Friday, 30 June 2017

The Problem Bitcoin Mining Creates

The intentional metaphor in the term mining alludes to literal mining gold, disingenuously so. Mining for gold doesn’t grant the ability to alter gold’s nature, wheres Bitcoin mining does offer that capacity.

As Bitcoin establishes itself comfortably in countries like China, Japan and India, and the Bitcoin exchange market becomes a reality among citizens and even among Bitcoin exchange services in India competing to be the best Bitcoin exchange in India, many countries take proactive stances on cryptocurrencies and Bitcoin to take advantage of the best Bitcoin rates in their own way.

The systematic problem in Bitcoin’s structure is that mining is incentivized but controlled. In order to issue Bitcoin, Bitcoin must be mined, but, the more are mined the harder the mining process becomes and the less lucrative it is to do so.

This creates a logistical problem for miners without specialized computers, given that if you have less a capable machine, it might be more costly to pay for the electricity your machine consumes mining for you to the point where it adwares your earnings.

 This makes it so that the demographic of miners will diminish in numbers, leaving the landscape of Bitcoin mining to government subsidized industrial scale operations, since it’s only large scale organizations that can bank-roll this in a cost efficient way. 

As less miners remain a brand new problem is born, the problem of 51%. Bitcoin’s designed decentralization has this problem as an inevitable consequence. If a, let’s say for the sake of the example, that the government of China were to create subsidies for governmental regulated mining, then they would grant themselves the capacity to modify the rules of Bitcoins whimsically.

The collapse in Bitcoin is far from being the only consequence of this risk. Given that the capacity to mine Bitcoin overlaps with Bitcoins intrinsic value, a party having direct influence over Bitcoin, can also influence its intrinsic value as they so please.

 Such a thing has never occurred before in the history of human civilization. Cornering a market has been a possibility before, yes, but the ability of controlling its intrinsic value is unheard of.

Although all we have to worry for the time being is the Bitcoin speculative bubble and when could pop.

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