Demons in Digital Gold

Crypto-currencies have many advantages. Don’t overlook the disadvantages.

the ‘gold’ is fairly obvious … the ‘digital’ is kind of implied … the ‘demons’ require imagination

Here begins a series exloring the pros and cons of crypto-currencies. “That would have made a perfectly reasonable title,” you’re thinking, “simple and easy to understand: Exploring the pros and cons of crypto-currencies.” Yea, sure, but experience has taught that dramatic titles pique curiosity and motivate people to expend the energy of clicking from Twitter to Medium.

So we’re sticking with “Demons in Digital Gold” (DiDG) for the duration. Notwithstanding the title, the objective of this series is a BALANCED understanding of crypto-currencies. Pros and cons. Advantages and disadvantages. Yin and yang.

Given that the advantages of crypto-currencies get A LOT of ink, I am going to spend less time on that side of the debate and most of the time on the disadvantages side. I am not overtly biased, I am simply being practical. You want a full treatise with equal time spent on both sides of every facet? Wait for the book.

Motivation

Crypto-currency discussions tend to extoll the advantages at great length. Trade-offs and compromises — to say nothing of weaknesses — are breezily dismissed or just plain overlooked. The motivation for this series is to provoke BALANCED thinking. So we need to put stuff on BOTH sides of the balance, hence the focus on little-addressed disadvantages.

I’m here to lay out facts that you may have overlooked. You’re here to reach your own conclusions.

The importance of contextDemons in Digital Gold (DiDG) will spend more time on crypto-currency challenges, shortcomings, vulnerabilities, and the ilk. These issues are presented to develop a more complete and more balanced understanding. Prepared with the additional knowledge, you can weigh the evidence and reach better informed conclusions.

Please (PLEASE?) keep the context in mind as you read the series, it will make the journey more constructive for all of us.

Bitcoin (et al)

This series addresses crypto-currencies in general. Any such discussion quite naturally included Bitcoin, and I will use the term “Bitcoin (et al)” as an alternative to “crypto-currencies.” Sometimes I’ll use plain-old “Bitcoin” as the same general placeholder, because I can be lazy like that.

Many elements are broadly applicable across crypto-currencies, for example, custodianship. Some elements are the opposite, for example, transaction fees. In the latter case, I will strive to be specific: “The recent jump in transaction fees impacting Bitcoin and Ether is not an issue for Bitcoin Cash and Litecoin.”

So I will strive to differentiate between the general and the specific … but don’t be too surprised if you catch the occasional over-generalization.

Perspectives: past, present, future

In the land of crypto-currencies, theses are often built on one perspective …

• Past: “As the original whitepaper clearly articulated …”
• Present: “Transaction fees are absolutely unacceptable …”
• Future: “Mining will consume more energy than produced by the sun …”

… and by “built” what I really mean is “myopically focused.” For example, someone will argue a section of the whitepaper until they are blue in the face, without paying heed to the situation on the ground here and now. Someone will be consumed by a just-over-the-horizon challenge, without recognizing that the machinery is working surprisingly well right now.

This series focuses on the present perspective, because we live here (deep pop psychology, no?). I will often incorporate the past perspective, because a lot of people and a lot of the literature lean on “Satoshi’s Vision.” No dig there: it is useful to consider intentions from the start of the journey, as it helps explain how we got here. We will also talk about the future, to illustrate if we are headed in the right direction for an objective.

Value

A reoccurring element will be value, specifically customer-perceived value. I have lived in Silicon Valley quite some time (long enough to remember when I-280 had ZERO traffic), and I quickly recognized The Siren Song of Technology: we are often blinded by cool technology and lose focus on delivering actual value to normal humans. That is how [a] someone thought “People want to buy vegetables in foil packets with a $700 machine to press them into juice!” and [b] someone else gave them $120M to run with such a batshit crazy idea.

Full disclosure: I have personally fallen for the Siren Song of Technology over the years. I built an internal checklist to keep away from the rocks. It includes questions such as:

• What problem are we solving?
• Do real humans — outside of Silicon Valley — consider it a problem?
• Is our solution better than the alternatives in the customers’ eyes?
• What value will customers ascribe to our solution (a.k.a. product)?

Posts in this series …

Bitcoin you’re HODLing may be a derivativeDo exchanges pose a system risk?Store of value / Vulnerabilities in store

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Copyright © 2018 Bruce Kleinman. All Rights Reserved.

Demons in Digital Gold was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.