Bitcoin miners do nothing except resolve conflicts… NOT

Hi Jeff,

Actually, “mining” is not the resolving of transaction conflicts and such that you describe. Yes, miners run fully validating nodes confirming signatures and the existence of the coin in the UTXO (Unspent Transaction Outputs). But that is a TINY fraction of the processing they are doing, and not at all the processing that is burning all the electricity (on par with the whole country of Ireland).

The validation rules (that any full node runs whether mining or not) keep the same coin from appearing twice in a single block, then checking the UTXO keeps Alice from doubles-spending her coin in a future block, that is quite distinct from mining.

The whole reason you need specialized mining hardware with GPUs is because the actual mining activity is the processing of a variant of the Hashcash algorithm to produce a nonce which starts with 13 zeros. This is brute force cryptographic cracking which serves the purpose of delaying each block commit so there is time for synchronizing the transactions for the next block and randomizing the selection of miner who gets to commit the block.

Every miner is doing tons of processing that just gets thrown away.

One miner, uses the successful output of that processing — a single number — which is the proof that they did all that busywork brute-force hash processing, to validate their right to create 25 bitcoins from nothing, as the mining reward for committing that block.

Just because they create it from nothing, doesn’t mean they don’t have to follow rules, or that they can do it willy-nilly as you describe it.

But I agree that there are some other differences from dollars. The miners do not determine the schedule or how much to create… The coders decided on a 130 year linear growth of the supply that when encoding it into the bitcoin validation rules for mining rewards. So it is still a small elite making the decision. And when coders can’t evolve the rules without being DDOS attacked by miners who don’t want them changed, miners are still exerting undue influence.

The Bitcoin supply does not have the ability to expand and contract in response to actual market forces and behavior (which can be coded into mutual credit algorithms for credit limits, for example).

Bitcoin is still simulating artificial scarcity of a mined commodity. But the scarcity is created through competitive brute-force cryptography instead of issuance as interest (where there are always dollars more owed than exist to pay the debt).

People can and do steal keys and attempt to forge transactions. Part of the danger of groups controlling 51% of the mining is exactly that they might be able to commit invalid transactions / double-spend. The specifics of the power dynamics are slightly different than with the bankers, but the general pattern of an elite still controlling the currency, remains. Bitcoin did not democratize it in the ways many have hoped.

Blockchain increases transparency. It successfully brought digital bearer instruments into the mainstream consciousness. Bitcoin has done some good in these respects. But it has not fundamentally altered the power dynamic of an elite few controlling the currency, it has just changed who the elite is. That is the point I’m making in the article.

If you’d like to see an alternative approach that I’m suggesting can democratize currencies, you can find it here — Beyond Blockchain: Simple Scalable Cryptocurrencies.