A few months ago, my wife and I went on a 30 day Interrail holiday across Europe. 10 countries, over a dozen cities, making over a hundred payments.

I looked in the window of every cafe, restaurant, corner shop, pub, bar, museum, and tourist-trap that we went into. All of them accepted a wide range of credit cards. Some politely informed us that they were either cash-only or no-cash. A few gleefully accepted foreign currencies at ruinous exchange rates.

None advertised accepting crypto.

Due to the language barrier and the risk of looking like a bellend, I didn't actually ask anyone if I could pay with crypto. But every bill we were handed told me which (fiat) currencies I could pay in. The tip-jars let me tap my card or drop my (metal) coins. There were signs warning that I couldn't use American Express.

But, again, no mention of crypto.

I literally only saw one sign that cryptocurrencies existed. Tucked away in Zagreb train station, next to the left-luggage lockers, was this:

I've never used a crypto ATM before. I've no idea if it's safe or whether it'd give me a good deal. I also didn't know whether a guy with a crowbar would follow me out of the station. But, hey, YOLO!

There was no queue of people waiting to use it, so I thought I'd investigate.

Delightfully, it wasn't just Bitcoin that it offered:

Including two subtly different stable coins. Which is nice, I guess.

I clicked through a screen confirming that I wasn't a Politically Exposed Person and got hit by this screen:

I've never had a cash ATM warn me about those kind of scams. Progress!

And yet, after wandering Zagreb for a few days, I didn't find anywhere to spend whatever crypto I could've purchased from there. I went to laundrettes, museums, galleries, bougie little eateries, and had dark kitchen deliveries. None advertised their acceptance of crypto.

Perhaps I'm not cool enough to go to the hip underground club where all the cocktails are only purchasable with an obscure shitcoin. Maybe there's an exclusive casino where all the beautiful people spend their evenings playing baccarat chemin de fer for tokens?

Or perhaps I'm just unobservant.

In the last few years I've wandered through the twisty passages of the Marrakech Medina and pounded the mean streets of Halifax, Nova Scotia. I've drunk in the bars of Kuala Lumpur and slurped food-court noodles in Hong Kong. From Sydney to London, I'm not exaggerating when I say that no one has ever offered to let me settle my bill with a cryptocurrency.

I've paid by mobile, in-app, using loyalty card points, instant bank transfer, and fairground tickets. No crypto.

In London, my home city, there are maybe 50 places which say they accept Bitcoin. London's population is about 10 million. It is one of the most visited cities in the world. There is, effectively, nowhere to buy a coffee using the blockchain.

Perhaps crypto is more like gold? I don't know any shop which would let me pay with an ingot or doubloon. Yet plenty of people have gold as part of their investment portfolio. Although gold is a physically and chemically useful metal whereas the utility of crypto is yet to be demonstrated.

It's the same with shares. I can't go to a pub and buy a round with GME:NYQ. I need to convert it into something more liquid before I can enjoy something more liquid.

So crypto can be an opaque speculative investment. Maybe it is the next tulips, maybe it is the next Ford Model T. But it is obviously so far from infiltrating normal payments that it can be safely ignored.

I've been writing about Bitcoin since 2011. I even studied for the Certified Blockchain Professional qualification and wrote about it for my MSc a couple of years ago.

I'm just so tired of all the unjustified hype. I despair about the amount of energy that's been wasted - both electrical and mental.

It has been seventeen long years since Dr Craig Wright published the Bitcoin paper. How much longer are people going to keep pretending that this is a transformative payment technology ready to be embraced by the masses?

Think I'm wrong. Don't bother arguing in the comments. Instead, you can put your money where your mouth is by sending Bitcoin to me at bc1q60rt4rrnky7syxdw6234zqnmy84ah2gphra5ev 😂

So I signed up for a wallet, installed an extension, verified my credentials, saved a seed phrase, and - without too much technical fuss - had some crypto transferred to my account.

So far, so good. Compared to a traditional financial institution it had some advantages - there were no KYC checks or ID verification requirements. But the disadvantages were obvious - I had to install a different app on my phone and link it to my computer. The UI for the app and extension were awful. A huge amount of technical jargon was thrown my way - and there were dozens of technical pages to read through all stuffed with yet more jargon, memes, and insider jokes.

