewellery *by mass*. But we’re obviously not going to agree on this - I think the argument stands up, you don't.

Or in other words, you can demonstrate no such thing, merely conjecture.
posted by Dysk at 4:56 AM on November 8


These comments from the final OP link, if they're valid, provide slightly more illustration of what happened:
Although the WalletLibrary was named as such it was defined as a contract:

contract WalletLibrary

Contracts have storage variables, like an owner variable, and actual libraries do not. Defining it as:

library WalletLibrary

Would have prevented it from having an ‘owner’ variable.

Because it was defined as a contract, it had an uninitialized owner variable. Someone initialized that variable as themselves and killed the contract. This contract contained underlying code for the actual multisig wallets. Killing this basically killed the functionality for these wallets.
and
paritys take on multisig addresses is to make new multisig addresses dependent on a "master contract". the master contract had a flaw, where everyone could take control of it and kill it. by killing the master contract, some guy who actually tried to hack multisig addresses also killed all parity multisig addresses created since july 20. these include iconomi and polkadot funds among many others. total locked out ethers are around 500.000 or 0.5% of the total eth supply.
posted by XMLicious at 4:59 AM on November 8 [3 favorites]


If a newbie was to ask for a link to a really good primer or overview of what crypto-currencies are, and why we should care, what would you recommend? Thanks.
posted by Artful Codger at 5:02 AM on November 8 [2 favorites]


I now know what it feels like to travel to the future and have no idea what is going on.

You'll be right at home among its designers, then.
posted by flabdablet at 5:03 AM on November 8 [8 favorites]


it had an uninitialized owner variable

What kind of idiot defines a new programming language that allows uninitialized variables to be used/propagated? It seems Ethereum acolytes’ ignorance of economics is matched only by their ignorance of computer science. Bah, humbug!
posted by monotreme at 5:17 AM on November 8 [10 favorites]


Oh monotreme, you don't know the half of it. The Ethereum contract language is much, much worse than that one design flaw. Everything about it is a tower of terribleness.
posted by pharm at 5:24 AM on November 8 [10 favorites]


So the first time this thing hard forked they split into two chains; ethereum and ethereum classic--both of which have some degree of going concern. Now here's the thing I'm still having trouble wrapping my head around. For folks with a position prior to the fork who were not party to whatever issue caused the fork, isn't this in some way like a stock split. In other words, they go from having N units in one universe to having N units in two universes. Assuming the units are fungible in one or more markets, their wealth effectively doubles.

This feels like a lucrative flaw...
posted by Fezboy! at 5:37 AM on November 8


Holy schmokes, pharm, that's nightmare reading.
Everything is 256 bits wide, including the "byte" type.

... There is no garbage collector. Dead allocations are never reclaimed, despite the scarcity of available memory space. There is also no manual memory management.

...the literal 0 type-infers to byte, not int. Therefore "for (var i = 0; i < a.length; i ++) { a[i] = i; }" will enter an infinite loop if a[] is longer than 255 elements, because it will wrap around back to zero.

... The compiler is riddled with mis-compilation bugs, many of them security critical. The documentation helpfully includes a list of these bugs... In some situations, the optimizer replaces certain numbers in the code with routines that compute different numbers.
It sounds suspiciously like it was written to make exploits as likely as possible. What's that saying about malice and stupidity?
posted by clawsoon at 5:39 AM on November 8 [8 favorites]


I think it goes: "Any sufficiently advanced form of stupidity is indistinguishable from malice."
posted by jonnay at 5:47 AM on November 8 [13 favorites]


pharm, of course the 90's tech companies were not pyramids. They issued shares and the stock market is where those share prices became inflated out of proportion. Hence, a bubble. A bubble, though is not a pyramid.

There is one thing which you seem to be neglecting and I bringing up:
bitcoin is designed to be limited. Shares in companies are not. Pyramids (like MLMs) operate on the assumption that the resource is unlimited, but in fact it is. bitcoin is only different in that it is being honest about its limitation.

Also, bitcoin is not a company. Companies create (or at least pretend to create) value. Bitcoin mining creates nothing. Bitcoin is both a bubble, and a ponzi scheme.

Bitcoin is assiduous in that it eventually aims to take over the global trade and supersede all other currencies. It may not be explicitly stated but you can infer that. Now, the world's total product will increase as humans accumulate their respective time, and no fair currency may therefore be limited.

Now if you created a currency and convinced people to use it, but by design, you decided to hold one half of it from the get-go, you would basically be aiming to own the world (or half of it), by the time the currency became potent enough.

Now blockchain is different, since it is the medium, carrier or protocol if you will. I'm not against that.
posted by Laotic at 5:48 AM on November 8


a really good primer or overview of what crypto-currencies are, and why we should care, what would you recommend

Crypto-currencies are an economic cargo cult: an attempt by people, most of whose understanding of money does not go far beyond appreciating a few of the less important properties of physical coinage and banknotes, to create tradeable artificial scarcity in a medium - digital information - whose defining property is its support for endless perfect duplication.

We should not care. We should actively and vocally not care whenever presented with the opportunity, except insofar as the unconscionable amounts of energy the techbros burn in order to run their Rube Goldberg economic machinery is raising all our electricity bills.

I would recommend not believing the hype.
posted by flabdablet at 5:58 AM on November 8 [5 favorites]


Or in other words, you can demonstrate no such thing, merely conjecture.

OK. Fine. You want to keep going. Seriously: it’s not like I’m proposing some 'out there' theory here. Gold having the majority of it’s value deriving from it’s use as a monetary instrument & store of value rather than for it’s intrinsic use value is a widely held belief. You will find it in widely cited academic papers as well as amongst the weirder gold buggy outposts of the internet. If you don’t want to believe it, fine: don’t believe it. But claiming that I’ve pulled this assertion out of thin air as my 'conjecture' is going a little far frankly.

Laotic: bitcoin is designed to be limited. Shares in companies are not. Pyramids (like MLMs) operate on the assumption that the resource is unlimited, but in fact it is. bitcoin is only different in that it is being honest about its limitation.

Wait, so the syllogism is: BitCoin is limited, Pyramids operate on the assumption that their resource is unlimited, therefore BitCoin is a Pyramid?

I gently suggest that you think that one through :)

BTW, I agree with you that a limited currency like BitCoin is a terrible, terrible idea for all sorts of reasons, but it’s still not a pyramid scheme.
posted by pharm at 6:00 AM on November 8 [3 favorites]


The READMEs from the Underhanded Solidity Coding Contest make for sobering and/or entertaining reading, depending on whether you own any Ethereums(?) (Ethereus? Ethereii?)
posted by clawsoon at 6:05 AM on November 8 [1 favorite]


Yeah, solidity is terrible on every possible axis except for the 'looking enough like Javascript that SV techbros types thought they understood it' one, which made it a marketing win. And in the cryptocurrency world, marketing and virality is everything.
posted by pharm at 6:07 AM on November 8 [4 favorites]


Ooo wait, Crypto-currency explainers.

You should all rush out and buy David Gerard’s "Attack of the 50 foot Blockchain" Amazon . UK, Amazon . com.

As the man says, it’s pretty much r/Buttcoin the book.

Yes, that David Gerard: the Wikipedia one
posted by pharm at 6:11 AM on November 8 [5 favorites]


The fact that something can be widely used as investment doesn't mean that that is where it derives its fundamental value from. Somewhere between an eighth and a tenth of all gold is in industrial use. Some significant proportion of the ~50% that is jewellery is used, has a value beyond as an investment or value store. Property is widely used as a value store as well, but that doesn't mean that it derives its value from the same, either.
posted by Dysk at 6:20 AM on November 8


This is all heading for cstross's "Economics 2.0" isn't it? (Googles briefly) Yeah I'm not exactly the first one to think of that.
posted by Foosnark at 6:20 AM on November 8 [2 favorites]


That is indeed an impressive list of braindeadedness in Solidity. However, lacking floating point operations is not one of them. Float and decimal lack a 1:1 mapping. Using floats in financial software is literally the most brain dead thing you can do if you care about correctness.

