"Crypto" Is Being Redefined as Cryptocurrencies

I agree with Lorenzo Franceschi-Bicchierai, "Cryptocurrencies aren't 'crypto'":

Lately on the internet, people in the world of Bitcoin and other digital currencies are starting to use the word "crypto" as a catch-all term for the lightly regulated and burgeoning world of digital currencies in general, or for the word "cryptocurrency" -- which probably shouldn't even be called "currency," by the way.

[...]

To be clear, I'm not the only one who is mad about this. Bitcoin and other technologies indeed do use cryptography: all cryptocurrency transactions are secured by a "public key" known to all and a "private key" known only to one party­ -- this is the basis for a swath of cryptographic approaches (known as public key, or asymmetric cryptography) like PGP. But cryptographers say that's not really their defining trait.

"Most cryptocurrency barely has anything to do with serious cryptography," Matthew Green, a renowned computer scientist who studies cryptography, told me via email. "Aside from the trivial use of digital signatures and hash functions, it's a stupid name."

It is a stupid name.

Posted on December 4, 2017 at 9:14 AM • 93 Comments

Comments

RamriotDecember 4, 2017 9:43 AM

So does this mean words like cryptozoology now just mean how you buy animals with electronic funds?

Or should we just stick with the Greeks on this one?

Crypto => Hidden or Secret

Period

NicholasDecember 4, 2017 9:46 AM

I rarely ever hear "cryptocurrency" concatenated to "crypto" with anyone actually involved in the technology, least of all the actual develeopers of said technology. I usually hear them called "altcoins" or "*coins" in any case where the cryptocurrency in discussion isn't Bitcoin.

which probably shouldn't even be called "currency," by the way.

Journalists probably shouldn't pretend to know economics.

RachelDecember 4, 2017 10:00 AM

The UK and EU are now planning to heavily regulate bitcoins from next year. Because it is abonymoys and can thus be used criminally and to evade tax. Now, we know its not anonymous. But thats their take on it.
It is actually fine for one word to mean a number of different things. The french language is notorious/beloved for its metaphors. But the technical realm is different. Concepts must be clear.
As JG4 and others point out, indeed these products are not currencies but securities.A lot of the folk promoting coin offerings have received warnings.They do not fit the definition of currency.
I am waiting for a celebrity to promote a 'TulipBit' or 'TulipLite'. Does Ether mean it gets you high, puts you to sleep and dissipates instantly?
This is a useful post Mr Schneier. Thanks for raising it.

RanizDecember 4, 2017 10:05 AM

So what do we call them then? I agree that they are neither cryptographic nor currencies.

They do use hashes to prove authenticity, so what about "authenticated digital securities"?

David Allen WilsonDecember 4, 2017 10:21 AM

At least it's getting "some" public attention to cryptology. People wouldn't care at all if laws were passed tightening or loosening crypto regulations before. Now they do... because *chuckle* bitcoins.

David RudlingDecember 4, 2017 11:24 AM

Here is a question, not a rhetorical one - I would like to see serious answers from some of the well-informed contributors to this blog.

What is the credible expected range of lifetime of the cryptographic underpinnings of the likes of Bitcoin in the face of possible future attacks by quantum computing and is this therefore a safe and suitable technology on which to build "authenticated digital securities" (or whatever one wants to call them) on the scale that seems to be envisaged in the medium and long term.the

I am assuming that successful cryptographic exploitation would cause a complete collapse in the value of the securities.

David RudlingDecember 4, 2017 11:27 AM

Ignore the superfluous "the" at the end of the penultimate paragraph - poor proof reading.

.December 4, 2017 11:37 AM

Kinda like surfers - it's OUR ocean and OUR waves, man. Stay off our beach. And don't even use surfer lingo without our permission.

RhysDecember 4, 2017 11:45 AM

Once, when crypto was an adjective- it had one understanding.

Becoming part of a noun belies that there is much about the "currency's " existence that remains cloaked in speculative- trust, reliance, integrity, ...etc.

Too much focus on the algorithmic functionality distracts from the fact that the currency is a system of systems. Within a system of systems. No stronger than the weakest, or compromised, link in the chain.

It also begs the question how long political economies will tolerate its existence (or competition) without the political fingerprint applied upon it. Deep state manipulation of the basis of value is still another weapon of (non-military) war.

I would be more concerned with trusting the potable water supply by cryptosporidium before trusting beyond the (arguably) accountable political economy. {According to the CDC, both the parasite & the disease are commonly known as "Crypto."}

WaelDecember 4, 2017 11:53 AM

It is a stupid name.

Maybe a stupid name, but some made a lot of money!

@.

Must be crypto... right?

Wrong! Must be stego ;)

Douglas CoulterDecember 4, 2017 12:02 PM

When they came for ___ I said nothing, as I wasn't a ___.

This is another one of those. I got endless grief for complaining about the redefinition of the word "hacker" to mean "cracker, or black hat" when it didn't mean that at all growing up.

And more for pointing out that FUD as originally used, meant Fear, Uncertainty, and Deception, not "Doubt" as some later tried to redefine it - which of course was already covered under "Uncertainty" - fear of calling a liar a liar I suppose, but still. MS of course was the target of that one and we know why.

Now it's come home to roost here with Crypto...and most of this gang wasn't there on the other misuses of the language to support an agenda or give a pass to ignorant journalists.

I'm not saying that's good, I'm saying what is.

NinjaDecember 4, 2017 12:02 PM

So the proper name would be something like "decentralized, cryptographically secured investment fund" or something like that, no? Like a very volatile fund (ie: stocks). So bitstocks?

Peter PearsonDecember 4, 2017 12:06 PM

Here the US Senate is considering a bill (S. 1241) that seeks (among other things) . . .


to interdict and detect prepaid access devices, digital currencies, or other similar instruments, at border crossings and other ports of entry for the United States

and we're fussing about the name?

RhysDecember 4, 2017 12:12 PM

@Peter Pearson

I think the financial industry already staked out a name with "altcoin".

Certainly has better precision.

Eric SternDecember 4, 2017 12:15 PM

@David Rudling,

When quantum computers start to get advanced enough to possibly be a practical threat the cryptographic algorithms in Bitcoin will simply be changed to quantum resistant ones. I understand there is already quite a lot of research going on in this area already.