It felt sloppy and unprofessional. But, hey, $20 is $20.

Then I tried to withdraw the crypto into something useful. You know, money that I can use to buy goods and services. This, it turned out, was impossible.

I had to install a different extension. Then I had to decide which bridge to use. I popped into Discord chat and said "Hey! I'm new! Which bridge should I use?"

The answer won't surprise anyone who has dealt with cryptocoins.

"DYOR!"

Here's the thing - I don't want to do any research. When I want to change money with Wise.com, I just click a button and the cash is converted.

One of the classic web design books is literally called "Don't Make Me Think!" People are busy and tired and stressed and confused and just want their damned money.

I asked again "How do I judge which site is safe and which service I should use?"

The responses were filled with technical jargon, links to 3rd party sites, a list of acronyms, and assumed a huge amount of pre-existing knowledge. When I said "I've only just got started - how do I withdraw money?" I was told to watch a 3 hour YouTube video and / or install yet another extension.

That's when it struck me.

Cryptocurrencies are perfect for people who want to feel smart.

Some people like learning. That's great! But rather that learn something useful, they create ever more complex systems. They become the gatekeepers of rarefied knowledge. A lore so vast and tangled that they can smugly laugh at the smoothbrains who just don't get it. HFSP!!

Right now, in the UK, I can send £0.01 to anyone for free. The transfer is instant. But, more importantly, it is simple. I don't need to learn anything. My friend sends me their account details, I click a button, paste their info, hit a button, and done.

I don't need to know how the underlying infrastructure works. I don't need to understand how the global financial system works. But, with crypto, I need to understand staking, gas fees, bridges, offramps, DeFi, and a dozen other things. This is stupid. It makes insiders feel smart because they have embraced the self-created complexity, and allows them to feel smug that normal people aren't as smart. That's it. That's why some people love crypto.

PayPal solved crypto's fundamental usability problems decades ago. Click here to send money to an email address. Done.

Fifteen years of cryptocurrencies and the usability is still dreadful. Why? Because the people running it are addicted to complexity.

One of the things people do when trying to create a new product or service is to write little user stories to illustrate the problem they're solving. You've probably seen this sort of thing:

• As a… busy parent, I want… a push alert from my washing machine; so that I… can stay on top of the laundry.
• As a… citizen, I want… an online passport application process; so that I… can save time and money.
• As a… corner-shop owner, I want… a simple way to accept credit cards; so that I… can attract younger customers who don't carry cash.

Stories are not always good nor, indeed, accurate. But they help you and your team explore what sort of problems you're trying to solve. Ideally, they're backed up with user research - but even if they're just figments of your imagination, they give you something to work towards.

One of the (many) failures of Cryptocurrencies is that they have a weak to non-existent set of user-needs. Very few of the "whitepapers" even discuss users, except in the abstract. They ones that do talk about specific needs are really just addressing the fact that the USA has an antiquated financial system - they are mostly ignorant about the financial services which exist in the modern world.

Let's take a look at one of the ur-texts of this movement - the original BitCoin paper. The problems it identifies are that users want:

1. To "transact directly with each other without the need for a trusted third party."
2. Lower transaction costs, because high costs are "limiting the minimum practical transaction size and cutting off the possibility for small casual transactions".
3. Protection from fraud via "Transactions that are computationally impractical to reverse".

And that's it as far as end-users are concerned. There's a little bit about privacy - but it doesn't discuss whether users want it. There is, I suppose, an overarching need for an honest network - protected by cryptography.

It is obvious that BitCoin has failed on its first two user needs. It is impossible to transact without being online and trusting thousands of third-parties to process the transaction. There's no way to hand over, say, a USB stick full of bitcoins without the risk of double-spending.

Similarly, the transaction costs of BitCoin (and most cryptocurrencies) are comically high. In the UK I can send a single penny to any other UK bank account and it doesn't cost me anything.

What about (3)? Does BitCoin protect users from irreversible transactions? Yes! But do users want that? No!