I don't consider defaulting to 256 bit numbers to be stupid, either, but overflow protection would be better. Regardless, the entire idea of Ethereum and its smart contracts is insane in a world where bugs are so rampant. In that context, willingness to work is in some ways a feature.
posted by wierdo at 6:28 AM on November 8


Crypto-currency is really just performance art, right? Come on, admit it. It's Banksy for coders.
posted by Naberius at 6:33 AM on November 8 [10 favorites]


I could see value in a version of something like Ethereum using TLA+ or some other language intended to show formal proof of correctness for the contracts.

It's crazy to me that investment banks and venture capitalists that (seemingly) understand the value of paying good lawyers a lot of money to write and review contracts are happy to get on board with a cryptocurrency system practically designed to make it easier to write bad contracts than good ones.
posted by jedicus at 6:36 AM on November 8 [3 favorites]


As someone who has actually executed something like this on a production server:

delete from EverythingImportant
--where UniqueID = "wfiq49483b93q48ht98ng9";

I feel their pain. That immediately-sweaty, heart-drops-into-your-shoes reaction on discovering the mistake is horrible. I at least had backups.

For the non-SQL in the audience: the dashes indicate a comment, which means only the first line gets run, deleting everything, rather than both lines, which only deletes a single record
posted by AzraelBrown at 6:36 AM on November 8 [6 favorites]


Crypto-currency is really just performance art, right? Come on, admit it. It's Banksy for coders.

This is the r/Buttcoin creed in a nutshell.
posted by pharm at 6:42 AM on November 8 [1 favorite]


flabdablet: We should not care. We should actively and vocally not care whenever presented with the opportunity, except insofar as the unconscionable amounts of energy the techbros burn in order to run their Rube Goldberg economic machinery is raising all our electricity bills.

My gut suggests that's the case. Digital tulip bulbs. My brain knows only a little about modern economics and that there's a sort of consensual hallucination going on anyway as to how modern economies work. So that makes me think that somehow crypto-currencies are going to sleaze into widespread use, grandfathered in as the first working blockchain-based currency, or because of traction being gained as a borderless, government-immune medium of exchange. Or simply because enough people think there's a fortune to be made (or missed if they don't get in).
posted by Artful Codger at 6:55 AM on November 8 [2 favorites]


depending on whether you own any Ethereums(?) (Ethereus? Ethereii?)

Eurethras.
posted by TheWhiteSkull at 6:55 AM on November 8 [6 favorites]


Bitcoin isn't a pyramid scheme! It's a ziggurat scheme, which is totally different from a pyramid, as everyone knows.
posted by explosion at 7:05 AM on November 8 [12 favorites]


I agree with you that a limited currency like BitCoin is a terrible, terrible idea for all sorts of reasons, but it’s still not a pyramid scheme.

Well it kind of is, if you remember that a pyramid is a huge structure built at vast expense for purposes no longer considered worthwhile, which just kind of sits there in the background slowly crumbling away to dust, all the while attracting endless speculation - most of it ill-informed - about how people without access to efficient modern machinery managed to scrape together the energy required to put it together.
posted by flabdablet at 7:07 AM on November 8 [7 favorites]


People keep stating "bitcoin is not a pyramid," but how is it not? Its only value derives from future suckers buying in. When it runs out of suckers, people will start cashing out, generating the usual Ponzi death spiral.

Gold does have intrinsic value. Aside from electronics, it is bright and shiny and easy to form into jewelry. It never tarnishes. It is extremely hard to break. It can be made into very thin sheets. It has had a value as ornamentation for millenia for those reasons. Human beings are hardwired to like things that reflect light. If stainless steel were hard to make, it would have the same value as gold.
posted by Native in Exile at 7:11 AM on November 8


Artful Codger, this video from 3Blue1Brown* might be a start.
Ever wonder how Bitcoin (and other cryptocurrencies) actually work?
(YouTube, 26 minutes)

I remain extremely sceptical about cryptocurrencies in general, and won't knowingly have anything to do with them.

*Aside: Regardless of one's attitude toward vaporware funny-money, 3Blue1Brown's videos on mathematics are brilliant. Seriously, go watch.
posted by Weftage at 7:11 AM on November 8 [1 favorite]


Bitcoin is a commodity that only works for existing investors when it is operated as a pyramid scheme. Its investment value is driven by scarcity imposed by its technical constraints, which are designed to draw more investors to the commodity. If the commodity lacked scarcity, it would have no draw for further investment: its value is not as a real currency — you cannot pay taxes with Bitcoin scrip — but the artificial attributes that draw in more investors, who in turn will exchange increasing amounts of real currency for less scrip. Pyramid schemes also offer the same veneer of value, drawing in more investors to pay off those who already bought in.
posted by a lungful of dragon at 7:13 AM on November 8 [1 favorite]


Every year or so there are people who try to get me involved in some kind of cryptocash venture and every year I tell them no thanks, because the space is just teeming with creeps and cranks.

The creeps are the idiots with no values except mercenary motive. The cranks are the idiots with a single all-encompassing value, somethingLibertysomething that sounds like Mommy-Is-SO-UNFAIR!!!

There is money to be made and the blockchain as a concept is genuinely intriguing. But on the whole it's not the coins that are lacking in value(s), but the people.
posted by dmh at 7:23 AM on November 8


Pyramid schemes rely on ever greater numbers of investors being drawn in each generation in order to maintain the same rate of return. BitCoin is just a bunch of traceable tokens that relies on one individual wanting to buy the token you bought for more than you paid for it in order for you to make a profit. This is the crucial difference between BitCoin and a pyramid scheme - BitCoin doesn't require an exponentially growing supply of buyers to maintain it’s current value, just a chain of buyers willing to pay the current price, therefore BitCoin is not a pyramid scheme.
posted by pharm at 7:28 AM on November 8 [2 favorites]


(It’s manifestly terrible in lots of other ways of course.)
posted by pharm at 7:29 AM on November 8


...the blockchain as a concept is genuinely intriguing.

So are square wheels. Doesn't make them the right choice for your everyday car.
posted by flabdablet at 7:30 AM on November 8 [1 favorite]


Blockchains as non-repudiable third party transaction records that are visible to all parties alongside the internal ledgers that they all keep are a useful idea that Cryptocurrencies have done a lot to popularise.

Everything else about BitCoin appears to be monumentally useless in every way, but the mindshare it’s achieved thus far means the idea that it is a worthwhile place to store value might have become self-sustaining in the general population. The early BitCoin adopters will have achieved a marketing milestone: turning useless computing into $billion of value for themselves. Not sure whether to applaud them or weep for humanity frankly. A little of each perhaps.
posted by pharm at 7:40 AM on November 8 [2 favorites]


These crypto-currency/theory of money threads always make me want to start trading my fiat currency for canned beans and shotgun shells.
posted by Standeck at 7:44 AM on November 8 [3 favorites]


That's slightly too down on Bitcoin, pharm. It would make a fantastic medium for individual international exchange if its value wasn't so variable and so high. Peg it to USD or SDRs or something and suddenly it provides actual use cases to support its value.

The coin can be divided small enough, but transaction costs are way too high right now.
posted by wierdo at 7:48 AM on November 8


pharm: Blockchains as non-repudiable third party transaction records that are visible to all parties alongside the internal ledgers that they all keep are a useful idea that Cryptocurrencies have done a lot to popularise.

But isn't the failure of the idea of non-repudiable transactions in practise what keeps getting illustrated by these stories? Or am I misunderstanding?
posted by clawsoon at 7:50 AM on November 8 [2 favorites]


A bubble, though is not a pyramid.

