Preface Link to heading

This is an interesting discussion with many people that have in one way or another echoed the point of view that cryptocurrencies in general are a blight on society. While a wiser man than I cautioned against accepting the premise of the bully, in this case doing so is instrumental in dismantling the arguments.

Participation in the cryptocurrencies is voluntary. As any emerging technology it had some rough edges, and when compared to the recurring economical fiascos of the traditional banking system, blockchains have demonstrated a profound improvement in some areas, and problematic behaviours in others were not.

This resulted in a large amount of so-called intellectuals such as the self-proclaimed systems programmer Drew DeVault, to write scathing articles disclaiming any relationship with crypto.

The one of interest to us, is the following rant that has a half-digested semblance of an idea wrapped in profuse uncritical “technology bad” rhetoric that is somewhat understandably accepted by the community, as Drew tends to have “good reasons” for these vents. I do so from time to time. I have a space for it; you’re reading the article in the somewhat hard-to-get-to rants section of the blog. The idea being that I need to publish my thoughts to silence the inner critic. This doesn’t seem to be the case with Drew.

Because of the abject stupidity and negativity of his article, there is a collapsible and collapsed-by-default dislaimer that reads as the following:

While it is tempting to assume that this is a heartfelt apology from an engineer under too much pressure, with undue problems that he didn’t sign up to fix, it is also completely disingenuous. With the clear understanding of the fact that arguments by example are better, but without any semblance of understanding why that is, Drew has continued to spew vitriol at projects tangentially related to his work and causing him problems. If I did the same, this section would have been perhaps 10 times larger. The few examples that he has provided can be easily disproven by looking at sources, that is other than wikipedia.

Disclaimer for a disclaimer Link to heading

Despite the fact that I have no respect for Drew, I will indulge in his request to expose my “stake” in cryptocurrencies: 32k’s worth of stablecoins. I have around ten times that amount locked in other assets, my net worth being modest compared to his, with a small proportion of it kept in Cryptocurrencies.

The reason for this blatant violation of privacy is to demonstrate that anyone of my kind is a lying grifter. Easier to tell based on my stake.

I am someone who is positive about cryptocurrency. I don’t need a “bigger fool” to make my money back, because the value of a stablecoin is tied to the value of the fiat currency, in my case USD, as a result, I can happily live with the liquidity that is available.

Oh and by the way, the reason I have this amount of cryptocurrency is two-fold: I need it to send money to a friend of mine, who most banks consider a scammer, and make my life more difficult, and I have it, because for some time, sending money from my employer to me was problematic, because of the broken banking system, that doesn’t seem to think that it needs to put on a veneer of customer satisfaction anymore.

Are there people that invest into a Ponzi scheme and need a bigger fool? Yes. Some of them, are using cryptocurrencies for that, but the historical majority used any technology that was available. Unfortunately, this includes the so-called fight against climate change, that instead of focusing on the real culprits, blame those who have neither a say, nor a choice in the matter. It would seem preposterous to use that as a weapon against those few that are genuinely trying to do the right thing.

It is far easier to generalise when you seem to have the moral high ground. It would have been easy to remind Drew of the error of his ways simply by pointing out the groups of dubious intent and conduct that he has been part of. He does not seem to believe that being a moderator at a paedophile forum makes one a paedophile and fundamentally untrustworthy, so he can’t possibly believe that being in a poor company necessarily means that you should give up.

Him being a co-creator of free software does not automatically make him culpable of the sins that he so-happily points out in the leaders of that foundation, curiously omitting actual problems of funds being siphoned into dead-end projects, lack of transparency, preoccupation with activism, instead of building actually good software, no just the social awkwardness, and sexual misconduct that would never even approximate enough evidence for a lawsuit.

Similarly, he does not believe that he should accept responsibility for the projects hosted on source hut; there will certainly be malware there, that is treated better than cryptocurrencies and/or blockchain technology. Does his contributions to wlroots make him an enabler of hyprland and transitively responsible for vaxry’s angry outbursts? That is silly and that’s the point; reductio ad absurdum as it is called in philosophy textbooks is at work.

Drew seems to believe that the people who designed BitCoin or Ethereum should be held responsible for the crypto scams; this is not evidenced in the text of his rant… I’m sorry, it is practically spelled out in this exact phrasing… OK, that makes my life simpler… let me start again.