Let's take a look at that whole sentence from the paper:

Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.

(Emphasis added).

Both buyers and sellers want escrow. There will always be a user-need to mediate disputes. One of the reasons users love credit cards is that - in the UK at least - there are incredibly strong consumer rights laws. If a merchant screws you over, you can ask the card company to refund you. Try doing that with a cryptocurrency exchange!

Creating Some User Needs

I think one of the reasons NFTs got so much (brief) attention is that they had identified a well-understood problem and proposed a fix for it.

• As an artist, I want to receive a percentage of any future sales of my artwork, so that I see the gains in any future popularity.
• As a customer, I want to invest in something which might grow in price, so that I can resell and make a profit.

That's it. That's all there is to the NFT value-proposition. NFTs were never about supporting artists; PayPal and bank transfers has that covered. NFTs are deeply flawed in many ways, but they relentlessly focused on those two user stories - and users flocked to them. For a while.

So, what might a user want from a modern, digital currency? Here's my attempt to sketch out some idea. You will notice that many are contradictory! Users are not a homogenous blob and may have needs which can't be satisfied at all times.

Instant payments

These are part of those "parity with cash" needs. If I hand you a fiver, the transaction happens instantly & no-one takes a cut. Similarly, all online money-transfers is instant & free. Any future currency must meet those user expectations.

Low / No Fees.

In the UK, I don't pay anything for access to a credit card. I don't pay for cash withdrawals or deposits. I can transfer tiny or large sums of money instantly without a fee.

Now, the flip of this is that merchants pay a fee for handling my credit card transactions. They also bear the cost of transporting and insuring cash. Banks don't charge for current accounts or transactions - but do have huge fees for overdrafts and the like.

Crypto tends to evenly split this cost between the customer and the merchant. That's probably a fairer way to do things. But it is unusual - and will take some work to convince users that it is sensible.

Evading Capital Controls

Some countries place limits on how much money can enter or leave the country. Try wandering through an airport with a large suitcase full of cash and see what happens!

So, "As a user, I want to move money in and out of a country without a trace, so I can ..." what exactly?

Insured Funds

One of the things the BoE talked about was what to do if someone lost their wallet. If your cash gets shredded, you can usually send it back to the bank for a replacement. If your bank goes bankrupt, a central bank insures your money.

How could a digital currency provide that service?

Escrow

A customer wants refunds, but a merchant disputes that. Enter an escrow service. A middle-man to hold on to the money /goods until both parties are satisfied. In the non-crypto world, this is commonplace. Smart-contract sort-of provide this for digital exchanges. But they're unregulated.

Your story here

It's late and I'm tired. The original BitCoin paper didn't analyse user needs - and has manifestly failed on 2 out of its 3 identified needs.

If digital currencies are to thrive - they need to be attractive to real users. It isn't enough to make something mathematically perfect, or which only appeals to gamblers, or con-artists. Products live and die by addressing problems faced by users.

One of the many reasons crypto is dying is that it still doesn't have a compelling user story other than "number go up".

These are mostly notes to myself - but I hope if you find something interesting (or incorrect) that you'll leave a comment.

One of the biggest challenges organizations face in adopting blockchain solutions is the energy intense blockchain mining. In this chapter you will be exposed to IIB Council’s proprietary framework of Sustainable, Secure and Scalable Blockchain Development based on Quantum Computing.

You can tell someone is chatting bullshit when they invoke Quantum Computing. Much like cold fusion, it has been on the cusp of revolutionising the world for the last 50 years.

Proof of Work (PoW) is a necessary(?) evil to prevent double-spending and other attacks against Blockchains. Making the cost (via energy prices) prohibitive for anyone to mount a 50% attack.

It is estimated that the total electricity consumed by Bitcoin miners currently is more than that of the Czech Republic at 71.12 Terawatt hash (TWh) … and all that power is in a way wasted; in fact, no useful purpose is served … Environmentalists have raised real concerns about this situation. … the carbon footprint is also very high, currently estimated at around 387 kg of CO2 per transaction.

Good to see them acknowledging this!