Well...it could be.
posted by Naberius at 7:52 AM on November 8 [1 favorite]


Another piece of evidence that scrip like Bitcoin is pyramid scheme-like is how aspects of its implementation and language are used to sell shady investments. The recent intersection of personal genomics and blockchain terminology has yielded unique scams of all sorts.
posted by a lungful of dragon at 8:04 AM on November 8 [1 favorite]


Peg it to USD or SDRs or something and suddenly it provides actual use cases to support its value

If you're going to run your transactions in units pegged to a fiat currency, you might as well just denominate them in the fiat currency and not bother with Bitcoin or its frankly insane consensus-generation model in the first place.
posted by flabdablet at 8:11 AM on November 8


But isn't the failure of the idea of non-repudiable transactions in practise what keeps getting illustrated by these stories? Or am I misunderstanding?

You can separate out the money part of BitCoin from the distributed public ledger part: There’s nothing stopping people from using a Blockchain of some sort for recording ordinary transactions (of whatever kind - tracking goods, monetary exchange, etc etc) in a public fashion whilst completely ignoring the whole 'digital cash' thing.
posted by pharm at 8:15 AM on November 8


Particularly, common terminology used in MLM/pyramid schemes is to "get in now". Other commodities are advertised on the basis of getting in early, or investing in a Bitcoin-like commodity, before it is too late. No one wants to be at the bottom of the pyramid: you always want fresh blood underneath, putting upward pressure on your investment.
posted by a lungful of dragon at 8:15 AM on November 8


isn't the failure of the idea of non-repudiable transactions in practise what keeps getting illustrated by these stories? Or am I misunderstanding?

Non-repudiable transactions have their place.

Implementing software libraries is not one such place.

BitCoin is massively inefficient by design, but Ethereum is actually broken.
posted by flabdablet at 8:16 AM on November 8


Bitcoin is not a good foundation for transactions at a large scale because it has a low global transaction rate limit.
posted by idiopath at 8:18 AM on November 8


Oh come on flabdablet, if your goal was to create as much internet hilarity as you could possibly manage Ethereum is doing pretty well so far. BitCoin is boring by comparison.
posted by pharm at 8:19 AM on November 8 [7 favorites]


Smart contracts have definitely proven themselves capable of causing a sharp stinging.
posted by flabdablet at 8:29 AM on November 8


Some significant proportion of the ~50% that is jewellery is used, has a value beyond as an investment or value store.

I don’t know about that. Gold buyers and pawn shops, who are the primary purchasers if jewelery on the second-hand market, care mostly about two things: purity and weight. Aesthetic value, is a distant, distant third.
posted by Big Al 8000 at 8:34 AM on November 8 [1 favorite]


As soon as I read "multi-threaded" my first thought, before reading the rest of the comment, was "ha ha oh man I bet something gets written out of order sometimes".
A programmer had a problem. He thought to himself, "I know, I'll solve it with threads!". has Now problems. two he
posted by roystgnr at 8:34 AM on November 8 [26 favorites]


I have no interest in using pretend computer nerd money. I don't know anyone who would touch pretend computer nerd money with a ten foot stick. They don't care about it. They wouldn't use it. They won't accept it as pay. They have no interest in figuring out how to deal with something that involves any kind of effort or technical know-how. How do you mine, acquire, use, or cash out pretend computer nerd money? I have no idea. Even the thought of trying to figure it out exhausts and bores me. It was annoying enough to set up my universal remote. My employer pays me money backed by the government, everyone agrees that can be used for trade, there is no effort or weird ponzi-scheme crap involved. You can argue what is or is not technically a ponzi scheme, but to me this stuff stinks of scaminess worse that those calls from "Windows" trying to convince me there is something wrong with my computer.

That said, reading these threads where people actually care about this stuff is endlessly amusing, just like the Eve Online threads (which I also have no interest in actually getting involved with).
posted by fimbulvetr at 8:41 AM on November 8 [5 favorites]


Complexity is fraud.
posted by whuppy at 8:42 AM on November 8 [1 favorite]


>Some significant proportion of the ~50% that is jewellery is used, has a value beyond as an investment or value store.

I don’t know about that. Gold buyers and pawn shops, who are the primary purchasers if jewelery on the second-hand market, care mostly about two things: purity and weight. Aesthetic value, is a distant, distant third.


I think that actually makes the point that people buying jewelry are buying it for aesthetic value: because if it was purely an investment or a value store, primary purchases paying the premium prices for aesthetics is a terrible deal and they would be better off buying non-jewelry gold. That certainly leaves open the idea that people are buying gold jewelry in part because it retains some, non-zero, value, but that's a bit besides the point -- which is that on the primary market, jewelry itself has value separate from the value of gold. Which makes sense since, you know, there's also a lot of non-gold jewelry for sale.
posted by cjelli at 8:43 AM on November 8 [2 favorites]


Investment gold jewellery is 22 ct. - see India, China
posted by infini at 8:47 AM on November 8 [1 favorite]


Gold buyers and pawn shops, who are the primary purchasers [of] jewelery on the second-hand market, care mostly about two things: purity and weight. Aesthetic value, is a distant, distant third.

"Ohhhh Yeeaaaahhhh!"

(sorry. Toronto joke)
posted by Artful Codger at 8:52 AM on November 8 [3 favorites]


The ledger is written and updated by fairies, chosen because they are supposedly untouched by greed. But fairies are often distracted. They sometimes entertain themselves by turning coins into donkeys, who run off braying into the woods. Or sometimes they take coins and throw them into the darkest lakes, hoping humans will chase after them and drown. Sometimes they will give coins away to a thief who offers the fairies a lovely piece of cake. At any rate, sometimes the coins vanish into the wind, never to be seen again by mortal men. - Teegeeack AV Club Secretary

Can you tell us more about the cake? - sebastienbailard

the cake is definitely a lie. but so are the coins
posted by k5.user at 9:07 AM on November 8 [4 favorites]


Aesthetic value, is a distant, distant third.

erm - big brands have buy back policies
posted by infini at 9:25 AM on November 8 [1 favorite]


Can someone explain to me how cryptocurrencies are supposed to represent a new form of value, when they are wholly dependent on commodities (electricity and processors) that are valued in, and purchased with, traditional currencies?

It strikes me as vaguely alchemical.
posted by TheWhiteSkull at 9:52 AM on November 8 [1 favorite]


erm - big brands have buy back policies

Which pay back the value of the gold in the piece, as you’d expect. You could go to any gold dealer & get exactly the same deal.

You’ll note that every piece listed by that jeweller prominently features the weight of the gold content & the prices listed are pretty much the bullion price of said gold plus a percentage to cover the labour cost of manufacturing the jewellery.
posted by pharm at 10:03 AM on November 8


TheWhiteSkull: BTC are a commodity: The price swings according to what people trading them think they’re worth. (With the sizeable caveat that there’s a whole load of wash trading going on on the exchanges - I don't believe that BTC markets have the depth that some of the BitCoin boosters claim.) Trading them costs energy, as does "mining" new ones, but neither of those affects already extant BitCoin.
posted by pharm at 10:11 AM on November 8


Can someone explain to me how cryptocurrencies are supposed to represent a new form of value, when they are wholly dependent on commodities (electricity and processors) that are valued in, and purchased with, traditional currencies?

(Not a cryptocurrency fan myself, but.)

There's nothing inherent about electricity or processing power that says that fiat currency had to be traded for it. Fiat currency is involved because, in this day and age, it is very, very hard to get anything done without it. I dunno if they're trying to replace the monetary system or not, but in the meantime, our world is largely a place where you need cash to do things and also not starve.
posted by reprise the theme song and roll the credits at 10:17 AM on November 8


Trading them costs energy, as does "mining" new ones, but neither of those affects already extant BitCoin


So what would happen to the value of a cryptocurrency if, say, a new type of processor (perhaps one based on quantum technology) were to enter the market, suddenly making it far easier and more efficient to mine coins?

Or what would happen if a government actor had access to such technology? Could they not manipulate the market? What if they were able to hack the blockchain?
posted by TheWhiteSkull at 10:25 AM on November 8


There's nothing inherent about electricity or processing power that says that fiat currency had to be traded for it. Fiat currency is involved because, in this day and age, it is very, very hard to get anything done without it.


Well, yes- there is nothing inherent about electricity or processing power that requires a fiat currency, except that both require labor to produce, which, in our current economic system, is valued in the form of money.