Drew believes that just because it is possible to use cryptocurrencies for scams (as it is possible to do so with neural networks, phones, banks, credit, paper documents, paper money, and free software), that this immediately devalues all cryptocurrencies and people that work designing blockchain technology should be ashamed. This is not a straw man argument, this is the text of the previous quote. Drew extols the second infinity that Einstein mentioned in the famous quote; it is the one that Einstein was confident was actually infinite.

Casus belli Link to heading

The reason why Drew has had his knickers in a twist this particular time is because crypto has enabled a peculiar type of abuse. One can use computational resources, to “mine” proof-of-work coins. It is not the intended use, and from his perspective an abuse, CI services that he provides are paid for by him and are meant to be used for building software on his platform. His dissatisfaction is understandable; it is mathematically impossible to tell what the CPU is used for, so the consequence of that was uncharacteristically eloquently put by Drew himself:

It is unfortunate. It mirrors the arms race of adblockers and internet advertising, and targeted advertising and search engines. I would accuse Drew of letting ads go easy, but I don’t think that he considers them worthy of his attention. And that is ok. Ads don’t negatively impact hundreds of people while being comparable to several countries worth of emissions, universally reviled and largely a solution to no problem. This is an oversimplification of course, but advertising would be a bigger target, to anyone who is not just post hoc justifying their distaste; which Drew of course counters with a link to wikipedia on whataboutism.

While I could counter with more finesse, I don’t feel the need to. Simply put, the non-rentability of an older business model is a fact of life. YouTube is tightening its monetisation strategies for the same reasons as you had to fight for your CI: times change, new technologies make the previously possible impossible.

Enough about that. The blog post is mercifully short, and bookends with much vitriol. Like a chimpanze throwing faeces at zoo attendees behind a glass pane, the damage is largely psychological. Unfortunately, in this metaphor I am the zookeeper that has to occasionally calm the overly enthusiastic chimp down; reminding myself that we are not too different, despite the gulf in intelligence and self-control. I do not wish to harm Drew, nor do I have any hope of magically advancing his mental faculties to a level wherein he would stop. Continuing to dissect his poorly argued articles is in fact equivalent to stooping to his level, and I have no desire to do so.

I do however, have the unenviable job of wiping the faeces off the glass pane, to advocate for my work: blockchains. Drew speaks with such conviction and is involved in so many projects that his opinion can be confused with facts, and I must clarify what he and so many others have muddied.

What blockchains are Link to heading

Blockchains are simply a different way of organising data. It confers some advantages in some cases. It has its drawbacks in others. It is an evolving technology with much work still ahead of us. Cryptocurrencies, as any technology can be used for good or ill, and has historically had its darker side in the spotlight.

Decentralisation Link to heading

The chief advantage of an economic system such as Bitcoin is that it does not and cannot have a centralised authority that can override major decisions. It is global, democratic and egalitarian. Your bitcoin if you are a citizen in Africa is worth as much as a bitcoin for a citizen of the United States. It is produced in small quantities, there is a limited amount available, and while those who have greater concentrations of hardware can mine bitcoin at a higher rate, there are no positive laws that prevent anyone else from mining their own bitcoin, albeit less efficiently. Not one authority can increase the rate of mining of bitcoin, without also investing into a technological breakthrough.

If this all sounds like a cliche you have not considered how many of these statements are true of any one fiat currency. Not one currently existing currency has all of these properties; in fact, there isn’t one that has even half of them. The US dollar is probably the closest to a global fiat currency, unless you happen to be in one of a few countries that happens to be on bad terms with the US. It is not democratic, in the sense that the US government can unilaterally decide to mint more dollars, and also to decide not to. Minting one’s own fiat currency is considered a felony in most places. Decisions are largely made via an opaque process, with little involvement (if any) of the common people. The amount of fiat currency in circulation is most likely only known to the authority that minted all of it. The total amount of fiat objects is unlimited, can be denominated at will, and through a phenomenon known as hyperinflation has led to large-scale humanitarian crises.

