THE MYSTERY OF THE BITCOIN

the word has echoes of mystery, but also of technophilic lust. The difficulty in understanding its technical, financial and social mechanisms does not help to define itself. Is it possible to understand bitcoin without being an IT expert? It is always better to start with the continuities: "As a phenomenon of the financial and financial world, bitcoin and cryptocurrencies in general are another link in the transformation of money into digital information", explains Conicet's doctoral student Andrés Rabosto. To add that "this digitization process begins in the '70s when the possibility of converting dollars into gold ends and when the first forms of digital payment begin to be implemented. Today it is estimated that at least 90 percent of the money is in the form of digital circulation. "

But bitcoin takes things further: not only are numbers on a screen; there is not even a State or a banking system that endorses that money with the weight of its history. Bitcoin is a decentralized currency, in which everyone and nobody has control, and which allows transactions anonymously (or almost). These, among other particularities, exert an irresistible appeal above all for the extremes of the political spectrum: anarchists and libertarians who see it as a way to undermine States and the banking system. Some prefer this currency for its practicality, but the lack of controls also attracts sectors of speculative financial anarcho-capitalism.

But what is bitcoin?

The story of bitcoin is made of film: in 2008 an article appeared with the pseudonym Satoshi Nakamoto, in which the bitcoin computer protocol was described. This is, very briefly, a chainchain or blockchain system (See box). Each block that registers the new transactions requires a mathematical process performed by nodes; Once validated, the information is added to the chain, the rest is verified and registered for everyone. The great advantage that this system has is that if any of the previous blocks is modified it is evident in the later ones. The distributed system makes it difficult for someone to control the currency or the "steal" and that everyone can guarantee the validity of the transactions altogether.

"Satoshi combines pre-existing technologies," explains Alejandro Hernández, doctor of computer science at the University of Denmark and researcher at the Universidad Abierta Interamericana. He explains that "Satoshi adds the idea of ​​using consensus for work tests that validate transactions. This is how the information storage and the production of new currency are decentralized with the support of an encrypted code ".

Specifically, the owners of this currency have a virtual wallet in an application and from there they make transactions to others. People do not need to reveal their name at any time, ideal feature to perform illegal transactions, although its growing popularity and simplicity to conduct transactions attracts more businesses to accept payment in this and other virtual currencies. The lack of controls also makes it particularly attractive for international exchanges.

The big question is: why is this currency accepted as a carrier of value? Because people believe they have value and accept it.

The answer is tautological, it is true, but it is also applicable to the bills or numbers that appear on a screen with our account balance: money is almost always only a convention.

The community around bitcoin has grown in the world and can be acquired first by cashier after depositing cash (there are two in Argentina), buying them with a credit card (the problem is that you lose your anonymity when doing it) or selling products.

One of the most problematic points of bitcoin is the proof of work necessary to validate transactions. Every time someone does an exchange of bitcoins the information circulates through the network and the nodes must validate it by means of a complex mathematical operation. In exchange for this work bitcoins are obtained as a reward, although in a decreasing way since the system is designed so that the last ones take place in 2033. To decelerate the emission the retribution for "mining" is getting smaller, something that is compensated by the increasing valuation of the currency over time (albeit with pronounced ups and downs) and by the commissions paid for each transaction. Currently the currency has been trading for a while the 8000 dollars unit with peaks of almost 20,000.

Every day around 300,000 daily transactions are produced that must be added to the chain of blocks. This proof of work is increasingly complex and the system requires that a limited number of transactions be accepted every ten minutes. Only the first to validate a new block will receive the prize; That is why competition is fierce and has a real impact on global energy consumption. "It is estimated that the energy consumption of the bitcoin network at the end of 2017 came to represent about 0.5 percent of global electricity consumption," explains Rabosto, who is also a researcher at the Technology and Society Center of the Maimónides University. This leads, in turn, to the "miners" are installed in countries of cheap energy: "The computational power to solve the test work is so large that it has been centralized in few players," explains Hernandez. "The main mining poles exceed 60 percent of the mining and are mostly in China so you can not talk about true decentralization."

Recently the city of Plattsburgh in the United States, next to a hydroelectric power station and with subsidized energy, had to prohibit the mining of bitcoins that was carried out in old abandoned factories because it had forced the importation of electricity at a market price. These ventures did not even generate jobs.

"The energy cost poses serious limits to the expansion of bitcoin as an exchange currency," continues Rabosto, to indicate that "current transactions represent a tiny portion of daily transactions in the world. If all were done with bitcoins, the planet would explode. " Matías Romeo, one of the founders of the Bitcoin Space in Argentina, assures that this limit will be resolved shortly: "A second layer is being added that will allow thousands of instant transactions without increasing energy costs". The first tests have already been done and he hopes that it will be implemented soon.

What is behind so much complexity? What many see as a mere technological and neutral issue is interwoven, as always, in the social fabric. To the extent that few actors have much power, they can operate speculatively on the currency to obtain quick profits. "At some point there will be many losers and few winners as in all bubbles", explains Rabosto, although it is difficult to know what is really happening with this currency, since most of the specialized media do not understand the financial and social implications but repeats uncritically news that is rarely checked.

Is there more to speculation? "From the point of view of those who defend virtual currencies, bitcoin is a way to undermine corrupt states and banks that invent money; there they propose a certain margin of independence in the face of the intrusions of the financial sector, commercial banking and a certain possibility of operating with digital money in an anonymous way, "says Rabosto. "But if we consider it as an alternative to the financial sector, we see a more dystopian panorama. Somehow it is a proposal to replace the classic leviathan with a techno-leviathan not controlled by anyone, with a code that works in an automated way ".

<div class="text-justify>"The biggest risk of the currency is that when the mining operations become so large, links are created with private energy suppliers or the State," agrees Romeo, who sees no security problems in the technology itself. "The risk is that they create a list of who is validating transactions and who does not. That would have a lot of impact on the credibility of the currency. " And he continues: "Those of us who started from the beginning saw in this technology a disruptive possibility against the status quo, as an alternative to the financial system. For me it has that potential although bubbles can be formed: there are many people who get into cryptocurrencies to get rich quick. I do not care much about the price, I'm interested in technology that is disruptive. Bitcoin is a small part of what is possible with blockchain. "

Regulate to stop speculation or let do to free the population of banks and States? That is the dilemma that comes with cryptocurrencies.

By:

@Orlndojose

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