So do the proponents of crypto eventually expect to replace the monetary system, or will it always exist in parallel to traditional currencies?
posted by TheWhiteSkull at 10:29 AM on November 8


A long while ago, I met a software developer who relayed an anecdote regarding some Web 1.0 company. I forget which one it was but it was something like Yahoo or Geocities or Altavista or something. Apparently they had instituted a procedure where some of their production systems (webservers maybe?) were automatically killed and restarted every few hours. Why? Because they had some kind of memory leak somewhere and this was deemed sufficient rather than tracking down the source of the leak and fixing it there. This process greatly offended my interlocutor because he came from the world of chemical engineering where he had worked on control systems for full production-scale chemical plants. He said that if the chemical world were run on the same kind of software engineering standards that the web world was running off of... well, let's just say he was not generous.

Anyways, in my layman's opinion, it seems like the people who designed the Ethereum language (never mind the people actually writing code/contracts in Solidity) are working much closer to those Web 1.0 standards than chemical engineering standards.
posted by mhum at 10:30 AM on November 8 [7 favorites]


I feel like the instability and volatility written into cryptocurrency is viewed by developers as a feature rather than a bug.

If it was truly secure and stable, it would just be another investment. In its current form, you're experiencing the smug sense of satisfaction associated with making a heavily researched commodity trade AND the heady rush of degenerate gambling.

It's like the financial planning equivalent of shooting a speedball (which I'm sure lots of financial planners do anyway, but still).
posted by prosopagnosia at 10:38 AM on November 8 [3 favorites]


for a lot of reasons, writing an Ethereum smart contract that is bug-free and can't be exploited is very difficult, much more so than writing normal software. the programming language, Solidity, that is officially supported, does NOT have the capabilities you'd need to help with this process. even rudimentary "hello, world" level apps can have subtle bugs in them. so this doesn't surprise me at all.
posted by vogon_poet at 10:44 AM on November 8 [1 favorite]


Bitcoin is backed by whatever the latest incarnation of the black market that runs over the Internet is called, aka the Dark Web that Vice.com likes to run all those lurid articles about.

Thanks to the Internet, Bitcoin can be traded for cocaine, and thanks to the War on Drugs, cocaine can be traded for USD, and for a profit.

The best part is that, thanks to the War on Drugs, Bitcoin is also backed by violence - the DEA willingly keeps the street price for drugs high.

---

Stocks are created by dilution of pseudo-ownership of a corporation, and the paperwork for creating corporations is pretty easy, but there will never be more than 100% of a corporation, making that a limit on supply; does that make that the stock market a pyramid scheme too? ("Yes" may be acceptable answer.)
posted by fragmede at 11:08 AM on November 8 [2 favorites]


So what would happen to the value of a cryptocurrency if, say, a new type of processor (perhaps one based on quantum technology) were to enter the market, suddenly making it far easier and more efficient to mine coins?

The difficulty of mining a block scales with the hashrate, so the rate of BTC inflation due to new BTC generated from mining remains constant as the hashrate changes. (This has already happened several times as BTC mining moved from CPU -> GPU and then to custom ASICs.)

Or what would happen if a government actor had access to such technology? Could they not manipulate the market? What if they were able to hack the blockchain?

If you control enough of the hashing power (ie, significantly more than 50%) then you can choose which transactions go into the blockchain & you can do various other devious things, but you can't reverse previously logged transactions.

If you could hack the blockchain then sure, you could do anything to it, but that probably requires a total break in SHA256 which really doesn't look likely at this point in time. Oh, and if you want to actually transfer other people’s BTC around then you’ve got to reverse the elliptic curve encryption, which (perhaps fortuitously) is based on curves where the NSA don’t seem to have chosen the points.

BitCoin has stood up to a fair amount of cryptanalysis - it appears to be robust. One day, that might not be the case - cryptography only ever gets weaker after all - but right now it’s sound & looks overwhelmingly likely to stay that way for the foreseeable future.
posted by pharm at 11:11 AM on November 8


Yes, BitCoin is a de facto pyramid scheme, but Satoshi's intent was revolutionary, not criminal. And Satoshi cashing out his massive stash today would crash BitCoin.

In truth, all investments are pyramid scheme to some extent, but the distinction between straight pyramid schemes and real investments should be: What is the underlying value?

All that mining contributes security to BitCoin, but adds zero value. What is underlying value behind BitCoin then? Answer: Satoshi's revolutionary ideology of resistance to state controlled money.

I think the fatal flaw in BitCoin is that, as mining rewards decline, the miners must require high fees, but if the miners charge appropriate fees then BitCoin no longer functions as a currency.

At this point, BitCoin remains a viable investment instrument, but the underlying dream of Satoshi dies with the currency ideal. If that dream dies, then eventually BitCoin dies too. This is inevitable.
posted by jeffburdges at 11:13 AM on November 8 [1 favorite]


That said, we'll be entertained by BitCoins for years to come because ideological dreams take a long time to die.
posted by jeffburdges at 11:19 AM on November 8 [2 favorites]


There are lots of scams not structured as pyramids. "BTC is fundamentally a scam" does not imply "BTC is a Ponzi."
posted by PMdixon at 11:56 AM on November 8 [4 favorites]


does that make that the stock market a pyramid scheme too?

No, because the stocks do fundamentally map to ownership of a company and their assets. However impractical it might be, shareholders can theoretically collectively decide to liquidate the company and cash in their shares for those assets - and (again, theoretically) this is exactly what happens if a company goes properly belly up. Bitcoiners can't really exchange their Bitcoins for the underlying computation work in any meaningful sense under any circumstances. That's a pretty fundamental difference.
posted by Dysk at 12:17 PM on November 8 [2 favorites]


You can’t "liquidate" your gold to recover the energy expended to mine that either - all you can do is find another buyer to sell it on to, just as with any other commodity. BTC is a commodity with all the use value sucked out of it, leaving only pure monetary value. It’s a very neat hack from an abstract comp sci point of view.
posted by pharm at 12:25 PM on November 8 [1 favorite]


You can however make use of the gold in a variety of manufacturing processes or products, meaning it possesses an inherent usefulness or value that bitcoin simply doesn't.
posted by Dysk at 12:34 PM on November 8 [2 favorites]


It's been repeatedly explained in these threads that Bitcoin does have inherent usefulness or value. One use is to donate to Metafilter if one prefers not to use Stripe, Paypal, or a personal check, for example. There are also transactions in which one wishes to maintain relative anonymity. These are reasons that one might wish to buy a few millibits that have nothing to do with currency/commodity speculation.
posted by Mapes at 12:51 PM on November 8


That's not an inherent usefulness or value - it's useful for those purposes only by virtue of being exchangeable for fiat currency. Unlike gold, which has use value in and of itself (as well as being an anonymous - if impractical - option for MetaFilter donations).
posted by Dysk at 12:58 PM on November 8 [2 favorites]


presumably indicates that they will treat such instruments harshly in future

Well, that was a mistake, because shortly after publication of SECURITIES AND EXCHANGE COMMISSION, Release No. 8107/July 25, 2017, Report of Investigation Pursuant to Section 21(a) of the Securities Eschange Act of 1934: The DAO , the EU admitted "bitcoin" securities and ICOs, bitcoinETI listed on the Gibraltar Stock Exchange, Gemini (I think) floated "bitcoin" futures, and Jamie Dimon lost his mind as money flowed out of JPM pockets.

The SEC regulation actually endorses bitcoin securities "safety" for the risk-averse
posted by marycatherine at 1:04 PM on November 8


>That's not an inherent usefulness or value

That's just moving the goalposts of "inherent usefulness". It's correct that digital Bitcoin cannot be used to make a physical wire bond. No digital entity can.
posted by Mapes at 1:05 PM on November 8 [1 favorite]


Right, which is what makes it different from other commodities or value stores which fundamentally do have or represent an inherent usefulness in and of themselves.
posted by Dysk at 1:08 PM on November 8


(Examines 10 pound note in wallet closely)

No, I don’t think it has much use value whatsoever: I suppose I could burn it, so that puts an ultimate floor on its value equivalent to the same mass of wood.