Emissions Link to heading

Bitcoin is far from the only cryptocurrency, but it is the single largest target, due to being rigid, and having multiple fundamental flaws that cannot be remedied. Specifically, BitCoin is known as a proof-of-work cryptocurrency, where one’s voting power is proportional to one’s labour.

That labour needs to be verifiable, and electronic and must also be possible to apportion into smaller packets known as coins. To do so, the work must be cryptographic in nature.

The amount of work that needs to be done to enable a certain amount of value varies from blockchain to blockchain. Because of a miscalculation in how it was set up, the original intent behind BitCoin was that it would be used more as a currency, and less as a way of monetising sheer capacity to do cryptographic work. Unfortunately, due to differences outlined in the previous section, bitcoin was seen as a competitor to fiat currencies, one that took away power from the world’s governments, and as such, the natural elements of its evolution were forestalled, while the rest of its meteoric rise continued.

This created an imbalanced set of incentives and a chain reaction resulting in the two mining booms of 2016 and 2020. While the media were somewhat uncharitable, to the event, blaming bitcoin miners for shortages of GPUs and other components, such an event was far from the intended use of cryptocurrencies.

As such, proof of work blockchains, and cryptocurrencies based in those blockchains are largely going extinct. Despite this, the popular perception is still that blockchains are universally power-hungry, a sentiment that is echoed by a certain individual whose name was given enough limelight. As such, I believe that it is imperative that we evaluate the claim.

For simplicity we shall assume that all such research is reported and done in good faith; a claim that ignores the gulf in the detail, and does not pass the regular person’s experience check, but one that I will indulge in. Specifically, let us examine the article that is cited in Wikipedia as the study that estimated the bitcoin’s total power consumption at a fraction of a percent of the global power consumption: with 117.27 TWh presumably over the period preceding August 2021. Ironically the article is merely a demonstration of China’s government intervention forcing bitcoin miners to adopt less clean energy sources, but that is not relevant here.

A quick search on sciencedirect yields several articles estimating the impact of online advertising; during the less-aggressive advertisement period of 2016, it was estimated to be approximately 106 TWh, the range being less certain, between 20 and 200 TWh estimated.

Another article demonstrates the impact of advertisement on the power consumption of one’s browser. The reason for citing these is not a case of “whataboutism”, but rather to give the reader perspective on the scales of power consumption that one refers to: the impact on global warming of blockchains is not an order of magnitude greater than the impact of online advertising; even the most conservative estimates(in a non-peer-reviewed article) put Bitcoin at a grand total of 0.4% of global electricity consumption. Let us estimate that the remaining cryptocurrencies account for 0.6% rounding the number to a solid one per cent. This should give the reader the relative significance of focusing on cryptocurrencies as a driver of climate change.

It is not wrong to desire a more efficient system of consensus, one that would not require such an environmental impact, but attacks on the basis of environmental impact are largely not phrased in a fashion that is conducive to intelligent discourse; it is not “can you come up with a more efficient way of using bitcoin”, it is more of a “you dare use electricity, and do something useful with it! Die infidel!”. This is largely the consequence of traditional media finding a scapegoat for natural, albeit unpleasant economic processes.

The reality of the situation is thus: the mining booms of yesteryear are unlikely to recur, the two will probably be the last. The cryptocurrencies are moving towards more energy-efficient methods of consensus, such as proof-of-stake. It is not likely that networks such as bitcoin will experience a rapid loss of clients, but the newer cryptos will be predominantly not proof-of-work.

Security Link to heading

Blockchains have a fundamentally different threat model to traditional fiat currencies. There is usually a single private key per identity. I will cover what that means in a separate post, but for our purposes it is a piece of information, a number to be exact, that provides anyone who knows that piece of information access to perform actions on behalf of an identity. As you can probably tell, the exclusiveness of this ability hinges on keeping the information a secret.

If you lose your private key, that’s it. No recovery, no speaking to the manager, no reporting your private key as stolen, freezing your account, and no other similar services. Those could be part of a secure custodian that manages your assets on your behalf and would never lose your private key, but as an engineer, trusting a single party with an irrecoverable piece of data seems like a terrible idea.

Because the digital sources that store the private keys, also known as hardware security modules, like any hardware are capable of being destroyed, you must have redundancy not to be locked out. The problem is that you have now increased the attack surface area. Being able to access your funds is more important than making sure that nobody else can.