Bitcoin is software and so can be enhanced and modified to meet changing conditions.

Rufus OnfyaDecember 4, 2017 12:36 PM

I propose we refer to all cryptocurrencies as "digi-wampum." One appropriates it from others for cheap, hoping to resell at inflated prices, while flaunting its ownership and not understanding who made it or how.

And when their wallet gets hacked we can say they "got digi-wamped!"

justina colmenaDecember 4, 2017 12:55 PM

No commodity hardware or software yet in existence is anywhere near secure enough to keep any kind of digital or crypto- currency safe from hackers and thieves. La Cosa Nostra, «воры в законе,» and other organized criminal networks, having stolen the identity of the National Security Agency of the United States, work continually to weaken the security of all commodity hardware or software, and to hinder the efforts of individuals and businesses to secure their online assets.

Sok PuppetteDecember 4, 2017 1:06 PM

Oh, Jeez, WHO THE HELL CARES????

If you want to be that way, most of modern "cryptography" isn't cryptography. Where's the hidden writing in Diffie-Hellman key agreement, to say nothing of, for instance, "Computation from Append-Only Ledgers"? Or secure multiparty computation?

By the way, did you know that almost none of the cypherpunks were technically speaking enciphered at any time? False advertising, if you ask me.

Oh, and "cybersecurity" has nothing to do with cybernetics. The "cyber" prefix was imported by ignorant Beltway buffoons (via chatroom masturbators). Bunch of ignorant interlopers with no knowledge of the technology or the field's preexisting culture... sort of like the Blockchain Barbarians at the gates now. Anybody who's ever used "cyber-" unironically, let alone used "cyber" as a noun, is, shall we say, poorly positioned to complain here...

And, for the record, from about 1990, the primary meaning of "hacker" is fully entrenched as "person who attacks and penetrates computer security systems".

Language evolves. Get over it.

AJWMDecember 4, 2017 1:10 PM

I though Crypto was the name of Superboy's dog? ;)

Oh no, wait, that was Krypto. (And Supergirl's cat was Streaky. I was raised on silver-age DC comics. They've been retconned since.)

Mark SDecember 4, 2017 1:14 PM

Many people use the word "wiki" to mean "Wikipedia" (or "USB" to mean a flash drive), and domain experts don't seem to have much influence on how people use words.

hmmDecember 4, 2017 1:20 PM

"Math money"

"Block bling"

"Calc cash"

They need something catchier. Especially if they're not actually encrypting their transactions!

hmmDecember 4, 2017 1:22 PM

Or in light of the hacks/disappearances of whole exchanges, "kleptocurrency"?

Sincerely,

Satoshi Guacamole

AlexDecember 4, 2017 1:48 PM

We already lost the "hacker" debate. Might as well start getting used to this one. :)

Liza PlentyDecember 4, 2017 1:53 PM

The word crypto comes from the Greek "kryptos" meaning "hidden in the pot where your wife doesn't look." Any other use for this word is just offensive. You are all a bunch of hipsters. For shame.

MarkHDecember 4, 2017 3:03 PM

Although the "crypto" prefix is at best misleading ... calling it _____currency with any prefix is even worse.

Bitcoin shares some characteristics of actual currencies, but differs in so many respects that people thinking of it "like money" are will put themselves at risk.

Andre AmorimDecember 4, 2017 5:15 PM

They should follow "...the ISO 7498-2 standard, use the terms "encipher" and "decipher." It seems that some cultures find the terms "encrypt" and "decrypt" offensive, as they refer to dead bodies..."[1] :-o

[1]Applied Cryptography: Protocols, Algorithms and Source Code in C 20th Anniversary Edition, ;-)

Clive RobinsonDecember 4, 2017 5:16 PM

@ Sok Puppette,

By the way, did you know that almost none of the cypherpunks were technically speaking enciphered at any time? False advertising, if you ask me.

The word "cypher" has had many meanings down the years, two of which are "nothing" or "zero". So you could say the equivalrnt of "he's a zero" by saying "he's a cypher". You could also say that someone was a cypher of another person, that is in effect they were at best a temporary puppet...

So "crossed meanings at dawn, and bring your seconds" ;-)

MaxDecember 4, 2017 5:39 PM

So, what's an alternative name? Cryptocurrencies use blockchain technology, why not call them blockchain currencies? I'm sure people would come up with horrible abbreviations all by themselves.

Won't happen anyway, the term cryptocurrency is already established. People don't like to change terminology and understandably so. Remember Mebibytes?

hmmDecember 4, 2017 6:26 PM

"People don't like to change terminology and understandably so"

You have to have something worthy of changing to, brevity or wit.

Blockchain-McCoinface is going to win though, too many reddit idiots for it not to.

WaelDecember 4, 2017 11:04 PM

I wish I bought some a few years ago. The way it's looking, I'll be working until I croak.

Gunter KönigsmannDecember 4, 2017 11:11 PM

What I also don't understand is all the claims that
-the Blockchain will allow to process much bigger amounts of data than computers can currently. It actually doesn't scale extremely well.
- the Blockchain will improve the security of ___ (put in any unrelated substantive here)
- the Blockchain will ensure privacy for your medical data
- that this processor/ rented single-core cpu in the cloud / operating system is Blockchain-enabled.

WaelDecember 4, 2017 11:32 PM

Well, hash algorithms, PKI and other building blocks of crypto currency are described as cryptographic operations. As for 'currency', how is bitcoin different than FIAT[1] money, especially after decoupling paper money from gold?

@Gunter Königsmann,

On the other hand quantum cryptography tends not to be too much crypto, neither.

True... I think. And Random Variables are neither ;)

[1] Fix It Again, Tony. AKA: Fabbrica Italiana Automobili Torino.

Clive RobinsonDecember 5, 2017 1:13 AM

@ David Rudling,

What is the credible expected range of lifetime of the cryptographic underpinnings of the likes of Bitcoin...

That is probably the least of your worries with these "numbers games".

In effect thry have no substance only sunk costs in time and effort, thus they are by no means a "Value Added Process".

Bitcoins and similar are in effect the modern "black tulip bulbs" and a study of Dutch history might give you rather more concern as to what happens when people loose confidence in them.

