An Infographical Survey of the Bitcoin Landscape

Josh Wardini sent me information on a new Bitcoin infographic that serves as a survey of events over the last 10 years in the world of Bitcoin development and legal regulation. Many interesting factoids in this graphic, some of which were unbeknownst to me. In the next few paragraphs, I will discuss my impressions that are brought to bear by each subset of factoids.

The relationship between blockchain and mining is an interesting one, and underscores the power of blockchain as both a data structure and a secure transaction system. Bitcoin is also its own economic system, complete with social interactions. In particular, the competitive and cooperative aspects of cryptocurrency can serve as a model for understanding the social structure of markets.

This is another interesting feature of bitcoin: the network has computational power to both unlock the value of existing blockchain as well as to create new currency. Bitcoin mining has always been a bit of a black box to me [1], but it seems as though it has potentially two roles in the bitcoin economy. In a Synthetic Daisies post from 2014, I mentioned that the supply of bitcoin is fixed (in the manner of a precious metals supply), but it turns out that it is not that simple. Of course, since then blockchain technology has become the latest hot emerging technology in a number of areas unrelated to Bitcoin and even the digital economy [2].

It turns out the computational systems (unlike people) is not all that hard to understand. However, digital currency, which is based on human systems, is much harder to understand (or at least fully appreciate). In 2013, I did a brief Synthetic Daisies mention of a flash crash on one of the main Bitcoin exchanges. There is a lot of opportunity to use blockchain and even perhaps cryptocurrency in the world of research. If ways are found to make these technologies more easily scalable, then they might be applied to many research problems involving human social systems [3].

NOTES:

[1] So I sought out a few introductory materials on Bitcoin mining to clarify what I did not know: 

a) startbitcoin (2016). Beginner's Guide to Mining Bitcoins. 99 Bitcoins blog, July 1.

* mining consists of discovery blocks in the blockchain data structure, the discovery of which is rewarded through a "bounty" of x bitcoins. From there, inequality emerges (or not).

b) Mining page. Bitcoin Wiki.

* the total number of blocks is agreed to by the community, as is the total amount of computational power of the network. This makes the monetary supply nominally fixed, but is not required by the technology.

c) Hashcash Algorithm page. Bitcoin Wiki.

Despite the clear metaphoric overtones, Bitcoin mining is essentially like breaking encryption in that it requires a massive amount of computing power thrown at a computationally hard problem, but is also has elements of an artificial life model (e.g. competition for blockchain elements).

Water-cooled rigs probably maximize your investment margin....

[2] Of course, there has been innovation in the use of blockchain for Bitcoin and more general cryptocurrency transactions. For more, please see:

Portegys, T.E. (2017). Coinspermia: a cryptocurrency unchained. Working Paper, ResearchGate, doi:10.13140/RG.2.2.33317.91360.

Brock, A. (2016). Beyond Blockchain: simple scalable cryptocurrencies. Metacurrency project blog, March 31.

[3] A few potential examples:

a) Data Management. 1  2

b) Alternative forms of social exchange.

c) Smart contracts.

d) Peer-to-peer cloud storage.

e) Electronic health records.