This has historically been the case, and resulted in some decisions, that have traded stronger security with a single point of failure, for weaker security with more points of failure. This makes even more sense, once you take into account that cryptos are used to speculate. It is a bad idea to have the most common mode of failure for your funds to be locked away irreversibly. Much better if the funds could be put to some use, even by a thief. It sounds preposterous, until you think about a situation in real life: you are being robbed at gunpoint; the two options are usually that you either give your wallet, or refuse to give your wallet and risk retaliation. A self-destruct wallet doesn’t seem to be something that comes to people’s minds. So blockchains follow that line of thinking.

So as you can see, the main source of vulnerabilities in the blockchain space is not in fact, technical. If you are not convinced by my description of a private key, consider how many sources of vulnerability are in the regular banking systems that you interact with on a daily basis.

1. Some banks don’t let you choose your password or logon information: Santander, for example gives you a ten digit number as a username, and six digits for a password. On the plus side, this is very unlikely to be re-used.
2. Most banks don’t let you use your preferred method of two-factor authentication. Most, like Santander, force you into receiving the second factor via SMS. An email is equally insecure, but far less unreliable. I would much rather have a TPM-based or HSM-based solution, given that TPMs are becoming an industry standard. At the very least, a TOTP is unlikely to lock someone out of their account because of roaming.
3. There have been banks that found a phone call suitable authentication for a transaction. I hope I don’t need to elaborate; the examples follow a pattern.
4. There is no guarantee that your data is handled gracefully. All you know is that your login information is sent out and that there is a process for storing your passwords. Given the other major security blunders on this list, it should not be surprising to find out that a banking system that still has some of its infrastructure in COBOL stores a spreadsheet of logon information.
5. There is often just one vendor of all your software. Don’t like the Santander mobile banking app? You have the privilege of remaining silent. This compounds with the previous points.
6. There is often no guarantee that something reported as a glitch isn’t deliberate manipulation.
7. There is often no guarantee that if something is wrong, you are given the raw data that can be used to fix the problem. We can extrapolate from the post office scandal, but there are more recent examples.

The attack surface on blockchains and crypto is largely social engineering. There is very little one can do to “hack” into one’s crypto wallet, without actively trying to steal their private key. With banks, especially ones that have a dubious moral code and/or lots of technical debt; pretty much all of them; there are many more avenues. Worse yet, because the API is restricted to only the bank-provided methods, and cannot even in principle have alternative clients, you can be lied to for years.

The only thing that is kind-of working in the banks’ favour is the fact that there is less operational overhead, and because the system is centralised, some things can be done more simply, under the assumption that the bank can be relied upon. Historically, banks have never been fined for misbehaviour, always reported the truth, never went out of business, never stole money from their customers, and most definitely never ever had problems caused by under-maintained software with a glaring issue. The advantage that is offered by blockchains is simply not needed, because reducing the greenhouse gas emissions is much more important than ensuring that people don’t lose their life savings.

If you did not notice a note of sarcasm in the above statement, you could use some research time. Come back when you have an informed opinion.

Blockchains are not without flaws. But with most blockchains, one at least has the certainty, that whatever happens is likely the outcome of a program behaving in unintended ways. Is it better to solve software problems than to persecute criminals? At least bugs don’t bribe programmers to not get fixed, and thus affect more people, so I’d say that this is a worthwhile trade-off in the long run.

Before we continue, I must address the question that will most assuredly come up; it has come up with Drew DeVault.

Well, if one simply looks at the zeitgeist, and recalls that there have been multiple cases of large crackdowns on blockchain trading firms one would certainly believe that Ethereum and Solana are the easiest way to lose one’s money. So-called meme-coins seem to be tied with the world’s foremost scams.

Indeed, I shall not deny the issues with FTX and Alameda Research; I shall merely point out, that these problems are neither new, nor disproportionately represented in blockchains. One can lose all of their money by losing their debit card. Sometimes, one can lose more, because it could be a credit card. Somehow, despite a rather long track record of less-than-optimal operation from the world’s banking system, with a consistent demonstration that the human element was the biggest contributor, we still find that it is easier to claim that blockchains are the lairs of scum and villainy.