Thus Quantum Computers do not have to work to make Bitcoin et al worthless, investors only have to believe they do to start a run on the exchanges. So a couple of suitably worded Press Statments in the right places could kill it tomorrow...

I would like to say that Bitcoin et al are the ultimate folly possible in human stupidity. But I know there is yet another "get rich quick" confidence trick waiting around the corner.

Some years ago I explained the difference between real wealth and fiscal wealth (raw materials/hard assets and work/energy). In the intervening time little or nothing has changed, the Sun still shines and man still uses it to recycle iron, all be it a little bit more efficiently.

225December 5, 2017 3:36 AM

Clipping compound words weirds language.

You couldn't have a crypto currency without hashes and signatures, not a very good one anyway, so I understand why they use the word crypto. But if you shorten a compound word to a commonly used prefix then without context lots of people will get confused, well that's what I heard on the tele.

FoxpupDecember 5, 2017 7:22 AM

It is a stupid name because all electronic payment systems have been secured with some form of cryptography or another ever since Western Union first had the idea of using ciphered telegrams for this purpose back in 1872. Bitcoin has many novel features but its use of cryptography isn't one of them.

("Digital currency" is even worse, as you'll have a hard time finding any currency - modern or ancient - that isn't based on discrete numbers.)

RachelDecember 5, 2017 7:25 AM

Rhys
Lets not forget crypto-fascist

Wael
How does it differ from money? lets see, what about the fact you can't buy 99% of stuff with it; the extremely long transaction times; the taxes and charges on nusing small amounts making it entirely counter productive. The inequality of distribution and access. Oh and what Clive said about fiscal vs real wealth. and why would one wish to use it as money now it costs so much?
I wish for you financial abundance. I also wish for you to derive great pleasure from your work. And I wish for you not to croak.

225December 5, 2017 7:41 AM

@foxpup

crypto currency is fine, digital currency is also fine, the digital is for digital circuits like in the digital revolution, not discrete mathematics or payments wholly paid out in severed fingers.

Chris JohnstonDecember 5, 2017 8:15 AM

Hmmm. Crypto?
I’m pretty sure that the blockchain ledger of transactions (every transaction is in there) is public / not secret. Right???

Cryptic?
Maybe they mean it is hard for many people to understand?

WernerDecember 5, 2017 8:41 AM

I wouldn't dismiss the importance cryptocurrencies and cryptography have for each other quite so rapidly. While the basics are not fancier than, say, PGP, there is work on protocols that go well beyond this, e.g., zero-knowledge proofs to improve privacy and scalability, Schnorr signatures for robustness and, again, scalability. And so on.

To get an idea of what happens at the edge between engineering and academia, one could have a look at the presentations at the Scaling Bitcoin conferences:
https://scalingbitcoin.org/

And some things go far enough that it seems fair to consider them contributions that do advance the state of the art. Not necessarily the core building blocks such as hash algorithms, but crytographic protocols built on top of all that. If cryptocurrencies continue to grow, academic activity directly aimed at them will only increase.

Having said that, there is also a lot of noise about all this, with impressive hyperbole both on the side of the doomsayers and the side of the anarchists/adventurers who are merrily hopping around their golden calf. (And there are of course those of us who should have been early adopters and thus by now ready for retirement in style, yet somehow managed to miss most of the fun.)

By the way, "altcoin" refers to cryptocurrencies other than bitcoin. Things like Litecoin, Ethereum, or any of more than thousand other coins. (Here's a list: https://coinmarketcap.com/)

Oh, and if you think what happens in these markets doesn't affect real economies: some cryptocurrencies can be efficiently minded with high-end graphics cards, prices for them have gone up considerably, to the great dismay of gamers. And if you're wondering why memory chips are so expensive, well, some lucrative mining uses lots of memory ...

Of course, all the mining is horribly wasteful in every possible regard. Would be nice if those "proofs of work" would, instead of measuring the speed of some hamster wheel, actually have some real-life value. So there's an opportunity for new contributions ...

- Werner

PatrickDecember 5, 2017 12:59 PM

Let's see, I can't call it "currency", because , and I can't call it "money" for the same reason. I can't call it "investment," because it's not capital invested in a productive enterprise. I would think I could call it an "asset," but someone will jump all over me for some reason I can't predict.

Well, what is it then? It is a decentralized transferable mathematical entity, based on digital signatures, hashes, and a distributed ledger, which some people are willing to trade for other goods and services. Not too catchy. Very well, I'll use the handy acronym DTMEBODSHDLWSPAWTTFOGAS. I'm sure that'll catch on.

I find it weird that we can't refer to something as "crypto" even though it is based entirely on asymmetric cryptography and hashes.


albertDecember 5, 2017 1:11 PM

@Nicholas,
"...Journalists probably shouldn't pretend to know economics...."
Economists don't even know economics.

@Clive,
A person is called a 'cypher' if they are just numbers on a page (or today, a display:). All personality and humanity being sucked out of them, or ignored. It's like the hatchet man who looks at salaries before the firing begins. Employee ID and salary. That's all they need to know.

@Werner,
The techies in the cybercoin realm are probably working on ways of using quantum computers to handle the mining and verification.

@Max,
"blockchain currencies" = BCC
BitCoin - BC
coincidence?
...........
With BitCoins dramatic rise in price, lots of folks are thinking it's an investment medium. It's not. Neither is it a commodity. The best investment media have: rarity(scarcity), value that can't approach zero, and desirability. It's a medium of exchange. If one is lucky enough to live in a country with stable currency, it's not desirable. If not, it may the best hedge against inflation in the short term.

. .. . .. --- ....

WaelDecember 5, 2017 5:33 PM

@Rachel,

I wish for you financial abundance. I also wish for you to derive great pleasure from your work. And I wish for you not to croak.

Thanks. But croak, we all shall.

abetancortDecember 5, 2017 6:24 PM

What is currency? I shall ask you.
What are the processes that insure, in the case of Bitcoin, that any of it involved in a transaction is not counterfeit? I shall ask you.

Answer these two simple questions and light will shine where now you only find darkness.

Rachel the UncroakedDecember 5, 2017 10:59 PM

Wael

money doesn't do stupid things like drop one third in value overnight based on some weird arbitary non happening. or increase in 'value' 500%in a year.
Albert, thanks for pointing out the wooly thinking re investing.
We could say money is anti fragile.
Bitcoin is just straight out fragile. doesnt even get 'robust' as a definition.

