Three Words of Caution for Bitcoin Fans: “Napster” & “Quantum Computing”

Multi-Billon Dollar “Bug Bounty”

“You know what a ‘bug bounty’ is? Someone says, ‘If you hack my system, I’ll give you a million dollars.’ So Bitcoin is now a nine-year-old multibillion-dollar bug bounty, and no one’s hacked it. It feels like pretty good proof.”

–Chris Dixon, general partner at venture capital firm Andreessen Horowitz; “Beyond the Bitcoin Bubble,” The New York Times (1/16/2018).

Just because something hasn’t happened yet, doesn’t mean that it can’t.

Or won’t.

Investors in the 1920’s watched stocks levitate so long that Yale economist Irving Fisher felt compelled to proclaim, “Stock prices have reached what looks like a permanently high plateau.”

That, in early October, 1929.

History is replete with other examples of tragically misplaced faith, including the supposedly unsinkable Titanic; France’s impervious-to-attack Maginot Line; and that “hotel in the sky,” the Hindenburg.

Bitcoin’s Achilles Heel: Open Architecture

But it’s the digital, not analog world that holds perhaps the best cautionary tale for Bitcoin enthusiasts:  erstwhile music-sharing service Napster.

Like Bitcoin, it functioned as a decentralized, peer-to-peer platform.

Also like Bitcoin, it enjoyed its proverbial moment-in-sun: a few, growth-crazed years coinciding with the peak of the dot.com bubble in the late ’90’s.

What happened?

Pouring (Digital) Sugar in the Gas Tank

The music industry first tried to shut down Napster by suing it and its legions of users for copyright infringement.

When that strategy failed, the industry wised up, and realized that it could use Napster’s open architecture against it.

Specifically, by uploading millions of corrupt files, it could essentially adulterate Napster’s content, rendering it unusable.

Think of it as putting “digital” sugar in an unlocked gas tank.

For Bitcoin, the parallel concern is that as-yet-unimaginable computing power, known as “quantum computing,” could wreak havoc on the currency’s underlying technology, called blockchain computing.

The strategy: create millions of bogus transactions, effectively destroying the integrity of the real ones.

How credible is that threat?

The fact that no one knows is reason enough (IMHO) to steer clear . . .



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