## Saturday, January 20, 2018

### Bitcoin and global warming: a key similarity between two religions

Lots of essays have been written about global warming's being a religion. Many fewer texts have been written about the Bitcoin's religious character. And almost no texts, if any, have been written about the similarity between these two social phenomena.

To summarize, I will primarily argue that
in both cases, a very small scientific observation or a modest technological invention without any visible practical consequences is blown out of proportion and painted as something that will decide about the future of the mankind by attaching and dogmatizing lots of memes and misconceptions that have no scientific or technological justification at all and most of which are just self-evidently dumb.
Let's start with the climate change religion. The atmosphere is a complicated physical system where thousands of processes take place and influence each other. Even all the known influences may require thousands of pages of textbooks to be clarified – these thousands of pages aren't among the most important ones in the list of millions of pages that are needed to capture the mankind's knowledge about the world – and almost all the people are bored with this stuff.

One of these thousands of processes is the greenhouse effect, an emergent effect that allows the equilibrium temperature of a system to be increased in the presence of gases that absorb the outgoing thermal (infrared) radiation. OK, in particular, these ideas may also be applied to carbon dioxide in the Earth's atmosphere and they imply that the doubling of the CO2 concentration – which takes a century to be reached at current industrial rates – implies the increase of the temperature by some one Celsius degree or so.

This is indeed a tiny effect that is measurable assuming that you install a network of precise thermometers all over the globe, write complicated programs that statistically evaluate the readings, and run this global observational system for a century. At the end, you may confirm that there has probably been an increase of the global mean temperature although you can't ever be sure how much of it may be attributed to the greenhouse effect.

But the practical implications are negligible – basically zero. A regular human being barely feels the change of the surrounding temperature by 1 °C even if the temperature change occurs instantly. The weather often brings us temperatures that are 10 °C colder or warmer than yesterday. But the greenhouse effect changes the temperature by 1 °C or so over a century, i.e. much more slowly.

It's self-evident to every rationally thinking person familiar with the concept of one Celsius degree that this modest change doesn't justify any substantial investments or forced changes of our lifestyle, especially if it is virtually clear that a 1 °C would be a small change but a net benefit when it comes to the sign.

Nevertheless, a whole religion has been created around this stupid technicality. The religion has its rituals – you must live your carbon-free lifestyle etc. (one could talk for hours about all the detailed insanities that have been proposed and even tried – proposals how the human lives should radically be changed or ended in the name of the global warming religion); the evil CO2-emitting companies have to be harassed; the freedom of speech must be restricted to prevent the people from saying blasphemous statements such as "the global warming movement is silly" (blasphemous statements are actually even worse sins than the emission of millions of tons of CO2!).

The religion has its own prophets who are remarkably allowed not only a carbon-based life but they're allowed to consume 100 times more fossil fuels than an average mortal. These prophets are allowed to sell indulgences for you not to feel guilty that you are killing Mother Earth. There will be the Armageddon, the global warming apocalypse, that is analogous to the second coming of Jesus Christ. Lots of international institutions have been created to enforce this religion – they play the role of the Inquisition and other limbs of the Catholic Church or any other church.

All of this stuff is being justified by a practically negligible effect – one of millions of effects that science knows.

Now, what about the Bitcoin? It also has a scientific or technological basis. In his original paper and the initial version of the software (Bitcoin wallets), the author or authors nicknamed Satoshi Nakamoto showed that the double spending (of financial balances remembered in a database – a trick when you may buy two things for your $1 because the second seller hasn't noticed yet that you no longer have the$1 to spend) may be prevented even without a trusted intermediary that has the power to decide which state of the database (account balances) is the latest correct one. In principle, the "trust" may be decentralized, Nakamoto pointed out.

The advance made by Nakamoto and the Bitcoin is really an extremely modest one and no one really "needed it" or "expected it" when the paper was written down. It's really nothing else than a curiosity. Nakamoto "decentralized" the trust by basically allowing a collection of people who may join or leave the network to "vote" about which form of the database (determining the current account balances) is the correct one. They vote by doing work (well, their hardware does difficult calculations that are expanding the blockchain – the ledger of the transactions). The work's being hard is why it's hard to retroactively edit or undo the old transactions – something that a malicious centralized authority could do.