Can PoW be redirected into something useful? As mentioned in a previous module, the obsolete "PrimeCoin" was an attempt to do this.

I wonder if the hashing power could be used to break private keys? Back in 2003, a team were trying to crack the original Xbox signing key

That was "only" a 2048 bit key. Is there now enough hashing power in the world to find the private key? If so, would that be a useful form of PoW?

Instead, they discuss Proof of Stake and Proof of Coin. Which, while interesting, still require you to have burned energy in order to get the coins in the first place. Proof of Burn is just ridiculous - intentionally mining and then destroying the coins!

Nonoutsourceable puzzles

Nonoutsourceable puzzles are a scheme that allows miners to claim rewards for themselves; consequently, pool formation becomes unlikely due to inherent mistrust between anonymous miners.

I don't get that. It prevents collusion between anonymous miners - but doesn't stop large pools of known actors. So, again, it leads to centralisation. There's a paper about it which is very technical.

A brief discussion about Quantum Computing follows, setting out the history and some basic definitions. Could Qubits be used to break encryption? Theoretically. Can they be used for faster-than-light information transfer? No.

There's a (broken) link to Qiskit which attempts to give basic tutorials in Quantum Computing.

Grover's Algorithm and Shor's Algorithm. Classic RSA is based on the fact that it is hard and slow to find prime factors. If that is no longer the case, lots of algorithms fall to quantum supremacy.

Lots of the discussion of "Quantum Resistant" algorithms sound like pseudo-science word-salad. There are some interesting resources on the NSA site - but it is hard to take seriously when there are no practical Quantum Computers to test on.

ASSIGNMENT

• Visit https://digiconomist.net/bitcoin-energy-consumption and estimate how much electricity will be used by the end of 2018 by Bitcoin.

  • Here's the current graph
  • 
  • Energy usage appears to be stable - driven, I assume, by rising energy costs. Previous periods of stagnation have been followed by slight dips, so I'd expect this year to end just under 200TWh.

• Answer the following questions

  • What is the carbon footprint of a single transaction of bitcoin?
    • 
  • What is the amount electricity consumed by a single bitcoin transaction?
    • 
  • Assuming Bitcoin is a county, and if compared with other countries, where does Bitcoin energy consumption stands in comparison? Name the country that comes just after the current level of Bitcoin energy consumption.
    • 

These are mostly notes to myself - but I hope if you find something interesting (or incorrect) that you'll leave a comment.

Another poorly edited chapter full of grammatical mistakes and logical leaps. Oh well! I've booked this course, so it's too late to back out now.

This is a massive chapter - and it took me a couple of sessions to get through it.

Bitcoin … has proven to be extremely secure and stable from a network and protocol point of view. As a currency, bitcoin is quite unstable and highly volatile…

Amazing! Yes, there have been few successful attacks. But its throughput is low and it doesn't work as a store of value.

It goes into a little of the history of digital currencies (as distinct from payments). For example Chaum's Blind Signatures paper. Chaum's paper is brilliant - an interesting scheme for issuing ballots, or money, which is relatively anonymous but easy to be de-anonymised with the consent of the parties. One core limitation is that it relied on a central authority to issue, check, and invalidate notes.

Similarly, the early e-Cash paper makes some interesting ideas - but it still relies on a central authority to check for double-spending. It also allows that central authority to revoke any coins which it has been issued.

The term Proof of Work emerged and got popular later with Bitcoin, but in Wei Dai's B-money a scheme of creating money was introduced by providing a solution to a previously unsolved computational problem. It was referred in the paper as a solution to a previously unsolved computational problem.

Seriously, this is the level of proof-reading in this book!

Anyway, hashCash was originally designed to stop spam by making it computationally unfeasible to send large amounts of spam.

The B-Money Paper presents an early form of cryptocurrency - using distributed databases where coins are created through solving mathematical puzzles. There's also a prototype smart contract as well. It also recognises the rapid advance in computing power which makes crypto so problematic.

Then there's the Auditable, Anonymous Electronic Cash paper from 1999. Introduces Merkle trees to represent coins and Zero Knowledge Proofs to display ownership.