It’s quite a good store of value though, relative to most commodities which tend to go off, rust, or have other exorbitant carrying costs.
posted by pharm at 1:17 PM on November 8 [2 favorites]


I print out my bitcoins and roll around in them like Scrooge McDuck. Does that count as inherent usefulness?

(I also work at a company which produces children's animation. What's produced is purely digital, but it does have an inherent use value: It babysits people's children for them.)
posted by clawsoon at 1:18 PM on November 8


(Examines 10 pound note in wallet closely)

Taxes. And I compared it to other commodities, not to currencies. Currencies have the backing of governments, not usefulness.
posted by Dysk at 1:22 PM on November 8 [1 favorite]


Whatever turns you on clawsoon :)
posted by pharm at 1:23 PM on November 8


Use value is a red herring. When gold started being used as day-to-day currency, it was as part of the military-coinage-slavery complex, and its main use was as a hard-to-duplicate token which taxes had to be paid in.
Throughout antiquity one can continue to speak of what Geoffrey Ingham has dubbed the 'military-coinage complex'. He may have been better to call it a 'military-coinage-slavery complex', since the diffusion of new military technologies (Greek hoplites, Roman legions) was always closely tied to the capture and marketing of slaves, and the other major source of slaves was debt: now that states no longer periodically wiped the slates clean, those not lucky enough to be citizens of the major military city-states — who were generally protected from predatory lenders — were fair game. The credit systems of the Near East did not crumble under commercial competition; they were destroyed by Alexander's armies — armies that required half a ton of silver bullion per day in wages. The mines where the bullion was produced were generally worked by slaves. Military campaigns in turn ensured an endless flow of new slaves. Imperial tax systems, as noted, were largely designed to force their subjects to create markets, so that soldiers (and also of course government officials) would be able to use that bullion to buy anything they wanted. The kind of impersonal markets that once tended to spring up between societies, or at the fringes of military operations, now began to permeate society as a whole.
posted by Coventry at 1:34 PM on November 8 [8 favorites]


Beanie Babies were a great investment opportunity and store of value until they weren't.
posted by Pyry at 1:48 PM on November 8 [4 favorites]


He said that if the chemical world were run on the same kind of software engineering standards that the web world was running off of... well, let's just say he was not generous.
That's a pretty standard consequence of risk compensation theory. A Paypal screwup isn't nearly as bad as a Bhopal screwup.
posted by roystgnr at 2:01 PM on November 8 [2 favorites]


I also roll around in my Beanie Babies.
posted by clawsoon at 2:01 PM on November 8 [9 favorites]


and where the slaves mine the gold. That part gets no shrift even in Graeber World.
posted by marycatherine at 2:12 PM on November 8


Right, which is what makes it different from other commodities or value stores which fundamentally do have or represent an inherent usefulness in and of themselves.

Emphasis added. There's some goalpost moving there.

(I am not a crypto booster but "this is worse for almost every possible purpose than state issued money" is distinguishable from "this is somehow inherently different from state issued money.")
posted by PMdixon at 2:17 PM on November 8 [2 favorites]


I'm not saying it isn't like fiat currency (well I am, but that's in its inherent deflationary nature, not use value). I'm saying it isn't like commodities or shares, which are useful or proof of ownership of something useful.
posted by Dysk at 2:35 PM on November 8


Anyways, we should work to end our governments' control over monetary policy because, although worse parties exist, those governments definitely utilize it to rob everyone and enrich the powerful. You cannot do this with proof-of-work schemes like BitCoin though.

We built GNU Taler in part to give regional currencies an online payment system. Taler transactions are perfectly anonymous for the customer, but non-anonymous for the merchant, thus making Taler not so useful for fraud, cryptolocker malware, etc.

There are interesting ideas like Solidus for adding privacy to so-called permissioned blockchains, meaning databases that use hash functions for provable consistency. In other words, you'd keep your money in a bank like normal, but now your bank's records are checked by more third parties without those parties seeing your specific details.

Bryan Ford's DEDIS group at EPFL has interesting projects like ByzCoin and OmniLedger, which improve scalability, and their proof-of-personhood parties might provide a basis for mining and making cryptocurrencies local.

In the end, we'll still basically use bank-like institutions but those banks will be better audited by non-government entities, mostly other banks, and could become impossible to monopolize, due to starting one becoming relatively easy, and operating in foreign currencies should become cheap enough that nations need to behave somewhat better.

There is no room for BitCoin itself in this future because better technologies will make the believe that BitCoin can act as a currency untenable, as if the current power usage does not achieve that already.
posted by jeffburdges at 3:11 PM on November 8 [3 favorites]


those governments definitely utilize it to rob everyone and enrich the powerful. You cannot do this with proof-of-work schemes like BitCoin though.

Uh. Did you read the FPP? BitCoin is proof of work exactly as long as a majority of participants agree it is. Code is law exactly until the point that that inconveniences those in control of the code.
posted by PMdixon at 3:21 PM on November 8 [2 favorites]


"Control of the code" is a slippery notion, when the code is open source, and anyone can file off the serial numbers and run their own version. The DAO hard fork really was a fork, yielding the contemporary dominant Ethereum chain, and the strict "code is law" Ethereum Classic chain (which is worth much less, these days.) Everyone who had ETH on the ledger prior to the fork had the same amount on both ledgers afterwards.
posted by Coventry at 3:54 PM on November 8


Anyways, we should work to end our governments' control over monetary policy because, although worse parties exist, those governments definitely utilize it to rob everyone

Yeah, we are in crazy cloud cookoo land now. I’m just a silly socialist Canuck, but I believe taxes, social systems, socialized medicine, and redistribution are inherently good things. I trust my elected representatives way more than anonymous rich tech heads.
posted by fimbulvetr at 4:14 PM on November 8 [6 favorites]


I believe taxes, social systems, socialized medicine, and redistribution are inherently good things.

I think that's a bit simplistic. Taxes and redistribution in occupied territories were central to Nazi financial stability, and major tools of systematic oppression, for instance.

I pay my taxes enthusiastically, and committed substantial personal resources to the Bernie Sanders campaign... Given that we're operating in a national currency system, redistribution and social services are what a government should be doing. But in my more utopian moments, I don't think it's crazy to wonder whether more democratic and accountable financial structures are possible.
posted by Coventry at 4:29 PM on November 8


Coventry: I don't think it's crazy to wonder whether more democratic and accountable financial structures are possible.

I got thinking today: Are the consensus-ish processes which drive decisions and value determination in current cryptocurrency implementations closer to one-vote-per-person or one-vote-per-unit-currency?

If they're one vote per person-ish, then you could call them democratic. If they're one vote per unit currency-ish - which is what I suspect is the case - then they're just another form of plutocracy.
posted by clawsoon at 4:43 PM on November 8 [4 favorites]


Ah, we have reached the Godwin inflection point.

How is a techbro monetary system more accountable and democratic than one run by an elected government?
posted by fimbulvetr at 4:48 PM on November 8 [7 favorites]


Taxes and redistribution in occupied territories were central to Nazi financial stability, and major tools of systematic oppression, for instance.


This is nonsense. Taxes require some degree of consent from those taxed. The Nazis engaged in straight-up theft of goods and forced labor in occupied countries.
posted by TheWhiteSkull at 4:57 PM on November 8 [3 favorites]


clawsoon: In proof-of-share blockchains, they're one-vote-per-unit-currency-ish. In proof-of-work, they're one-vote-per-unit-computation-ish. The key idea in both is that your influence over the consensus is dictated by demonstration of an economic commitment, so you'll probably see both as plutocracy, and actually it seems likely that any cryptocurrency which starts to undermine a major national currency will be vulnerable to attack through that flaw.

How is a techbro monetary system more accountable and democratic than one run by an elected government?

