Bitcoin: The Gamification of Waste

When it comes to organising society the fundamental question is really “what do we want members of society to do?” The answer to that question forms the basis of figuring out the nature of the systems we need to implement to direct behaviour (or not). Whether you believe in free-market capitalism, socialism, totalitarianism, feudalism or monarchy you have gone through this reasoning process (or your argument is incoherent.)

Do we want members of society to waste resources? Most would say no. Again, even free-market capitalist’s argue that a free-market is favourable because it allocates resources efficiently and therefor avoids waste.

Bitcoins are useless. You can’t eat them. They don’t cure any diseases. You can’t turn them into anything. No production process requires them. They can’t make people happy or better off or more ‘well’. They exist solely to be traded for something else. Accepted economic theory holds that they are demanded simply because they are in limited supply. I would argue that it’s more precise to say that they are demanded because people believe they can make a profit (or minimise loses) trading them. At least some Bitcoin users must want to make a profit else no Bitcoins would get produced. Bitcoins are just a speculative asset. They are the tokens you need to play the Bitcoin speculation game. Some people might just really want Bitcoins, however it’s more reasonable to assume that people  mostly produce Bitcoins because they can trade them for prizes at a profit. Note that profit is always someone else’s loss.

While Bitcoins themselves are useless, they require resources to ‘produce’. The production process is the execution of a mining algorithm. This process requires energy; if the energy costs are too high there’s no profit to be had producing them. As  a result Bitcoin production is going industrial. Production of Bitcoins has a (potentially huge) carbon footprint and requires allocation of physical resources that could be used for other things. For example the computers running the mining algorithm could be running a protein folding simulation, crunching astronomical data or whatever we can think up.

So, putting all of this together:

Bitcoin is a way to get people to tie up physical resources to produce entities that exist for no reason other than as a means to transfer physical resources into their possession. 

We have produced a system that encourages people to tie up resources in order to gain resources while doing literally nothing productive. You could argue something similar about gold coins; but at least an argument could be made (IMO an invalid one) that the upside is we get gold out of the ground. Not even this upside exists for Bitcoins. Bitcoins are literally useless whether we have them or not.

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