Bitcoin can be defined in various ways; it's a protocol, a digital currency, and a platform. It is a combination of peer-to-peer networks, protocols, software that facilitate the creation, and usage of the digital currency named bitcoin. Nodes in this peer-to-peer network talk to each other using the Bitcoin protocol.

A bit sycophantic, but OK. I hadn't realised that Bitcoin was the protocol and bitcoin was the currency. Which one is the monster?

Private keys it Bitcoin are 256 bit secp256k1 ECDSA curve numbers. They are usually converted to Base58 (with a few other bits) to make the Wallet Import Format. This does not seem to make the string much easier to use. So what's the point? Mini private keys can be used where space is limited, like QR codes. (This seems odd, QR should have no problem with a 256 bit number.)

If you need to refresh the relevant cryptography concepts, you can refer to Chapter 4, Public Key Cryptography, where ECC was explained.

I am in Chapter 4. It has not described Elliptic Curve Cryptography. Ah, this book is plagiarising content from elsewhere!

Terence Eden is on Mastodon

@edent

Replying to @edentAnother (sincere) Bitcoin question!
Can someone explain *why* the Wallet Import Format is useful?
The Base58 string isn't much shorter, and it doesn't obfuscate the private key in any way.
So what's the point in them? pic.x.com/TEcVyHQEct

---

Terence Eden is on Mastodon

@edent

Replying to @edentAmazing!
The book says "If you need to refresh the relevant cryptography concepts, you can refer to Chapter 4, Public Key Cryptography"
But this *is* chapter 4…?
Ah, they've just copied this text from a DIFFERENT BOOK!
google.co.uk/books/edition/… pic.x.com/FNP6Q6GPer

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The algorithm for constructing a wallet address - Public Key → SHA-256 → RIPEMD-16. Points to an utter failure of usability.

Happily admits that Bitcoin has no intrinsic value, but points to Metcalfe's law of networks to show proportional value to participants.

The Bitcoin structure is interesting but, again, rather theoretical. I don't understand why double SHA-256 is used.

A high level discussion of SPV and Stratum nodes. All very poorly explained.

Repetition of PoW. Bitcoin has a possible 21 million coins which are generated at a decreasing rate. There's no explanation for why they think this counters inflation.

Brief discussion of the "Script" language for bitcoin spending. Not Turing complete and no loops (to avoid hanging the network). It's a Forth style(!) language with Reverse Polish Notation.

UTXO - remaining scraps of coins not spent. Sounds like the plot of a Superman film.

Terence Eden is on Mastodon

@edent

Replying to @edentOn the left, the EC Council's "Certified Blockchain Professional" book.
Note how it says "Businesses can use the following logo" but doesn't present an image?

On the right, the Packt book "Mastering Blockchain" - where the text has been copy-and-pasted from! pic.x.com/D4ja10WgUQ

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Wallets don't actually "store" bitcoins. They are private keys which prove ownership of coins on the network. Most keys are non-deterministic. But you can have deterministic wallets which use human-readable words to create a keyphrase which "unlocks" the keypairs.

A "paper wallet" is just a bit of paper with they key printed on it. Challenge to keep safe.

Privacy - all transactions are public. Can use "mixers" - which is risky, but can disrupt graph analysis.

KYC is required in many parts of the world - as is effective securities regulations.

Various alternatives / extensions to Bitcoin to deal with its slowness etc.

Forking - either intentional or unintentional. Unintentional usually due to bugs. Hard forks require a new chain and new software. Soft fork, usually can continue working on the old chain with old software but might not be able to fully participate due to change in protocols.

Say you want to pay a friend some money. But you're not physically close enough to hand over cash.

You create a new bank account with a unique username and password. As quickly and easily as getting a new email address. Couple of clicks and it is done.

You move money from your main account into the new account. This happens instantly and is free.

A property of these accounts is that anyone with the username can see the value of the account. And, possibly, other metadata like when it was created, what transfers have been made, etc.

You tell the payee the username - and they can see there is credit in the account.

You tell the payee the password as payment.

Payee either changes the password to claim the account, or transfers the funds somewhere else.