At the moment participation in cryptocurrency economies is entirely voluntary, and anyone can create one (haven't followed that tutorial, just picked a recent one.) That is ipso facto more accountable and democratic than one which can be used to start a war a majority of the population opposes, or covertly use funds intended to help homeowners to prop up favored financial institutions. If you don't like how a cryptocurrency is operating, you can vote with your feet.

Taxes require some degree of consent from those taxed.

That is untrue.
tax
noun
1. a compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions.
Nothing about the consent of the taxed, there.
posted by Coventry at 5:04 PM on November 8 [1 favorite]


Except for your actual participation in society. There's a slight bit of difference between paying taxes so you can have roads, and hospitals, and an army and such, and people invading your country, taking all your stuff, and leading half your people off to build the Atlantic Wall. Even the description of the book you linked to describes how the Nazis used theft from occupied countries to fund their own social programs while prosecuting the war.

Honestly, if this is the level of reasoning displayed by crypto advocates, it does not inspire confidence in the currencies themselves.
posted by TheWhiteSkull at 5:16 PM on November 8 [6 favorites]


Well, for instance, David Graeber, a respected left-wing anthropologist, and Götz Aly, a respected anti-Nazi historian, both used the word "tax" to describe payments demanded by occupying governments, so I think I'm on sound semantic ground. And I don't otherwise understand what point you're trying to make.
posted by Coventry at 5:20 PM on November 8


Meanwhile, over here in reality, when libertarians piss all over our social support systems and bitch about paying taxes, they actually fucking make it easier for the neo-Nazis to accrue power and influence.

As we have witnessed.
posted by sebastienbailard at 5:31 PM on November 8 [8 favorites]


I do think socialized medicine, retirement, unemployment, science funding, technology investment, etc. all matter more than any ideological details about the financial system. Yet, tax money largely funds anti-social endeavors: Americans pay for large scale murder abroad of course. Almost everyone pays investors interest on their national debts. Those debts have some stabilizing influence, but they are also exploited to channel massive amounts into the pockets of the super-rich. Worse, our answer to them is "more growth" while we're already killing the planet.

We do not want this libertarian crypto-currency stupidity either of course, especially not with its even faster environmental suicide plan, but permissioned blockchains are basically banks with nearly unforgeable audit trails, including some zero-knowledge schemes that maintain privacy. The "permissioned" literally means you replace the idiotic proof-of-work with security guards watching the servers, much like a normal bank. It won't be semi-antonymous software running unbacked currency that'll compete with taxation backed currency, but currency issued by ordinary human institutions operating either abroad or very locally. Software like permissioned blockchains, or Taler, will merely help make those institutions competitive with institutions backed by your national government.
posted by jeffburdges at 5:50 PM on November 8 [2 favorites]


roystgnr: "That's a pretty standard consequence of risk compensation theory. A Paypal screwup isn't nearly as bad as a Bhopal screwup."

Yes. However, it seems to me that the designers of Ethereum weren't even operating in world of Paypal screwup-level of risk (much less Bhopal-level). It really seems in my (non-expert) opinion that they've been about as rigorous with the design as a grad school side project even though it's meant to be the foundation of a system responsible for lots and lots of real money. I mean, why did they intentionally design the system to be Turing-complete rather than something more restricted and perhaps more amenable to formal verification? That seemed to me a lot like borrowing trouble.
posted by mhum at 5:59 PM on November 8


Absolutely not! These etherium devs routinely make crazy mistakes that would be caught by any grad student serious enough to consider a side project.
posted by jeffburdges at 6:06 PM on November 8 [4 favorites]


"We do not want this libertarian crypto-currency stupidity either of course, especially not with its even faster environmental suicide plan, but permissioned blockchains are basically banks with nearly unforgeable audit trails, including some zero-knowledge schemes that maintain privacy. The "permissioned" literally means you replace the idiotic proof-of-work with security guards watching the servers, much like a normal bank. It won't be semi-antonymous software running unbacked currency that'll compete with taxation backed currency, but currency issued by ordinary human institutions operating either abroad or very locally. Software like permissioned blockchains, or Taler, will merely help make those institutions competitive with institutions backed by your national government."
I realise I'm about to be incredibly rude, but I really can't think of a way of putting this so that it isn't: That's possibly the most incredibly naïve thinking and justification for anything I've read in a long time.

Though I'm not sure if it's "don't worry, The Power Of Blockchain will magically make the people/institutions using it be competitive with the power wielded by government & government-backed institutions" naïve, or "don't worry, something something Blockchain Sky Fairy will naturally bring us all to meritocratic efficiency and definitely won't turn on us and feast on our tortured dreams and desires, nope, no-siree" naïve…
posted by Pinback at 6:17 PM on November 8 [3 favorites]


permissioned blockchains are basically banks with nearly unforgeable audit trails, including some zero-knowledge schemes that maintain privacy.

This is not true.

Do permissioned blockchains engage in maturity transformation? No? Then they are ledgers. They are part of the infrastructure necessary for a bank.

They are not banks, basically or otherwise.
posted by PMdixon at 6:31 PM on November 8


The Power Of Blockchain will magically make the people/institutions using it be competitive with the power wielded by government & government-backed institutions"

I think it's more a hope that greater financial transparency and accountability will lead to more efficient and beneficial financial arrangements. There's no reason a government couldn't benefit from such a financial structure, so I think you've set up a false dichotomy.
posted by Coventry at 7:07 PM on November 8


Coventry: I think it's more a hope that greater financial transparency and accountability

Isn't a selling feature of most cryptocurrencies that they allow anonymous transactions? That's a strike against transparency and accountability. (And in favour of privacy, which is also a good thing, but the opposite good thing.)

I'm guessing that there's no technical hurdle in front of creating a cryptocurrency which is democratic, transparent, and accountable. (As a result, it would also have no privacy, and votes by small holders would sometimes go against the interests of large holders.) I'm also guessing that no-one would buy it.
posted by clawsoon at 7:37 PM on November 8 [1 favorite]


Sorry, there's a lot going on in this thread, and a lot of different capabilities a cryptocurrency can have, and it's causing confusion. I was referring to the unforgeable audit trails jeffburdges cited as potentially leading to more efficient/competitive organizations.

You have to go through pretty serious contortions to construct a cryptocurrency transaction I would consider theoretically secure. Most of the privacy assumptions people are making to justify darknet-market transactions, for instance, are wishful thinking IMO.

There are some cryptocurrencies, though, which use an encrypted ledger and permit encoding transactions via homomorphic encryption. As written, they're pretty simple things. But you could imagine a cryptocurrency where accountable agents are obliged by the cryptocurrency's software rules to do all their transactions in a publicly verifiable way, while other transactions are encrypted for privacy. It could be a lot like the US ideal of open government vs private life, except enforced in a predictable way through software.

Then, of course, someone is going to come along and fork it so that interactions they want to hide take place in the dark, and they might have sufficient power to force everyone to follow the fork... But at least everyone involved will know that's what's happened.
posted by Coventry at 7:57 PM on November 8 [1 favorite]


Almost all crypto-currencies make all transactions public, clawsoon, the opposite of anonymity. Real names are not used, making them pseudonymous, but that's zero real protection.

ZCash is anonymous by using zero-knowledge proofs to reference previous transactions without identifying them. In practice, ZCash might not provide much anonymity because anonymous transactions are annoyingly slow, due to computing a Merkle tree over the blockchan inside a zero-knowledge proofs scheme, so few use them and the anonymity set is currently smallish.

Monero attempts to provide anonymity using ring signatures, but fails for complementary reasons, i.e. you cannot include enough other parties in your ring signature to provide real anonymity. Don't trust Monero's anonymity.

Aside from blockchains, you can provide real anonymity for all transactions using blind signatures, like we do in Taler, but that anonymity only applies to buyers, not sellers. You need a bank-like legal entity to deploy blnd signatures though, not just some blockchain, because someone must hold the secret keys to issue the blind singed tokens.
posted by jeffburdges at 8:37 PM on November 8 [1 favorite]


Meanwhile, over here in reality, when libertarians piss all over our social support systems and bitch about paying taxes, they actually fucking make it easier for the neo-Nazis to accrue power and influence.

