Cryptocurrencies, like bitcoin, could revolutionize money to the same degree that the Internet has revolutionized communication. However, like any economic marketplace, human exuberance is the greatest threat to the cryptocurrency phenomenon. Markets fail to the degree that the market can be dominated by those seeking personal gain, and markets succeed to the degree that they resist domination and focus on benefiting society at large. <\/p>\n
The cryptocurrency market place is in danger of becoming so focused on profitability, that it loses sight of the potential computational benefits that it could provide to society. I hope that this article will influence designers of cryptocurrencies to attempt to avoid computational malignancy. <\/p>\n
Many people regard the success or failure of the market to be the degree that it works for them, rather than for society as a whole. One of the fundamental motivations for cryptocurrency is the general sense that banks, governments and markets have failed to protect the interest of the common man. It is not an accident that the rise of bitcoin began shortly after the sub-prime mortgage crisis. <\/p>\n
Cells, typically, prefer to serve the whole organism, but when they get confused and start to multiply without regard for the impact on the organism as a whole, they can morph into a series of diseases that we refer to collectively as cancer. This is why curing cancer is so hard. Cancer is not a disease, but a family of diseases that share a common core problem: cells acting in their own interests that betray the body as a collective. <\/p>\n
We have a similar problem with the use of computation in markets. We can call this malignant computation. This is when computation starts to ensure its own survival at the expense of the overall marketplace. The Skynet hypothesis is a boogeyman intended to scare the young and the paranoid. The real threat from AI is that it will become so good at the pointless tasks that we have given it that those pointless tasks will become a black hole of resources. <\/p>\n
This has already happened with high-frequency trading on Wall Street. There is an ongoing arms race between computers that trade stocks to see which one can get the edge over the other, and entire series of engineering feats that have no purpose whatsoever other than to overcome previous engineering feats. In several respects, the computational trading platforms are the most advanced computation systems on the planet, and they are engaged in a micro-second game of mutual navel gazing.There is so much money being made by these super computers that the only thing that is absolutely certain is that further funding for bigger super computers will become available. <\/p>\n
Capital markets serve a function in society. They ensure that businesses that provide value to society will have access to large amounts of capital to invest in otherwise too expensive projects. I have not been able to think of a single way in which the high-frequency trading platforms have improved the markets capacity to serve that function. No one has been able to provide me with any contrary insight, although several pointed me to more eloquent statements of the underlying problem. High-frequency trading is the first and foremost example of malignant computing, but it is not the last. <\/p>\n
Malignant computing is a problem in cryptocurrencies too, but in order to discuss it clearly, one has to understand how the computational arms race in cryptocurrency mining works. This article does a wonderful job of summarizing the issues of the crypto arms race. <\/p>\n
Cryptocurrencies in the bitcoin mold rely on a process called mining, which is the process of performing arbitrary calculations that help to ensure that the currency as a whole is functional and secure. Because of the inflated prices of bitcoins, mining has been very profitable, and as a result, we have seen the entire computational infrastructure of bitcoin switch to ASICS, or Application Specific Integrated Circuits. When you see the word ASIC, you should have a mental shortcut to single purpose computing. The bitcoin mining ASICs are so specific that they can only be used for the computations for bitcoin mining; they cannot even perform nearly identical computations for different parts of the bitcoin computation process. <\/p>\n
I believe that this is another example of malignant computing. Bitcoin mining will continue until 2033. For bitcoin, ASICs will do the vast majority of this work, and assuming the value of a single bitcoin continues to rise, the amount of money invested in specialized hardware to perform bitcoin mining will almost certainly pass into the tens of billions of dollars. The bitcoin mining algorithms rewards miners relative to the whole amount of computational power devoted to bitcoin mining everywhere. If computational power were equated to lottery tickets, this would be tantamount to massive changes to your chance of winning. <\/p>\n
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