Does this seem like a sensible idea? Let's ignore the Know-Your-Customer (KYC) issues, and the problems with secure transfer of passwords. It is convoluted, yes, but doesn't require transferring via banks. The money stays where it is, only the ownership of the account moves.

This is (sort of) what you can do with Bitcoin and other cryptocurrencies. Most crypto-fans will tell you that their payments are Peer-to-Peer (P2P). This isn't true. You can't transfer money from one user to another without recording and verifying that transaction with a 3rd party - the Blockchain. But you can create a new wallet. Transfer money to that. And then give the keys to someone else.

If I hand over a five-pound note to a friend, no central authority tracks that. It is truly P2P. My friend can transfer that note to someone else, and the currency will circulate. At some point, it might be checked by a central bank for authentication. But it is P2P up until that point.

Digital Money needs to work offline. Sure, the Bitcoin network has amazing uptime - but not every location on Earth has connectivity (or even electricity). Needing to access the network is a barrier to payments.

The inescapable fact is that the 'chain is a 3rd party to any transactions. That means it is inherently not suitable for P2P transactions.

Thankfully, there's very little technobabble. I nodded along with most of the technology - only pausing occasionally to consider how I would have done that particular hack.

Could a shadowy criminal gang really make money by cyber criming a botnet to disrupt the crypto markets? Who knows! But half the fun is the speculation. Nothing in this book seems out of the ordinary to those with a background in technology. It doesn't rely on some futuristic leap in computing power - it is firmly bounded by Moore's Law.

Good sci-fi shenanigans and, thankfully, no Bollockschain evangelism!

Like lots of Amazon trilogies - the first one is 99p.

It's not uncommon to see broken-down Windows displays - I run https://windowsisbroken.tumblr.com/ - which is dedicated to pointing and laughing at such mistakes. But this is the first time I've seen a display repurposed for profit!

It appears to be running NiceHash Miner Legacy. A BitCoin mining program for older computers.

I'm sure someone cleverer than me can figure out which wallet starts with 3Jgi6 and is receiving these coins.

Although, given that the hash-rate is zero, it may not be producing anything.

There's no way to know whether this is an external hack, or if an "enterprising" employee has decided to repurpose these computers on the weekend, or if the advertising industry has decided that mining is more profitable than encouraging people to enjoy a cool refreshing glass of blue milk.

If you've enjoyed this blog post, you can pay me in BitCoin.

In particular, I like the way The Pirate Bay (and others) have used QR codes to facilitate easy payments and donations. The QR codes contain only three variables - the payment method (BitCoin), the destination, and a message. As this is a donation there is no value set. There is a full specification for a BitCoin URI scheme which I think is fairly well designed.

I envisage a day when, on asking for the bill at a restaurant, I am presented with a paper slip totting up my purchases with a neat QR code printed at the bottom. Scanning the code will pull up my banking or credit card app and allow me to make a payment. A verifiable receipt is either shown on screen or sent directly to the restaurant.

For example:

PAY:
 WHO:Pizza Palace
 IBAN:GB29NWBK60161331926819
 CUR:EUR
 VAL:27.35
 REF:123456qwerty
 TIME:1370886496

That's enough human readable information - and machine data - to ensure the correct payment gets from one person to another. I'm sure there are some other fields which may be advantageous to add; tax rate, specific location, etc. But it certainly all fit within a QR code.

QR codes can easily be printed out using the current infrastructure of mobile POS terminals. Those terminals already have mobile network access so can be alerted in real-time when the payment is made. IBAN means we have an easy(ish) way to uniquely identify payment destinations. And, in the UK at least, we have a fairly rapid payments infrastructure.

What's needed is a simple standard and mobile banking and credit card apps to support it.

Simple...

... as our money becomes completely electronic, new crimes will undoubtedly be committed which take advantage of the technology itself. Perhaps if we could imagine what crimes might happen, we could start to think about how to prevent them.

What financial crimes could be committed within a completely electronic marketplace?

Future of Money Design Award

On one level, there's no change to the basic ideas of monetary crime. You either target an individual or a bank, then fool them or force them to relieve them of their money. Recent hacks of BitCoin banks are no different to an old fashioned bank robbery. Exploit the security, then stuff your pockets.