There could be many different methods that decide "how many votes" each member of the network has. In effect, Nakamoto's proposal isn't too different morally from the change of replacing a "responsible IT expert at the bank guarding the integrity of the banking databases" by "several IT experts who vote in a way". Except that the vote is somewhat more automatic and because one needs to waste lots of GPU time and electricity to affect the vote, it's considered safer than "just a vote" of some group of people who may easily get corrupt.

In reality, it's extremely questionable whether the "proof of work" voting proposed by Nakamoto is safer or better than any other method to decide about the "relative voting power" or than the centralized trusted authority, for that matter. Nakamoto's invention is a theoretically interesting curiosity, something that other people didn't even think about. Before Nakamoto, people weren't even asking the question whether it was possible to decentralize trust. It's a similar situation as in many groundbreaking advances in physics. The geniuses often solve problems that others haven't even asked about.

In principle, trust may be decentralized, indeed. In practice, it's more decentralized or less decentralized and even when it's in principle decentralized, it may be almost completely centralized in practice. The miners – voters about the "right ledger" that waste the electricity – are dominated by the mining pools. And 4 out of 5 of the largest mining pools, BTC.com, AntPool, BTC.TOP, ViaBTC (as well as most smaller ones), have headquarters in China. Only the currently 3rd largest mining pool, SlushPool, has headquarters in Czechia – and Mr Jan Čapek is the CEO. Also, the majority of the individual pieces of hardware connected to these mining pools (including a big fraction of the "Czech" SlushPool users) is currently located in China which has a simple reason: cheap and sometimes subsidized Chinese electricity.

OK, so in practice, the "decentralization of trust" only means "don't ask where the trust is". It's "somewhere" and "you're not supposed to care what's going on behind the scenes". In practice, the Bitcoin users are just forced to assume that the authority is a trustworthy one. They are supposed to overlook that the majority is in China, potentially controlled by the Chinese government that plans to shut down the mining and may also change the ledger and the rules in any way it wants. Once the decentralized or delocalized majority of the miners talk to each other and once they invent common plans, the decentralization is effectively abolished.

Nevertheless, just like in the case of the greenhouse effect, there is a "scientific or technological core" that the religion is based upon. The religion vastly overestimates the importance of the blockchain as an invention – just like the global warming religion vastly overstates the scientific importance of the greenhouse effect, even as a theoretical contribution. But there is at least an invention whose inventor could have deserved a McArthur grant or something like that – millions of dollars (not billions, however). The resulting applications haven't been useful so far. And the Bitcoin and other currencies – designed by Nakamoto as a new payment method – aren't used for actual meaningful payments almost at all. Some 0.1% of the businesses in the world accept the cryptocurrencies e.g. the Bitcoin, only 0.01% of these businesses' transactions are actually made in the cryptocurrencies, and in 99% of the cases, the seller immediately converts the received cryptocurrencies to the actual fiat money to prove that the crypto-payment was just a prank, an addition that made everything more complicated, not less complicated, and the buyer can't "switch" to that.

