My computer died today. It died a noble death having suffered a short syncope after a somewhat protracted battle with creeping decrepitude and obsolescence. After 9.5 years of loyal service, and a few service visits to the local computer shop, I laid it to rest in my garage.
Earlier today, after the computer technician had pronounced it dead on arrival, I took it out of the store and placed it on the catafalque. I just stood there beside it, despondently and dejectedly waiting for my wife to pick me up.
While I was reminiscing all the good and bad times my PC and I shared, it occurred to me that I had to pull myself out of the memory lane, and figure out what computer to build next.
I pulled out my phone, navigated to my WhatsApp applet and reached out to my tech wiz of a friend across the Big Pond. After I told him what had happened, he told me something that I already knew – that Covid-19 had put a crimp on the chip set production. He also casually let me in on something that I didn’t know. He told me that the cryptocurrency scalpers/farmers have been buying tens of thousands of chip sets for their goddamn crypto farms. Incidentally, I validated this information by asking a computer store clerk what was going on. The young gentleman confirmed that scalpers have been buying graphic processing cards (GPUs) by the pallet. This in turn coupled with the already depressed supply of computer components due to COVID-19, has caused the price of a GPU to balloon 200 to 400 percent.
And that is when I realized again how truly and utterly hopeless us humans really are.
Cryptocurrency – the story of a sham
Cryptocurrency is called by many people ‘digital money.’ What most people fail to understand is that “at its core, cryptocurrency is a system of value. When investors buy a cryptocurrency, they are betting that the value of that asset will increase in the future, just as stock market investors buy securities when they believe the company will grow and share prices will increase.“ (John Hyatt “Nasdaq”)
This means that cryptocurrency is purely a speculative exercise in futility. While stock valuations are tied closely to gauging a company’s future cash flows, cryptocurrencies are linked to investor appetite. Their value boils down to a couple of factors: “the likelihood of other investors buying the asset or the utility of the cryptocurrency’s blockchain.”
So what is a blockchain?
A blockchain is a digital ledger of transactions that is distributed across a network of computer servers. No single PC controls the ledger. Instead, a decentralized network of computers keeps a blockchain running and authenticates its transactions.
The algorithm controlling the generation of the cryptocurrency blockchain depends on the number of servers farming the virtual currency.
Cryptocurrency transactions are recorded in perpetuity on the underlying blockchain. Groups of transactions are added to the ‘chain’ in the form of ‘blocks,’ which validate the authenticity of the transactions and keep the network up and running. All batches of transactions are recorded on the shared ledger, which is public. Anyone can go and look at the transactions being made on the major blockchains, such as Bitcoin (BTC) and Ethereum (ETH).
Not only that but the more computer power you assign to validating blockchain transactions, the more cryptocurrency you mine. Looks like someone discovered the mother lode, eh!
This incentive-driven system is called a proof-of-work (PoW) mechanism. The computers ‘working’ to ‘prove’ the authenticity of blockchain transactions are known as miners. In return for their energy, miners receive freshly minted crypto assets.
Investors in cryptocurrencies don’t hold their assets in traditional bank accounts. Instead, they have digital addresses. These addresses come with private and public keys — long strings of numbers and letters — that enable cryptocurrency users to send and receive funds. Private keys allow cryptocurrency to be unlocked and sent. Public keys are publicly available and enable the holder to receive cryptocurrency from any sender.
And this is why it is becoming very difficult and expensive today to purchase computer parts to build your own system.
Because someone figured out a way to con people by writing a computer program code that transforms zeros and ones, virtual ethereal figures existing only in electronic form, into hard cash or tangible goods and services made by investing real money, and devoting real resources, labour, time and lots and lots of effort.
The utter stupidity of people is only matched by their bottomless greed. It seems as though the world could be powered by these two seemingly inexhaustible resource: stupidity and greed.
If only we could mine stupidity and greed like they mine cryptocurrency.
Old Benjamin Franklin was right to say “a fool and his money are soon parted.” In our case, some people work with their hands to produce the necessities of life. Others use their heads to do the same. Some create useful machines that save lives and multiply effort. A few inventive bastards steal a lot from the creators of real wealth.
Chances are that soon now, cryptocurrency will go the way of dodo bird, or suffer the ignominious end of the John Law’s Mississippi currency bubble of 1718-1720. 300 years ago, France’s experiment with paper money failed when private speculators’ greed met government’s attempt to wipe out Louis XIV’s gigantic legacy public debt in one bold stroke. Now as then, governments ignore this bubble about to pop at their own risk and peril. A few smart insiders will cash in 90% of the profits, while 90% of the people riding the cryptocurrency train will lose their investment.
Like any other bubble, the cryptocurrency will pop as soon as the financial system will have profited the few winners. Then, and only then, the public will once again realize the folly of its cupidity.
And that is how the cookie crumbles, folks!