One has to be rather careful here. Self-proclaimed intellectuals lacking in critical thinking skills can easily fall into the trap of comparing the severity of issues by the severity of the reporting around it.

It is much better and in my opinion far more intellectually honest to simply accept that systems are not perfect either way, and that the technologically newer systems are less likely to have gone through the processes that harden and polish these systems to an acceptable level. This statement is unlikely to induce a moral panic. This claim is also likely to eliminate any good will towards Drew in his tantrums; being as mercilessly uncharitable towards people that have maybe made his work harder, but not intentionally so, would have been justified had the objects of his attack — the crypto “bros” — were actually as malicious as he claims. Given this, I cannot blame Drew for not stating things as they are. While I would have preferred that he had stayed silent (shoutout to many people that have), I would simply like to correct the ideas that many may misunderstand. I have no axe to grind; I would have kept silent about him, had he not been loud enough to be taken seriously by the uninitiated.

Democracy Link to heading

Blockchains are inherently attempting to approximate democracy. Much like real democracies they tend to end up as oligopolies. This has its own benefits and drawbacks. Most people both under- and over-estimate the importance of this distinction.

The original assumption behind BitCoin was that it would be something that everybody can use, everybody can contribute to, and that it would be an inherently democratic system. Indeed it was. It started with the early adopters being genuine enthusiasts and believers. Over the span of less than a full decade it went to an oligopoly of mining farms, and ASICs much too expensive for the average Joe.

Ethereum ran into the same problem, this time constraining mining to ASIC-resistant algorithms and GPUs as the primary source of computation. Ethereum was then scolded both on the profiteering side, because it’d be far easier to buy one ASIC than several GPUs. As well as the common consumer, that when hit with a double and later triple whammy of tariffs, shortages and production issues, blamed the proof-of-work blockchains.

The solution was of course, a protocol that gave up on the idea that the price of entry is the hardware; instead it said that if one is going to invest in more voting power, it is better that that power grew without compounding factors, and extra environmental damage. The move is largely a huge benefit to the oligarchs, they can simply directly buy more stake in the consensus, instead of also having to find pesky mining equipment. The switch while relatively simple in the programming scene, was harder to accomplish because the oligarchs needed time to sell-off their now worthless ASICs and mining GPUs, to recover their money, ready to reinvest into the system.

Unfortunately, as this example illustrates, if there were no overlap with the interests of the oligarchy, we would still be stuck on a vastly inferior protocol. And the switch was delayed!

But is it better than the centralised monopolistic model of governments? I don’t know. In principle, we as a society should ensure that our governments never become tyrannical, we should prevent things where blockchains would be useful from happening. The way we accomplish this so far, comes down to even greater inefficiencies, and no holistic approach had been proposed; but one must keep an open mind. Blockchains offer a much more resilient system that is beyond any one country’s jurisdiction.

This means that in a trusted environment, the blockchains mimic the abilities of banks, with some advantages, and some drawbacks. In a trust-less environment, such as the manifold conflicts taking place on the planet right now as of writing, blockchains are a vastly technologically superior option.

Most advocates of blockchains would call it a day at this point, but I should mention that this is a coin with two sides. I can accept neither a world where blockchains are the only form of money, nor a world when traditional fiat is. I believe that the end goal should be a diverse combination of both approaches, with unnecessary in-name-only differences are collapsed, while significantly different protocols are allowed to coexist.

The elephant in the room is that blockchains can be used to circumvent financial sanctions. Or rather, that authorities that can issue financial sanctions have less voting power in the blockchain arena, though they still have some. This is a dilemma. On the one hand, there is the paradox of tolerance, wherein a policy of tolerance when being tolerant of intolerance would result in that intolerant policy overtaking the tolerant one. Thus blockchains in their commitment to a democratic system, cannot differentiate on the basis of tolerance, and cannot be part of the suppression mechanism.