Libertarians frequently express strong objections to taxation on the basis that imposing it requires an implied or even explicit threat of violence for non-compliance, but it seems to me that such objections miss the point that exactly those kinds of violence are inextricably bound up with the notion of ownership itself.

If a thing is owned but not by you, then you are not allowed to use that thing without the owner's permission, and any attempt on your part to do so will be met with some kind of sanction - up to and possibly including violence against your person. The scale of those penalties will depend on a broad consensus within the social group supporting their legitimacy about the value of the thing that's owned. Supporting a notion of ownership is identical with supporting the possibility of such sanctions as are required to enforce it.

Crucially, it follows that ownership claims are meaningless outside the context of a social group that is both willing and able to enforce them.

If such a social group constructs ownership rules under which regular partial transfers of ownership from private hands to public hands must occur as part of the legitimate process by which ownership claims (among others) are enforced, then within the context of that social group, ownership itself has no meaning aside from those rules. And a democratic nation with a legitimately elected government is one such social group.

Libertarians don't get to cherry-pick their morality here. Either you believe in democracy and pay your taxes like a good citizen, or the rest of the citizenry invokes the same right as reason to remove them from you that you invoke in support of the notion that they were ever your property in the first place.
posted by flabdablet at 8:40 PM on November 8 [9 favorites]


someone must hold the secret keys to issue the blind singed tokens

Disproving the idea that some form of central trusted authority is ultimately always going to be required in order to facilitate monetary exchange is the fundamental reason why BitCoin even exists.

Unfortunately for BitCoin, the idea is actually correct.

In the case of BitCoin itself, the overwhelming majority of its users believe themselves to be trusting in a putatively sound cryptographic protocol. But what they're actually trusting is a relatively tiny self-selected group of protocol developers and auditors.

Most BitCoin users do not have the level of technical skill required even to understand the protocol, much less verify its correctness. This puts them in exactly the same trust position vis a vis their currency of choice as the overwhelming majority of the users of national fiat currencies.

In any case, the actual currency in which transactions are denominated is an essentially unimportant detail as far as any genuine understanding of the operation of a monetary system goes.
posted by flabdablet at 9:01 PM on November 8 [3 favorites]


Supporting a notion of ownership is identical with supporting the possibility of such sanctions as are required to enforce it.

An appealing thing about cryptocurrencies is that, at least at the currency-transaction level, potential for violence is completely removed from the ownership semantics. You own a cryptocurrency asset because you know the relevant secret key, and that's it.

It's going to get more messy and familiar if cryptocurrencies start having a large impact on the real world, but right now it's one of my favorite aspects of the space.
posted by Coventry at 9:04 PM on November 8


Most BitCoin users do not have the level of technical skill required even to understand the protocol, much less verify its correctness. This puts them in exactly the same trust position vis a vis their currency of choice as the overwhelming majority of the users of national fiat currencies.

This is untrue, they're not in exactly the same trust position, because independent auditing is far more feasible when everything's out in the open. You weren't going to get some unknown in Japan calling out the abuse of TARP funds, it took an insider.

In any case, the actual currency in which transactions are denominated is an essentially unimportant detail as far as any genuine understanding of the operation of a monetary system goes.

It depends what you mean by "actual currency." We could call bitcoin "Shirley," and the system would run the same way, but the operation of bitcoin is manifestly more transparent and accountable than the USD.
posted by Coventry at 9:10 PM on November 8


You own a cryptocurrency asset because you know the relevant secret key, and that's it.

That's almost never "it".

Your ownership of that cryptocurrency asset requires that the relevant secret key remains accessible only to you. This, in turn, rests on your ownership of whatever physical assets contain that secret key (which might possibly include your body) and/or access rights for those assets. Assertion of that ownership does indeed equate to assertion of an expectation that sanctions, up to and including violence, will be imposed upon others who act to deny it.
posted by flabdablet at 9:22 PM on November 8 [1 favorite]


DoctorFedora: "Teegeeack AV Club Secretary's thing reminds me of how my high school history teacher told us about how the original Wizard of Oz novel was an allegory about the silver standard."

Turns out
it really probably wasn't.
posted by Chrysostom at 9:23 PM on November 8 [1 favorite]


This, in turn, rests on your ownership of whatever physical assets contain that secret key (which might possibly include your body) and/or access rights for those assets. Assertion of that ownership does indeed equate to assertion of an expectation that sanctions, up to and including violence, will be imposed upon others who act to deny it.

The point is, cryptocurrencies are valued by people without violence ever entering into it. Yes, someone has to do violence to me (or trick me, perhaps) to take cryptocurrency I have in my possession, but my complicity in violence by profiting from cryptocurrencies is far less than my complicity by receiving US Dollars, which are in demand at least partly because you have to pay your taxes in USD.
posted by Coventry at 9:35 PM on November 8


Given how much energy it costs to mine and transact the scrip, the violence is still there. It is just hidden away by the public subsidizing the true costs of generating electricity and feeding it to computational infrastructure, be they the military-industrial costs of colonizing oil-, lithium- or other resource-rich countries, or the financing of social costs as a consequence of climate change and pollution, like resettling refugees from nations that suffer drought and collapse into civil war, or higher healthcare expenditures as a result of a sicker population, forms of violence in their own indirect ways.

In a way, it is ironic, the extent to which this scheme is dependent upon cost subsidies — socialism — that have been entirely and conveniently ignored by a libertarian crowd.
posted by a lungful of dragon at 11:40 PM on November 8 [5 favorites]


I see this escalated to "governments are evil, fiat currency is violence, taxes are theft" pretty quickly overnight. Ah, cryptocurrencies.
posted by Dysk at 11:51 PM on November 8 [2 favorites]


That is a mischaracterization of the views I've expressed.
posted by Coventry at 12:02 AM on November 9


Crypto currencies are merely free-riding on the legal system, or so called “threat of violence”, of the underlying State. A bitcoin millionaire in a failed state would soon have their private keys extracted by lead-hose cryptography.
posted by monotreme at 12:46 AM on November 9 [2 favorites]


Turns out it really probably wasn't.
[Merlin Mann voice] Turns OUT!

Yeah, that's part of why I phrased it the way I did — I don't know if I really believe it or not, and he was given to the occasional bit of Turns Out himself when it made for a more interesting narrative about 19th and 20th century American history. ƪ(˘∀˘)ʃ
posted by DoctorFedora at 1:11 AM on November 9


Given how much energy it costs to mine and transact the scrip, the violence is still there. It is just hidden away by the public subsidizing the true costs of generating electricity and feeding it to computational infrastructure, be they the military-industrial costs of colonizing oil-, lithium- or other resource-rich countries, or the financing of social costs as a consequence of climate change and pollution, like resettling refugees from nations that suffer drought and collapse into civil war, or higher healthcare expenditures as a result of a sicker population, forms of violence in their own indirect ways.

I think BitCoin is terrible in lots of ways, but this is one moral failing that you can’t lay on it for a couple of reasons.

Firstly, the hash threshold to mine a block scales with the cost of mining: BitCoin will keep trundling whether you embed the full cost of power generation or not.

Secondly, even if electricity generation did embed the full costs of fossil fuels etc, mining hashpower tends to end up in places where power is cheap due to there being a local surplus: Mostly hydro power in out of the way regions.
posted by pharm at 1:36 AM on November 9


I see this escalated to "governments are evil, fiat currency is violence, taxes are theft" pretty quickly overnight. Ah, cryptocurrencies.

The history of fiat currency (which includes precious metal coinage) is steeped in blood as David Graeber eloquently describes in his book & every fiat currency is ultimately backed by the ability of the state that issues it to enforce it’s laws. Surely this is uncontroversial?

In the case of BitCoin itself, the overwhelming majority of its users believe themselves to be trusting in a putatively sound cryptographic protocol. But what they're actually trusting is a relatively tiny self-selected group of protocol developers and auditors.