WaelDecember 5, 2017 11:56 PM

@Rachel,

Bitcoin is just straight out fragile.

That's where opportunities arise. BitCoin is just one of many crypto-currencies (go to coinbase.com, for example.) If we adopt a balanced disposition, we'd also see the advantages and possibilities of crypto-currencies. Whatever your views are, it seems that crypto-currencies are an evolutionary path we're already on. Maybe it'll survive; maybe not. But it sure beats this sort of Yap island's currency! The "The monetary system of Yap relies on an oral history of ownership." is now using Blockchain "technology" -- far more robust! And fits in your wallet, mobile device or a wearable IoT watch or ring, etc...

Try to do that with a Rai stone, or paper money, for that matter!

Viagra-Snorting SpookDecember 6, 2017 1:00 AM

@ The truth,

Sounds like someone missed the Bitcoin train.

Someone + 1 (sometwo.) Missed the Ethereum locomotive too. Wasn't very smart.

Clive RobinsonDecember 6, 2017 2:06 AM

A little thought experiment for people,

If you mined your BitCoin back when it was cheaper to do (in terms of actual resource input).

And say you had a thousand Bitcoin when they were less than 20USD each you would now be looking at them being worth nearly 12,000USD each currently an increase of over 60,000%....

If everybody who held Bitcoin decided to convert them to another limited resource such as gold or platinum what do you think would to the price of those metals, and what the outward effect of that would be.

You can start to see why those who's job it is to control the monetary supply would see bitcoin and similar as a disruptive technology and would want to ban it or if not possible to ban it control it in some way...

Thus I suspect that the wild speculation days of digital currencies is coming to an end...

Thus do you jump in now to get the last "wild speculation" or do you stay well out of it...

As some Dutch found "wild speculation" on tulip bulbs left those who got out late with something they could not even make a meal of... are a handfull of bits any more edible?

Viagra-Snorting SpookDecember 6, 2017 2:37 AM

@ Clive Robinson,

It's getting very cold this time of year! Hence the ...

Thus I suspect that the wild speculation days of digital currencies is coming to an end...

Maybe. But some will make a lot of money in the meantime. Is this a zero-sum game, in your opinion?

Sancho_PDecember 6, 2017 9:09 AM

@Rachel

”money doesn't do stupid things like drop one third in value overnight based on some weird arbitary non happening.”
Who told you so???? Haven’t you been alive in 2001?
Also ask my friend Stavros!

For the 500% you may ask from Bill G. to Mark Z. and ...
Hang on to a hype and you are in.
Money, cash or not, is a scam.

Clive RobinsonDecember 6, 2017 9:13 AM

@ Popup Spook with an itchy foot,

But some will make a lot of money in the meantime. Is this a zero-sum game, in your opinion?

There will be no increase in real assets in total. There will be a loss of energy and other resources due to mining and opportunity loss for society of those involved.

It will therefore create an inflationary effect of near "economic churn" multiplier times the actuall flow of suppprted currency or assets into the unsupported bitcoin et al systems.

A few people will walk away with the bulk of the supported currency that went in whilst others will be the goat meat left after fleecing and eviserating of the bubble bursting.

So from what level do you want to look at for "zero sum"?

All I'm seeing is a pyramid game that will hurt society in general. Which is probably not a concern if you clean up and get out before somebody somewhere decides those still in the game are guilty of some crime.

The likely result in the US is that US profiteers will be left alone if they are WASP and keep their heads down, if of some other ethnic origin good luck in the current political climate, because every body is guilty of something even if it's stealing air from more deserving citizens... Whilst their will be a show trial or three of "dangerous foreigners" who will not get extradited because the majority are as I understand it are in Hong Kong / China and thus conspiracy, racketeering and criminal association with a sode order of terrorism or perverting the US Political process will be rushed through a court, when it's China's next turn to be the current US Existential Threat. Remember "There can only be one" at a time the US sheeple brains might implode if they were told about more, or they might shout the wrong slogans the works of George Orwell will give you the reasoning.

Thus any assets they have not bern moved away from the greedy maw of the USG will be sequestrated into the US Gov coffers never to be seen again, as "proceads of serious organized crime" or other nonsance that realy means "Stealers Keepers".

If some do decide to fight you will see a re-run of Kim Dotcom, or similar tricks as have been pushed against Russian Oligarchies and their friends and relatives. No mater how legal what you did the cardinal rule is "Uncle Sam is right and you shall feel the might". It is after all why the USG throws some second or third world country back into the stone age every few years. Usually just as it is just getting to it's feet and has had the temerity not to allow US Corporates to rape pillage and plunder them back to the bottom of the third world nation list (see Operation Tiger and Mockingbird for start of offensive policy)

Thus the US Gov will get to see the whole bitcoin et al as a "tax on the stupid" that they have done well on either politically, financially or both.

So I'd follow the old investor advice "If it seems to good to be true then it probably is". But zero sum I think probably not when the authorities decide to take not just what Ceaser is due, but everything it can...

RachelDecember 6, 2017 9:37 AM

Sanco P

Thanks. I knew an example like that would be raised. And the stock market crashed a few times last century. My point is its not the inherent nature of money to wildly fluctuate every second day. By definition this is why we rely on it. And, when unfortunate events such as 2001 occur they are linked to real world events

Wael my non croaker

fair enough I appreciate your perspective. Evolutionary? for technology, maybe. For humans? Not really. Bitcoin is exclusive and elitist. I'll be more convinced when there are few homeless people left in Silicon Valley - as a result of something that occurred in Silicon Valley.
Ethereum smart contract tech may fit your evolutionary model. But what the agents did to scratch and rewrite the contracts to cover their own ass errors was highly offensive. It would not fly in the ; cough, real world. ( i hate that theres two worlds now) I would wish people (fanbois) were less naive.

Viagra-Snorting SpookDecember 6, 2017 1:12 PM

@Clive Robinson,

There will be no increase in real assets in total.

Common denominator: total real assets never increase nor decrease. Is there such a law of "conservation of assets"?

There will be a loss of energy and other resources due to mining...

Move to Iceland and leverage the free energy there or use solar panels: one-time cost hit.