On the other hand, sadly, the financial system has been and shall be used against individuals that are culpable of no sin other than disagreeing with their government. There is a profound asymmetry: the government can enforce its will with great tools that have only become possible because of the technological progress; tools that even the IngSoc would envy. We have LLMs and omnipresent surveillance, we have phones which are more accurately described as spying devices in addition to easily searchable indexed lists. Some countries require one to disclose their social media accounts, most, if you intend to travel, have a complex in-person song and dance to be approved for a visa. Worse yet, it is nowadays assumed that most people would have a bank account of some shape or form. One can no longer pay for most things in cash, not just because of some positive restriction, but simply put, because it is no longer considered practical. And that is before we consider any apparently already implemented minix

Blockchains threaten to provide an alternative to a system that can be unilaterally asked to sell out their customers. It is not generally untrue that blockchains can also, when issued with a subpoena have to provide some data, but the data itself might not be accessible without brute force. The blockchains are actively designed to limit the possibility of government intervention. There is a political spectrum and my opinions are my own. However, these opinions have been echoed in the works of many philosophers, like Dworkin, Hegel and Saint Augustine. To drive that latter point, consider what mercy and moral example would constitute in the financial sphere.

Pseudonymity Link to heading

One of the key problems with Blockchains is their perceived anonymity. This misconception stems from one key problem. As it was originally intended, BitCoin was a money alternative. Just like bills representing a set amount of gold held at a bank, the idea was to improve upon the existing financial system. One key consideration was that banks knowing much about their customers was instrumental in prevention of money laundering.

Indeed, BitCoin is not only not anonymous, every transaction can be traced back to its origin through every step along the way. The intention was that if the entire world switched to BitCoin, then one could not bribe a politician with plausible deniability. The bribe would show up, and if a more advanced cryptocurrency were used, it would also be possible to trace the intention, so the money didn’t happen to go from an interested party to another party, it was deliberately shoved. This would also allow large exchanges of money to be traceable, in cases wherein a deal was struck. If a BitCoin at some point was used by some criminal, that coin would carry the mark permanently, and would allow for intervention on a grander scale.

Because the eponymous Satoshi Nakamoto, a pseudonym to be sure, never intended BitCoin to be the final word in the blockchain world, but rather a first step demonstrating that it is indeed possible to do so, the network did not require any form of authentication other than generating a private key. As such, while every wallet was in no way anonymous, because one could have as many as they like, and furthermore none were tied to any real identifying pieces of documentation, the wallets are pseudonymous. You would be able to identify the wallets used by criminals, but you wouldn’t be able to tell whom they belong to.

This is not a fundamental issue, to make sure that people were aware of cryptocurrency one needed to lower the barrier of entry, and BitCoin was meant as a technical demonstration, not the final product. With that said, it did not stop actual criminals from using BitCoin. This is not necessarily an unfixable problem, at worst BitCoin becomes comparable to cash, at worst, a better cryptocurrency is introduced, that cannot have a regular person generate a private key. As a consequence, one can hold a private key, do what they want, but there is a central authority that can map wallets to humans and that’s the end of the story. If the newer blockchain were also similar to BitCoin in the modus operandi this would actually be far better than a bank’s ability to trace funds.

Still, because criminals did use BitCoin and sometimes preferred it, cryptocurrency is now known as the criminals’ best friend.

Other cryptocurrencies are less pseudonymous, and much more anonymous: specifically: Monero. As a consequence of being truly anonymous it can still be used by criminals but without any of the good properties that BitCoin would have for law enforcement. While it would be tempting to view the evolution of cryptocurrencies in that direction as a monumental failure, I cannot help but blame the lack of adoption of cryptocurrencies for the evolution. Most governments treat cryptocurrencies as if they were used exclusively by criminals and traders, and as such, cryptocurrencies adapted to have better properties for that niche.

Conclusion Link to heading

This is a rather long discussion of blockchains. I feel that I have gone into too much detail for some, while being not nearly as detailed for others.

The Blockchains are not the be-all-end-all solution to humanity’s woes. It is a potential next step in the evolution of money. There is a considerable amount of misinformation about blockchains, a stigma attached to working on them as well as a profound sense that the “intellectual elite” are firmly against it as an idea even in principle. I have not provided better arguments, I have simply poked holes in the existing ones. I believe that it is in everyone’s interest to engage in this debate seriously and deliberately. As such, consider this a starter towards a longer series on blockchains.

Epilogue Link to heading

This is probably the last serious article in the year. Definitely the last article that I will publish on the vitepress GitHub pages. I intend to turn this blog into a proper blog. I also intend to set up a proper presence on medium as well. There are many technical topics that I should write about.