I think you misspelt "small cartel of Chinese BitCoin miners" there. Regardless of what the programmers do, it’s the miners that choose to run the code & the miners that choose which changes to make to the protocol. It doesn't matter what the BitCoin programmers do - if the miners aren’t willing to play ball then they might as well be whistling in the wind.
posted by pharm at 1:45 AM on November 9 [2 favorites]


The history of fiat currency (which includes precious metal coinage) is steeped in blood

Sure. But that is meaningless. The history of currency is steeped in blood. The history of nation states is steeped in blood. The history of white men is steeped in blood. The history of earth is steeped in blood. History is steeped in blood. That tells you little to nothing about the current state of affairs. Personally, I think you'd do better to transition away from white men than fiat currency, but hey-o. Neither position is really anything but a nonsense.
posted by Dysk at 2:55 AM on November 9 [7 favorites]


Fiat currency remains backed by the ultimate threat of state violence today Dysk.

These days it’s very much the velvet glove the vast majority of the time but the mailed fist still lurks, ready to be brought out when necessary.
posted by pharm at 3:36 AM on November 9


So does all legislation, law, and civilisation itself. Being theoretically backed by the threat of state violence is pretty meaningless in and of itself.
posted by Dysk at 3:40 AM on November 9 [6 favorites]


Specifically, theoretical backing by the threat of state violence applies to the fundamental concept of ownership regardless of the exact manner in which that concept is implemented inside any given state; and as monotreme points out above, it is this and this alone that allows owners of BitCoins to have a reasonable expectation that their private keys will remain so.

The fact that taxes are customarily denominated in the fiat currency of the collecting state, and the other fact that part of the taxes collected by almost all states fund morally unsound activity, are complete red herrings with respect to this point.

Also, nobody gets a free pass from any degree of complicity in the morally questionable activities of their state simply by choosing to facilitate some or even all of their trading with a non-state currency. The complete fungibility of money is the entire point of money.
posted by flabdablet at 4:13 AM on November 9 [6 favorites]


It doesn't matter what the BitCoin programmers do - if the miners aren’t willing to play ball then they might as well be whistling in the wind.

Well it kind of does matter. If the protocol's designers find some flaw that requires correcting, but the miners choose not to apply that correction, and those few users who actually bother to audit the resulting blockchain can demonstrate that it suffers from the effects of the flaw, they can destroy the rest of the user base's trust in the older protocol implemented by the miners, who will suffer losses as a result.

This is not merely a theoretical possibility: BTC and ETH communities have both been fractured by blockchain forks driven by technical considerations.

But you're quite right to point out that the original BitCoin vision of an inherently incorruptible fleet of pure peers for whom mining is something that happens in the normal course of merely using the currency is now looking pretty laughable. It's now much less unlikely for a majority of miners to collude in a massive double-spending attack than it ever used to be.
posted by flabdablet at 4:51 AM on November 9 [2 favorites]


Specifically, theoretical backing by the threat of state violence applies to the fundamental concept of ownership regardless of the exact manner in which that concept is implemented inside any given state

Dingdingdingding we have a winner. If taxes are theft then property is theft.

This is getting to be a really dumb and generic derail.
posted by PMdixon at 5:33 AM on November 9 [2 favorites]


merely free-riding on the legal system

hmm. Not in the EU, certainly, where bitcoin is penetrating employment compensation norms, nor at anytime yer "bitcoin millionaire" redeems. That is what is known as a realizing capital gain, payable in legal tender and subject to taxation. And that's how the SEC ruling recognizing blockchain data types as a form of securities instrument, an executable contract, will kill the romance of the miners once and for all. Government M&A plays are difficult to beat.
posted by marycatherine at 5:42 AM on November 9


I've seen cost estimates that a 1 hour long double spending attack on ETH should cost only about $1M on Amazon EC2, flabdablet. If they add enough zero-knowledge cross-chain blah blah, and folks let you pay for mining in ZCash, etc., then one could imagine such attacks becoming viable, provided some chains will not roll back to help other chains. I'd love it if ETH shoots itself in the foot this way, maybe one could even build a botnet that launches such attacks automatically. lol

Also, I believe both that blind signed tokens provide the best known way to represent "spending money" online, and that we should focus on centralized deployments for blinds signatures, due to the extreme simplicity, efficiency, and responsibility when compared with distributed blockchains, but..

Ain't likely you'll find any actual formal limits on the "decentralization of money handling" because actually our banking system is already vastly more decentralized than BitCoin, with its limits being the regulation required for trust. We can always design new cryptography to utilize or augment whatever new trust people accept.
posted by jeffburdges at 5:51 AM on November 9 [2 favorites]


For those who have travelled to the future and have no idea what is going on:

Wikipedia on blind signatures

and a couple of relevant original papers:

Chaum, 1982: Blind signatures for untraceable payments
Camp, Harkavy, Tygar and Yee, 1996: Anonymous atomic transactions
posted by flabdablet at 6:42 AM on November 9


Fiat currency remains backed by the ultimate threat of state violence today Dysk.

These days it’s very much the velvet glove the vast majority of the time but the mailed fist still lurks, ready to be brought out when necessary.


Fallout dust in the air will be such a bitch
posted by infini at 8:39 AM on November 9 [2 favorites]


As a complete aside, I'm totally using anonymous atomic transactions as a song title for my cold war themed surf band.
posted by Dysk at 8:53 AM on November 9 [3 favorites]


mining hashpower tends to end up in places where power is cheap due to there being a local surplus: Mostly hydro power in out of the way regions.

Hydroelectric power — dams — requires construction and maintenance by state-level entities. Even if all mining was powered by hydro, you're still relying on the violence of a state to prop up the Bitcoin scheme.

But the question of moral hazard as regards the consequences and costs of energy generation and consumption is immaterial, as far as Bitcoin scrip goes: No state takes payment of taxes in Bitcoins, no more than they would accept copies of X-Men #1, tulips, etc. (except to first sell these items for real currency).

In the end, Bitcoin has no value until it is exchanged for real currency that can be used for real transactions.

That real currency — fiat currency — is itself valued by the extent to which a state will back it to pay debts. So Bitcoin requires no less "violence" to secure its value, as much as any other commodity that must first be traded for real currency to pay debts.
posted by a lungful of dragon at 10:08 AM on November 9


mining hashpower tends to end up in places where power is cheap due to there being a local surplus: Mostly hydro power in out of the way regions.

Given that the BitCoin protocol self-adjusts the proof-of-work difficulty to try to maintain a stable hash generation rate, and given competition between miners, the total amount of money that needs to be spent on powering the hashing engines will tend to track the amount of BTC that can be earned by doing so fairly closely. And as long as BTC remain in demand, given that they are deflationary by design, the amount of money it is feasible to spend on the energy required to generate hashes will tend to rise over time.

And it's the price of the energy, not its actual quantity, that determines how much of it can feasibly be spent on hashing. Which means that siting the hashing engines in locations where energy is cheaper simply means that even more of it will be uselessly burnt.

I am absolutely not in favour of drawing down hydroelectric storage dams at a higher rate than would be the case if a pack of deluded techbros could be arsed to stop messing about with their technically fascinating but socially ludicrous trustless trustworthiness ideology for two seconds and think about what they're actually doing.
posted by flabdablet at 10:36 AM on November 9 [4 favorites]


a pack of deluded techbros could be arsed to stop messing about with their technically fascinating but socially ludicrous trustless trustworthiness ideology for two seconds and think about what they're actually doing.

This particular train left the station some time ago I suspect.
posted by pharm at 11:24 AM on November 9 [5 favorites]


mining hashpower tends to end up in places where power is cheap due to there being a local surplus: Mostly hydro power in out of the way regions.

Also, most Hydro dams create big lakes on land forcibly taken from it's often indigenous owners by people with water pistols right?
posted by Megafly at 3:25 PM on November 9 [1 favorite]


Shorter Baudrillard, maybe: violence is only a simulacrum until it happens to you, personally.
posted by a lungful of dragon at 4:17 PM on November 9 [2 favorites]


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