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.
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.
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.
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.
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.
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.
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.
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.
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.
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.”
Permit me to digress with this analogy: Let’s imagine a lottery for $100. If you have 10 lottery tickets and there are 100 lottery tickets in total, then you have a 1/10 chance of winning. If the lottery tickets cost less than $1 and you are ensured that there will be many more rounds of the lottery, then it makes sense to purchase tickets in every round. Over time, consistent participation will ensure a profit. If the lottery ticket costs more than $1, then participating repeatedly will guarantee a loss.
Bitcoin-style mining works in much the same way. With one exception: the number of lottery tickets are proportional to the total amount of computation devoted to the process. Let’s imagine that there were several million lottery tickets available. Owners of ASIC computers would be able to acquire hundreds of thousands of tickets each. Owners of programable specialized hardware would be able to purchase tens of thousands of tickets. Owners of commodity hardware with specific graphics cards would be able to buy thousands of tickets. Owners of commodity hardware without graphics cards would be able to buy one or two tickets.
Remember that tickets are not free, running computers requires electricity, and the electricity bill for running a lot of computers can be quite high. In order to profitably participate in cryptocurrency mining, you have to at least make more money than your ongoing electricity costs and the costs required to obtain your hardware. To summarize (data as of the writing):
|Total computation devoted to mining (i.e. total lottery tickets)||88,502,557,900 MH/s|
|Typical ASIC computation||100,000 (2013) 1,000,000 (2014) MH/s|
|Typical FPGA computation||1000-25,000 MH/s|
|Typical GPU (graphics card) computation||500-2500 MH/s|
|Typical CPU computation||10 MH/s|
Currently, it is not practical to mine bitcoin without an ASIC. There are so many ASICs that are contributing to the total amount of computation devoted to bitcoin mining that nothing else can justify the costs of electricity to compete against the ASICs for reasonable shares of the mining rewards.
This is a problem because the ASICs represent a tremendous amount of raw computational resources that are permanently devoted to financial busy work. The bitcoin mining network would work just as well if it had far less computation devoted to it. Bitcoins would be mined at exactly the same rate if 1/2 or 1/4 of the computational resources were devoted. This means that bitcoin has incentivized a tremendous amount of computational busy work. So far, the estimate is that the bitcoin has used about 150,000 megawatt hours of electricity, which is about 1/8th of what the state of Hawaii uses in one year. It would not be unreasonable to assume that at the rate of growth, the bitcoin mining network will surpass the yearly electricity usage of a small state soon.
If we include the environmental impact of producing and manufacturing hardware specifically for bitcoin mining along with the electricity costs, then society has invested in a tremendous amount of unnecessary computation. Clearly, this is another example of malignant computation.
The order of usefulness in bitcoin mining is:
1. ASIC 2. FPGA 3. GPU 4. CPU
The order of usefulness for all other computations is exactly the opposite:
1. CPU 2. GPU 3. FPGA 4. ASIC
ASICs achieve their dominance over the mining network by being utterly and totally useless for anything other than bitcoin computation.
But we must give credit where it is due. It is a feat of engineering that bitcoin works at all. It is no trivial thing to engineer a cryptocurrency where none existed and ensure that it is both secure and adoptable. Bitcoin is a trailblazer, and there was no way to know for certain, in advance, that the drive to ASICs would happen.
Litecoin is another matter. Litecoin bills itself as “silver to bitcoin’s gold.” It was designed using mathematics that would resist implementation in an ASIC. Litecoin has proven to be the second viable cryptocurrency, and it won this position in no small part because it advertised itself as CPU-centric and mineable on “consumer” hardware. Essentially, litecoin was intended to be a cryptocurrency that would not succumb to computational malignancy.
Litecoin is facing something of a crisis, as the first ASIC to support litecoin mining will likely be out soon. Silver is distinct from gold because there are notable and substantial differences between the metals. Litecoin is about to lose its central distinction from bitcoin. All of the other distinctions between litecoin and bitcoin are mostly irrelevant, differences of preferences and not of substance. There is a poll and discussion on Bitcointalk that shows there is a preference for changing the litecoin proof-of-work algorithm to make ASIC mining impossible.
To suggest that this happen with bitcoin would be unthinkable. The bitcoin project advertised its method for proof-of-work, and there was never an intention to prevent any approach. But litecoin specifically had CPU-oriented proof-of-work as a goal. I hope that litecoin decides to change its proof-of-work to ensure it does not become a clone of bitcoin. If it is to stay distinct, it must do so in the most fundamental way and stick to its roots. After all, if I have to buy an ASIC, why not just buy one for bitcoin? I hope litecoin gets this one right.
I expect, however, that if litecoin decides not to modify its proof-of-work algorithm, it will be supplanted as “silver” by another cryptocurrency that does take this commitment seriously. YAcoin has committed to intentionally changing its proof-of-work over time to be ASIC resistant, but so far I have found no cryptocurrency that has committed to actually changing its proof-of-work if the current proof-of-work becomes ASIC friendly. So far, at least, no one regards this arms race as a central problem that needs both technology and cultural solutions. Changing the proof-of-work in a mining community would produce a fork unless there was strong consensus around the goal of avoiding computation for the sake of itself.
It order to avoid computational malignancy, a cryptocurrency must support miners who have computer hardware that is useful for other things. Or it could integrate a fundamentally useful process as its proof-of-work (which is the approach that primecoin takes as it attempts to find prime numbers).
Eventually, cryptocurrency mining software should ship with implementations of APIs that allow its computational resources to be accessed for other purposes. The OpenStack protocols are a good place to start for this. In fact, as the OpenStack protocols mature, they should support cryptocurrency remittance. That way, a currency miner who has invested in a data center can say, “Oh, you will pay me 100 litecoin/bitcoin/whatever to view my mining cluster as a Hadoop instance? I would only make 90 mining! OK, sold; here are your access keys.”
Which is the reason that I have an Ox in this ditch. The “Omics” in medical science is going to require super computer resources on a massive scale, and while the most profitable health care inquiries will always be pursued, there will be more and more of a need for computation resources for “orphan” diseases, etc. The capacity to repurpose mining networks to perform genomic, proteomic, or exomic analysis would ensure that the network would be available to serve society, not just itself.
(I should warn that I am not giving investment advice — or more strictly, that if you were to attempt to view the above as investment advise, you will probably lose money.)