On top of the "real invention" of the blockchain which is nontrivial and turned Nakamoto into a noted coder or important enough computer scientist, there are lots of extra things that are being added to the religion that have nothing to do with the interesting scientific or technological "seed". The "Bitcoin Core" branch of the religion is the most radical branch of the cryptocurrency movement. While it verbally derives its authority from Nakamoto's invention, it actually adds the following commandments that have no rational justification, that have nothing to with any advances in technology such as Nakamoto's consensus, and that may be considered analogous to the commandments such as "you shall never use fossil fuels" in the global warming cult:
• You shall only care about your entries in the blockchain started by Nakamoto himself.
• You shall use the term "šitcoin" for all the other appearances of the blockchain and for all the forks of the Bitcoin that your fellow believers label an aberration.
• You shall only say nice things about the Bitcoin and hate all those who say any negative things, however accurate, as heretics. You will use the acronym FUD for a heresy. On Bitcoin Reddit, you will attack heretics promoting FUD at least 8 times a day.
• You shall only tolerate a blockchain that adds a block in 10 minutes in average.
• You shall only tolerate blocks that are 1 MB in size. A related point is that you will always preach "as much decentralization as possible" (as small blocks as possible) but you won't try to go beneath 1 MB because the church allows you this level.
• You shall only tolerate the asymptotic number of Bitcoins equal to 21 million.
• You shall use all the fiat money you can find to quickly buy the Bitcoin, regardless of the exchange rate that is demanded at every moment.
• You shall never sell your Bitcoins and, on Bitcoin Reddit, urge your fellow believers to "HODL" their Bitcoins at least 9 times a day.
• You shall believe that, like God, the growing price of the Bitcoin has no limits.
• You shall pick the Moon as the only valid approximation of infinity. To discuss the hoped for infinite price, you will always use the phrase "to the Moon" (at least thrice a day).
• You shall believe that just by sitting on your aß (by HODLing), your $100 investment will turn you into a millionaire or a billionaire because 21 million Bitcoins will be equal to almost all the wealth on Earth. • You shall dream about buying a Lamborghini when your initial$100 investment (including a $20 fee) grows to one million dollars (and you shall promote LAMBO a few times a day on Bitcoin Reddit). No other car brands are allowed. In particular, Ferraris are forbidden because the company is co-owned by Fiat and "fiat" is a blasphemous type of money. • You shall consider all the people who join the Bitcoin movement glorious and destined to flourish in the future Paradise. You shall never ask which of them actually make a profit and which of them will make a loss (earlier birds and folks connected to the cryptocurrency exchanges etc. profit, late comers lose). Tony told me that I suddenly discovered the Bitcoin and I am fascinated by it. Well, I am not fascinated by it – I am fascinated by the religious insanity of the members of that cult. And I have been interested in such things since the childhood. And the first TRF blog post about the Bitcoin, Bitcoin will probably keep on skyrocketing, was posted in November 2013. It was a good prediction, right? Since 2013, when I wanted to open an account on Coinbase but I didn't, I was getting weekly e-mails from Coinbase. So you know, I have been among the most well-informed people for many years. Just like the global warming cultists paint every climate skeptic as an ignorant man, Tony and other Bitcoin cultists are doing the same thing about the Bitcoin skeptics like me even though Tony must know that this appraisal is a lie. When someone thinks anything negative about global warming or the Bitcoin, he has to be ignorant or stupid, right? Well, no. Tony also claims that it's demagogic to mention the brain-dead commenters at the Bitcoin Reddit. I beg to differ. They are actually the key players. They're the reasons why the mainstream media as well as TRF bombard you with several Bitcoin articles a week (and sometimes a greater number). Without them, the Bitcoin topic would be an esoteric technicality in computer science that 5 experts in the world sometimes mention in their paper – which is exactly what it would be in a rationally thinking world. The list of religious principles that I just wrote after bullets is the actual core of the Bitcoin religion. Nakamoto's invention is almost completely irrelevant. It's just being referred to in order for the cultists to fool themselves into thinking that they're standing at the cutting edge of technology (the climate cultists similarly pretend to be the best champions of science). They are not and well over 99% of the people who have turned the Bitcoin and other cryptocurrencies into this significant social phenomenon don't understand even 5% of the things about the Bitcoin technology that I do. Most of them have never read the Nakamoto paper and don't really know what's inside. For all trading purposes, the Bitcoin evaluation process is just another pyramid game or a Ponzi scheme, an insane bubble that the Millennials and some others have joined because they haven't participated in a pyramid game or bubble in their lives yet and they're fascinated by it. So of course they repeat that "this time is different". Their bubble cannot collapse etc. And it's indeed more resilient than most previous bubbles exactly because the movement behind it is much more religious than the set of buyers into any previous bubble in the history of the markets. But if you rationally look at the list of the actual commandments of the Bitcoin cult, you will realize that it's utterly irrational. It's not implied by any logical arguments, by any rational thinking, and it doesn't follow from any nontrivial technological innovation. These commandments are the actual dogmas of the church and every rational person knows that it's utterly stupid for someone to take these dogmas seriously. Even if the blockchain as a technological innovation were important in practice – so far it's not – there would be absolutely no reason why the "Bitcoin Core" should be the preferred incarnation. And indeed, the Bitcoin's market share among the cryptocurrencies dropped from some 90% a year ago to 35% or so now. The critics' observation that "Bitcoins may be scarce but other similar coins are unlimited" is surely starting to matter for the capitalization. There is no reason why the ledger initiated by Nakamoto is more important than other ledgers. There is no reason why the forks are "worse" than the "maximally conservative" version of the Bitcoin – they (like the Bitcoin Cash) are surely more practical for payments given their low fees. There is absolutely no reason for the maximum number of coins to be 21 millions – there is really no reason why the number should be limited in any way and the opinion that it should be limited is just a sign of crackpot economics. There is no reason why the Bitcoins whose ownership is remembered in the blockchain should be "backed by nothing" – instead, in better applications of the blockchain idea, the ledger might remember who owns how many stocks of a company or something real. There is no reason why the average block time should be 10 minutes – which is rather slow for a confirmation of a transaction in the year 2018 and most regular banks in the West will switch to a one-second confirmation of payments within a year. There is no rational reason why the blocks should be limited by 1 megabyte. Some "centralization" occurs when bigger blocks are allowed but some centralization is needed for such a system to work in practice, anyway. There is no "one size that fits all" because in some applications, more centralization is clearly desirable, in other applications of the blockchain, it's desirable to keep most of the critical data off the chain (the Bitcoin Core starts to do experiments with the "lightning network" that will make transactions very cheap because details about most of them will be remembered outside the blockchain, after all). Now, it's always absolutely irrational for someone to buy something regardless of the price that is demanded. A rational buyer always cares what the price is and whether it looks low or high. Here, what we dealt with was (and maybe still will be) a regular bubble where people buy an arbitrarily expensive Bitcoin and they may still make a profit by this utterly idiotic strategy because other, greater fools, and a greater number of greater fools, will do (or at least have done) the same afterwards, thus allowing the earlier fools to sell their Bitcoins with a profit. But such a process simply cannot go on indefinitely and it's plausible – and, I think, likely – that$20,000 was actually the all-time historical peak of the Bitcoin price.