Thus the US Gov will get to see the whole bitcoin et al as a "tax on the stupid"

Federal Reserve, maybe. US Gov... not sure.

Popup Spook with an itchy foot,

Sir, please! I do have a name. If you're too bashful to say it, then just call me VSS. Besides, ain't my foot that's itchy; it's my nose, dawg! Ever since my significant other caught me the first time... 'Spook'! What the hell is that blue stuff all over your nose? And why in the world is your nose so big and hard? My nose has been itchy since, but it sure beats mainlining the 'stuff'... almost made me a stiff ;)

Clive RobinsonDecember 6, 2017 10:22 PM

What environmental cost does Bitcoin have

I've mentioned that Bitcoin mining is now quite resource intensive, but few realise by just how much environmental effect it realy has...

Just remember that much of the mining is done in China with "dirty energy" with a realy major carbon foot print,

https://arstechnica.com/tech-policy/2017/12/bitcoins-insane-energy-consumption-explained/

Now what was someone asking about a "zero sum game"...

Oh and if you are not sure why Bitcoin is initial letter capitalised in some uses and all lowercase in others, or other odd questions you are to scared to put your hand up and ask,

https://arstechnica.com/tech-policy/2017/12/bitcoin-a-beginners-guide/

Have fun and remember even though it might be worth 150billion today, those 80% down swings in value could happen at any time, and might go higher than 99.9% it realy depends on just how much you can talk it up to drag in new money, much like a pyramid selling scheme... Oh and watch out for the trading and transaction fees over a thousand dollars on a single coin purchase currently is bound to make you wince...

JoshDecember 6, 2017 11:07 PM

@Clive Robinson wrote, "You can start to see why those who's job it is to control the monetary supply would see bitcoin and similar as a disruptive technology and would want to ban it or if not possible to ban it control it in some way..."

Bitcoin was intended to be a non-fiat currency. It wasn't until Mt.Gox, the first large-scaled online bitcoin trading platform, that fractional reserve was first attempted. Mt.Gox ultimately failed due to its operators misplacing or claim stolen by hackers its offline reserve of customer bitcions. But many observers had theorized that the exchange practiced fractional reserve and had to stop withdrawls in what appeared to be a modern day "bank run." In essence, it was the fractional reserve system that collapsed, not the principles underlying bitcoin. The operators may not have initially planned a ponzi scheme, but it appeared that a non-fiat currency simply does not have the flexibility and elasticity to keep up with the exploding demand.

Therefore, bitcoins are of little threat to those who control fiat currencies, because they can control it in a likely manner they do with commodities like gold. Furthermore, bitcoins very much like gold and other precious metals are denominated in fiat currency, so there is no debasement to monetary supply. There is no perceived threat until world commodities are traded and denominated in bitcoins, which will not happen in our and next generations.

Clive RobinsonDecember 6, 2017 11:40 PM

@ Josh,

With the wild swings in value, you would have to be nuts to go in for any kind of reserve banking on Bitcoin.

It would be like standing on a ladder with a rope around your neck taking pot shots at the rungs with a howitzer. Amusing to watch from a distance, but realy not something you would want to be close to let alone involved...

As has been noted a few times it's very easy to have your Bitcoin stolen. If you've ever had the numbers in an unencrypted way on your computer then malware can find them in the hard drive slack space. Even encrypted on the blockchain they can be stolen due to the way some software generated the private keys from a password. So it's definately "Wild West" country out there, and they are not "One Armed Bandits" you'll be playing with...

JoshDecember 6, 2017 11:41 PM

@Wael wrote, "As for 'currency', how is bitcoin different than FIAT[1] money, especially after decoupling paper money from gold?"

There is a big difference between bitcions and fiat currency.

When you ask a bitcoin exchange where you parked your bitcoins to return your bitcoins, the bitcoins are returned in a verifiable form which you can place into another wallet. An exchange cannot "short" bitcoins back to you because each of your bitcoins are uniquely identifiable. They must return your coins.

On the other hand, banks which as we know practice fractional reserve, can return money from their cash reserve. You have no way of knowing if a one-hundred dollar bill is different from another one-hundred dollar bill. Thus, you are more likely to be shafted by shaddy bankers who can keep a small cash reserve but maintain a large balance on paper.

Additioanlly, when a bank makes loan to you, it essentially creates new money instead of handing you cash from its bank safe. It imply deposit numbers into your digital bank account. This cannot be done with bitcoins because new coin creation is limited to the mining process.

JoshDecember 6, 2017 11:45 PM

@Clive Robinson wrote, "With the wild swings in value, you would have to be nuts to go in for any kind of reserve banking on Bitcoin."

Au contraire, if you truly believe bitcoins will crash in the forseeable future, you would be nuts not to "short" bitcoins to your customers as an exchange, because you can buy them back or simply pocket the gains when bitcoins crash in price.

JoshDecember 7, 2017 5:03 AM

@Clive Robinson

There will be no increase in real assets in total. There will be a loss of energy and other resources due to mining and opportunity loss for society of those involved.

@Wael

Not different in the sense that both have no intrinsic value.

It can also be argued that Finance Industry offers no real increase in real assets in total, because it simply exists to move digits from one place to another in a never-ending inflationary spiral thru boom-bust cycles.

However, that is not the complete picture because it provides a valuable medium of exchange to fasciliate exchange of goods.

It goes the same for transportation industry. When a cab driver drives a person from one location to another, there is no visible increase in "real assets" because the only thing that changed as a result was the person changed his location. Can it be argued that cab drivers are a loss of energy for society of those involved?

Clive RobinsonDecember 7, 2017 7:38 AM

@ Josh,

It can also be argued that Finance Industry offers no real increase in real assets in total, because it simply exists to move digits from one place to another in a never-ending inflationary spiral thru boom-bust cycles.

It's funny you should say that...

I've argued that if the finance industry was analysed as an industry then it's major manufactured item would indeed by inflation.

If you stand back a little way from the finance industry you will see that a large part of it is a series of faux markets, the sole intention of which is to generate fees by moving numbers around in lots of circles, slicing a percentage of each time it goes around, which would be a spiral if they did not find ways of robbing peter to pat paul who inturn pays rob.

I'm old enough to have become a Lloyd's name in the bad old days and very nearly did about a year before the LMX spiral that caused such a disaster.

I got lucky in that whilst working in the oil industry I happened to bump into a consultant who had seen what was happening to asbestos risk and how it was going to go bad realy bad in the US and quite quickly. He said there was not a syndicate big enough to cover it as it was going to be billions...

Over a drink with somebody else that I used to wear the green with and who worked at Lloyds as a working name I asked him what he knew about the asbestos risk. All he could tell me was that the old syndicates were passing the risk of to the new syndicates via re-insurance faster than a xheater with rocket assist. It sounded all rather suspicious so rather than sign on the dotted line to be a lay member (non working name) I started to ask questions. It became clear that there was a lot of new money being brought in but actual risk on assets covered was not going up... So where was the money going? The money appeared to be going into reinsurance only and premium money evaporating due to the re-insurance appearing to be covered by other re-insurance going round in circles.

As I was trying to work my way into the murky depths of reinsurance it appeared that information was being deliberatly hidden. So I was a great disapoint to some because I was quite blunt in that I said I wanted to see way more information before I signed. They hummed and harred and I was not getting any further info just platitudes and the "we are the experts" line.

Well it went south rather rapidly and one of those platitude speakers ended up in court where some said "He had less morals than an ally cat" and the judge did not even look as though remonstration was needed other than the "quite so"...

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/insurance/4613377/Lloyds-of-Londons-collapse-has-lessons-for-todays-crisis.html

http://www.truthaboutlloyds.com/fraud/myth83.html

WaelDecember 7, 2017 9:59 AM

@Josh,

It can also be argued that Finance Industry offers no real increase in real assets in total

Someone above mentioned something about "conservation of assets".

albertDecember 7, 2017 12:17 PM


There are -no- "free markets". The very concept of a 'free market' is a philosophy created by theorists to keep the Unwashed Masses from the truth. Everything is controlled by groups that we don't belong to. The Western Financial System is even infecting Eastern and non-US-aligned countries. Why? The answer is basic and very simple.

There is another concept called 'intrinsic value'. 'Modern' societies are based on 'Extrinsic' or 'Instrumental' Values. They are inexorably linked to EVs because it's damned hard to live where we live without them. The downside is that EVs are controlled by the Financial Elite.

What things have Intrinsic Value? Again, the answer is simple.

. .. . .. --- ....

TheTKSDecember 7, 2017 3:01 PM

Calling it hip scrip in my earlier post was only partly tongue-in-cheek. Bitcoin has some resemblance to scrip I own: a medium of exchange that is limited in the places you can spend it.

The scrip I own some of is called Canadian Tire money. It was all paper for decades, launching in the late 1950's, but went digital a few years ago, with the exception of a pretty banknote this year celebrating Canada's 150th, but the paper and a few special-issue coins are still accepted by the store.

Launched with the intention to be spent only in-store, the store is so common where I live that I have bought things with it person-to-person, during promotions at small retailers, or as donations for non-profit fundraisers. This happens less now that there's less of the paper around.

Maybe I should reserve "Hip Scrip" for Canadian Tire money. It's hipper than Bitcoin could ever be.

JoshDecember 7, 2017 6:21 PM

@Clive Robinson wrote,

It became clear that there was a lot of new money being brought in but actual risk on assets covered was not going up... So where was the money going?

I cant help but ask where did the money came from? We know that new bitcoins are generated thru a crypto-mining process and that every transaction is saved on a blockchain, while some say fiat money is created by the stroke of a pen with due diligence on record keeping.

Clive RobinsonDecember 8, 2017 12:55 AM

@ Josh,

I cant help but ask where did the money came from?

In the case of the Lloyds of London LMX scandle, it was a few rotten apples at the top getting it in and laundering it into their own pockets. They were actively recruiting "new names" under false pretenses.

Back then all you had to do to br a Lloyds name with all it'd then social statud was show you met a basic fixed asset and money in the bank requirment. Having done that you joined a syndicate you had been invited to join. You were then alowed to underwrite risk upto twice what your asset/cash value. The reality was it was not you but thr syndicate underwriters deciding where the money went, for a nice fee of course...

As the return back then was around 7% on risk written you were looking at a return of 14% on your assets. Which was quite attractive as you would still be getting interest on the cash in the bank and any rental etc you were making on your fixed assets. So thirty percent returns were what was being held up as possible.

In theory you could loose everything if the risk you were underwriting went realy bad such as total loss of a vessel and SOBs (say an aircraft flew into a mountain, oil rig blew up killing all hands etc).

But such events were realy rare and there was something called "Stop Loss Insurance" you could get. Put simply with stop loss you paid the first X thousand of a claim and it paid out the rest of the money. In effect to stop your losses and spread them amongst many people.

So on the face of it being a Lloyds name looked like a very good way to get "money for no real risk". In effect that was how it was being sold to "new names", and many faily well known people signed up including several of my friends some of whom were actually "working names".

What was realy happening was the likes of Ian Polegate the "star underwriter" had started a tax avoidence scheme through off shore banking to avoid the very high levels of taxation the UK government had put in place in the 1960's&70's. But for it to work it needed lots of foreign undereriting. Back then nobody realy knew about the hidden long term blue and white asbestos risk. Thus asbestos was seen as a wonder material you could spin like cloth, use it like woodpulp to make boards and sheets for roofing. It realy did not burn and had thermal insulation properties with out the rot risks. It was quite literally getting stuffed in every where especially in post WWII home rebuilding even cigarette filters.

The thing is asbestos was assumed safe little or no protections were put in place so workers did not wear masks and other protective clothing. Worse if they found it "dusty" and made them cough they were encorraged to light up a cigarette as "the smoke lays the dust"...

So from an insurance risk point of view it was in effect "money for old rope" and thus the tax avoidence schemes fell on it like fresh meat thrown in the lion pit.

The reality as we now know was the clock had started on a massive industrial and social time bomb that would wipe out large industries and bring down many many others in related industries. Worse the clock had also started on an even bigger time bomb in Lloyds thay had taken on what had looked like no risk underwriting...