It is irrational to deny that some valuation schemes are more rational or accurate than others – and the most rational schemes peg the price of the Bitcoin to zero. OK, it's irrational to think that a bubble may grow indefinitely. And it's irrational to think that the "relative early birds" who have bought the Bitcoin soon enough will be allowed to become trillionaires – that the world will allow the price of the Bitcoin to grow to millions of dollars.

I could continue for quite some time. It's irrational to believe basically anything that belongs to the actual core of the Bitcoin cult. The members of the Bitcoin cult are a religious sect that believe lots of either arbitrary or provably incorrect dogmas and that are persuading each other that they're not only sane but they're hip and the elite in some sense. And they pretend that their belief is "implied" by some important discoveries in science or inventions in technology.

Sorry, folks, but you are not an elite, you are not hip, and you are not sane. And your core beliefs aren't implied by any discoveries or inventions. You're just members of another cult of New Age-style religious nut jobs that tries to derive its authority from science and technology but science and technology actually provides 0% of your actual core beliefs with a justification.

By the way, I talked about the similarities of the two religions. But there are also huge differences – that one would expect to lead to huge sectarian wars. The Bitcoin mining already consumes as much electricity as half of Czechia. Why don't we hear the climate cultists – who normally scream because of every 1% of Czechia's electricity that may be saved – screaming that the Bitcoin crime against the planet must stop? And why don't the Bitcoin cultists scream that the carbon offsets are a heretical currency like the U.S. dollar because only the Bitcoin is a good unit of the "money"? I think that it's because at the end, both religious cults realize that they're nutty far postmodern religious cults and they tolerate each other just like the Third Reich and the USSR after the Molotov-Ribbentrop Pact.