So those star underwriters hatched a plan, new syndicates were pulling in new names and lots of new money to be used as part of the various off shore schemes so as with the later mortgage scams bad risk was parcelled up and sold on as a good investment to new syndicates, and to cover things up they also got sold stop loss insurance in various hidden ways back to them over and over again so the risk was in no way spread but actually consentrated back and likewise the fees taken at every hidden turn "life ws good for the stars" even if a few envelopes stuffed with cash did have to be handed out from time to time to keep others "on board"...

It was in effect just another pyramid style scheme with those at the top getting out with not just unloading ruinous risk but also getting large sums of money as fees that were then offshored to avoid tax. As long as new names money got pulled in at the bottom the merry go round music carried on playing and people were smiling, and not seeing the large storm clouds approaching.

As I said I nearly signed up to this, but my natural curiosity come suspicion that "things are never that good" got me digging, and I delayed signing whilst I started to dig and got effectively fobbed off, making me look all the harder...

Then a risk went sufficiently bad that things started to unwind, and oh boy did they unwind badly. The new names got paupered almost over night as various sharks rearanged the deck chairs with the likes of the "hardship committy" chaired by the wife of a well know author and Conservative Party Minister and major fund raiser.

Even to this day many of the realy guilty walked away with pockets stuffed full of cash and their reputations untarnished except to a few insiders who were either equally as guilty or turned and looked the other way "to protect the good name of Lloyds". Even politicians felt Lloyds was not just a flagship of British Finance but way to important let alone big to be alowed to fail...

As for the new names they had three basic options, Death, Bankruptcy or be bleed to death drip by drip via the rigged hardship fund system...

As for the working names and old names that you would find as close relations to peers of the realm and various royals from diplomatically sensitive countries, they carried on as though nothing had happened...

Just like the later Banking Crissis One (BC1) and Two (BC2) with the likes of the US finance system being put on "life support" that came from the laundering of Drugs Money and similar criminal enterprises. The bankers kept their bonuses a few fines were payed and offset against future taxation and those with little or no assets had the stuffing kicked out of their lives by the likes of quantative easing...

So you can see why I'm skeptical of not just about Bitcoin but the zero sum argument...

Which is why I encourage others "To look further, and seek answers". In my case such behaviour saved me from becomming a Lloyds new name with loss of everything including dignity... Oh and remember the Finance Industry is always rigged one way or another the insiders always win and the outsiders always loose in the end. As an outsider you are "denied knowledge" thus as a market it is neither fair or free, hence the bulk of it is "faux markets" designed to extract fees and commission from the unwary. Also as long as it has power over governments which it has in immense amounts nothing will be alowed to realy change the rent seeking behaviour it mainly works by... In the case of the US where public opinion has to be slightly saited and large fines are not enough, it's easy to get a few foreigners into court for a quick show trial or three...

Have a look at the recent Volkswagen trial... One small fry stupidly went to the US for a holiday or some such. The FEDs grabbed him on his way home and he's had what is a show trial and been given a show trial sentence. Whilst the US citizens involved with the emmissions rigging in oh so many ways are left alone, and the real directing minds just stay out of the US or other US supplicant nations and in effect walk away with their bonuses and leave the shareholders and tax payers to pick up the tab for the fines the USG imposed...

Take care to study it well because the curtain rarely gets lifted for us to glimps behind it at the oh so sordid goings on behind. That realy is the everyday reality of the finance industry in most parts of the world. Money begets power, which in turn begets corruption, as William Shakespeare did once note through the voice of Marcellus in Hamlet, "There is something rotten in the State of Denmark".

Viagra-Snorting SpookDecember 8, 2017 11:49 AM

I cant help but ask where did the money came from?

It's no secret that money keeps coming from here (five parts).

First anniversary: Niagara
Second anniversary: *sniffle*...

the way of language sadlyDecember 8, 2017 1:09 PM

People try to sound cool and use technical jargon which they don't really grok, and so they misuse it.

It reminds me of the cringe-worthy stupid trend among some boardgamers to use "RNG" to mean "random" or "randomness", e.g. "Chess is not RNG", "Settlers of Catan has too much RNG for me", etc.

DNS QuestionDecember 8, 2017 7:26 PM

DNS Stuff

Hi with all the brains in here, i am somewhat strugling with DNS
Might sound silly to do DNS as I do it but here is how i do it anyhow
First of all I block outgoing port 53 tcp and udp on the outgoing firewall.

Then i use dnsmasq caching server and configure it to use a couple of servers
since i at my home use not only computers but also androids i need some to have
my internal DNS "providers" to also listen to insde addresses
so i have configured DNS masq as a caching server that reads a hosts file
where alot of crap is blocked but then also "provides" the end result from that to the inside clients
that will get its addresses from DHCP server

Then my DNS Servers using this scenario,there DNS servers are using 4 sources only (today)
- TOR DNS
- DNSCRYPT
- Hosts file
- DNS Cache

I know it sounds perhaps weird for you but i have used this or similar approaches to this
for years what can you win from it, well not much perhaps but at least it has the ISP to do some harder work and not just collect lazy DNS collections.
And you are 100% sure you never leak DNS requests.

Also used with TOR it might be a good idea to do it this way, at least the blocking of port 53 outgoing.

Anyways I wanted to post this idea for the security blog here, what you thinking about this approach, stupid or beneficial.
Anyways ive used it for years and it works very well
Also its a good way to make your android devices to point to inside IP
where you can sniff the DNS traffic with tcpdump to easier see what is going on.
Today android devices especially are very vulnerable and a fast way to see if the device is infected is by looking at DNS requests

Regards DNS

JoshDecember 8, 2017 9:18 PM

@Clive Robinson wrote,

Back then all you had to do to br a Lloyds name with all it'd then social statud was show you met a basic fixed asset and money in the bank requirment. Having done that you joined a syndicate you had been invited to join. You were then alowed to underwrite risk upto twice what your asset/cash value. The reality was it was not you but thr syndicate underwriters deciding where the money went, for a nice fee of course...

What you describe is way of the underwriters/bankers to mitigate "systematic risk" into the hands of general public participants. Hence, the analogy of holding a bag. Similarly, in other locales, its governments simply intervene thru bailouts funded by public indebtedness. So where did the money come from? The underwriter/fianciars issue new "chips" based on your credit worthiness with which you are bid up "risk" in a race. The supply side of the Game is, likewise, indefinite in liquidity thru the process of reinsurance more "risk" is created thru stroke of a pen. The "un-wind" occurs when due diligence on record keeping could not keep up with systematic failure because both the numerator and denominators are susceptible to uncurbed rigging.

Bitcoin markets are, unfortunately, different from above scenario, because there is no "indefinite" expansion of bitcoin supply, unlike the invariable expansion of money supply thru issuance of "credit worthiness." New bitcoins are only created thru a crypto-mining process. Thus, the supply side of bitcoin is variably limited. Which is why it can only be systematically rigged in a fashion similar to commodities like gold, via a securitization process. This, then, brings us back to my original point it can only be failed by modern day "bank runs," because whether you use bitcoin as the numerator or the denominiator, only one side of the Equation is viable to systematic un-wind.

Clive RobinsonDecember 9, 2017 4:54 AM

@ Josh,

Thus, the supply side of bitcoin is variably limited. Which is why it can only be systematically rigged in a fashion similar to commodities like gold, via a securitization process.

Err no, unlike gold, land and other real wealth assets bitcoin has no real intrinsic value just rising sunk costs. They are at the end of the day of less worth than the raffle tickets that get put in the hat in the Xmas Prize Draw...

That is other than the sunk cost of the energy used to mine them their value is illusory and based only on the confidence that people put in them. If the confidence goes then you don't even have a piece of paper to show for the folly of mining/purchasing bitcoin.

Hence the difference between real finite physical assets such as say iron, non physical non finite assets such as energy and those numbers that could be written on pieces of paper... The only future value those numbers have are what people think they are worth as an exchange medium, you can not use them for anything else. Thus they are just like any other pyramid scam, when the confidence goes nothing of any intrinsic value is left, unlike fiat currencies there is not even the illusion of an insurer of last resort who backs the promissory note with reputation...

WaelDecember 9, 2017 5:07 AM

@Clive Robinson, @Josh,

The only future value those numbers have are what people think they are worth as an exchange medium, you can not use them for anything else.

You can buy a pizza or book a flight or do a few other things including exchanging it for other forms of currency. Indications are the list is expected to grow.

Clive RobinsonDecember 9, 2017 7:51 AM

@ Wael,

You can buy a pizza or book a flight or do a few other things

ONLY as long as they have the confidence to accept then[1]... which is my point their only value is that which people chose to give them. No confidence then they are worse than worthless because of the energy sunk cost in mining them...

[1] Reputedly the first transaction was 10,000 bitcoins for a $5 pizza... Even trading stamps had more value...

Northern WatcherDecember 11, 2017 2:52 PM

Let's call it what it really is - unsecured (unbacked) stocks in something that doesn't exist (vaporware).

JoshDecember 12, 2017 12:52 AM

@Clive Robinson wrote,

Err no, unlike gold, land and other real wealth assets bitcoin has no real intrinsic value just rising sunk costs.
...
Thus they are just like any other pyramid scam, when the confidence goes nothing of any intrinsic value is left, unlike fiat currencies there is not even the illusion of an insurer of last resort who backs the promissory note with reputation...

Au contraire, sunk costs exists for land owners, and other asset classes in various ways, because for example land ownership is in effect written on a piece of paper generally called "land deed" issued by an authority such as a government. Land owners are assessed for property taxes due to said authority, thus the tax is in effect a sunk cost for the priviledge of owning a piece of land.

Furthermore, gold has intrinsic value as a rare metal but owning gold is by no means illusion-less nor free from "confiscation." Its been done in the past. See executive order 6102, which I doubt you're young enough to experience.

The illusion of an insurer of last resort is an interesting concept, because FDIC insures individual safers up to $250K USD per bank. However, the FDIC is by no means free of "systematic risk" if you taken in account of how much it maintains in reserve. It simply does not have enough digits to pay off everyone in systematic failure.

Like bitcoins, if the internet and all digital systems are wiped out, there is no telling what digits you had in your bank accounts. Thus, your banks are not obliged to honor your claims because due diligence of record keeping could not be maintained.

Clive RobinsonDecember 12, 2017 9:39 AM

@ Josh,

Au contraire, sunk costs exists for land owners, and other asset classes in various ways,

All assets have ownership costs directly or indirectly, they are however not "sunk costs" in the main.

For instance a property/land tax is a "Tax" levied because a government local or central can easily set and collect it. In theory it hurts those with the biggest land holdings of all, but in practice those at the bottom have much greater "opportunity cost" losses so are actually hurt more. Other taxes have been tried in the past such as the "Poll Tax" but these have almost always caused civil unrest as Margaret Thatcher found in the 1980s.

There are also other taxes that come with ownership such as "Capital value Gains Tax". Which Bitcoin should be subject to as are shares and other assets held by title.

Even intangible assets have ownership costs, Bitcoin for instance have to be stored, usually securely and this has associated costs.

However as I've said there is a difference between sunk costs and ownership costs and you realy need to keep them seperate if you are trying to make evaluatiins.

RachelDecember 12, 2017 11:44 AM

All

apparently Venezuela is intending state blockchain application by way of an oil backed 'petro' crypto currency
And the Russian Federation a state backed 'CryptoRuble'
am sure Mr Schneier will report more as appropriate

JoshDecember 14, 2017 3:03 AM

@Clive Robinson wrote,

All assets have ownership costs directly or indirectly, they are however not "sunk costs" in the main.

ERr, "sunk costs" are in simply costs that aren't recoverable. Each property tax payment is in effect a "sunk cost" to the land owner, and especially so after SALT deductions are abolished for US persons.

In theory it hurts those with the biggest land holdings of all, but in practice those at the bottom have much greater "opportunity cost" losses so are actually hurt more.
If by "opportunity cost" you are referring to land development, then you may have a point. It is not uncommmon for developers to have local politicos under close arms, especially when it comes to "up zoning" or "urban planning" of large swaps of undeveloped land under their jurisdiction. However, this is irrelevant to the current topic.

Let think about property taxes a bit. A portion of it in the US goes to fund municipal bonds issued by local governments, which means feeding the inflationary spiral. Land owners who are lucky to sit on boom cycles may see their land "value" increase due to inflation which in turn cost them higher property taxes which goes back to feed the inflationary spiral. This is in essence an "asset bubble" which bitcoins are no different from.

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