So, one could dress up a historic heist in modern clothing - just like Star Wars is a dressed up version of Kurosawa's Samurai films. That's a bit dull though.

What we need is to think about how people will change when electronic money is the norm. (Of course, for many of us, paying by mobile or card is the new normal.)

Here are three of my thoughts which I may turn into competition entries.

Digital Chugging

Walking along the street, you see a homeless man begging. Rather than holding up a cup to catch coins, he has a sign with a QR code on it. "Help The Homeless - Scan Here".

Scanning the code pops up your phone's banking app. "Do you want to set up a regular £5 per month direct debit to the charity Shleter?"

Why! What a perfect idea! You thumb in the password to your online banking and bask in the smug glow of philanthropy. A few minutes later you get an email from the charity thanking you for your donation and, would you be interested in sharing some of your personal information with them?

The scam? Shleter isn't a charity. They're quietly draining you of your money and trying to get your personal information. By the time the banks tie together the various complaints, they've vanished with your cash.

Millionaire For A Night

One of your buddies wants to impress a girl. He thinks the easiest way to do this is to convince her that he's a very wealthy man. Because it's trivially easy to move your money round instantly, your group of friends hatch a cunning plan.

All ten of you will transfer your life-savings to your mate for one night only. You all set up a "push" transaction to happen at the same time. You watch him set up a "refund" transaction for, say, 3am. Long after his "riches" have helped his seduction.

It works! He shoots, he scores! And the money comes back to you.

Next week, he wants to try it again. It's so simple to set up rapid transactions that it's a no brainer to you.

Of course, come the next day, your money hasn't been refunded. Your friend has skipped town with all the money his friends pledged him.

Round Robin

Transactions can take place faster than ever. You no longer need to wait 2-5 working days for a payment, most are done within a couple of microseconds. Stores don't have to wait for a debit-card processor to aggregate the money paid to them and then withdraw it from your bank. If you need to pay a friend, the money leaves your account and is deposited in theirs instantly, ready for them to use.

You set yourself up with several bank accounts. You place £1,000 in each one. You tell the first account to pay its balance to the second account. You tell the second to pay to the third. Repeat until you tell the very last account to pay its balance into the first. Repeat the transactions every second.

You've now created a loop. A thousand pounds leaves each account just as a thousand pounds comes in to the account.

Or, at least, it would, if banks had bothered to update their critical infrastructure. Their clocks should be precisely aligned with each other - but DDoSing them at just the right time introduces a little bit of lag into their systems.

All of a sudden, according to their transactional records, there was a balance of two thousand pounds, which was then forwarded on, then one thousand pounds was deposited.

As the errors in the records build up, the amount of cash flowing through the ring increases. At precisely the right time, the money is simultaneously withdrawn.

While the banks try to reconcile thousands (or millions) of transactions with conflicting timestamps, you make off with your bounty.

Limitations

As I said at the start, it's hard to think of an entirely new crime. Many of us use electronic banking and some variants of e-money and the frauds that are out there aren't radically different to what they were a hundred years ago.

The speed and ease with which we can will be able to move money will probably change our attitudes and that - I think - will have an unpredictable effect on society and criminals.

We could built digital currencies with certain safeguards, but that would destroy some of its perceived value. A banknote which lists everyone it has ever come in contact with is useful for traceability - but disastrous for privacy.

People, it seems, don't change. The dot-com bubble is no different from the tulip bubble, sticking a knife in someone's face will convince them to transfer money to you, scam artists will fleece the unwary.

Perhaps we should just give up on money altogether.

Bitcoin me! 1LJmePYmet9VzzzzzzLbd0RVGoYcLqAZhk

If that "sentence" makes any sense to you - you're not a muggle. Muggles (for want of a better epithet) don't want to invest a lot of time into things which don't fit with their mental model of how the world works.

Without getting into a philosophical discussion on what money is and how value is generated - let's look at how Bitcoin works in practice.

Failing to Design is Designing to Fail

Bitcoin is doomed to fail. Pick a reason why.

• Governments will ban it.
• A proprietary alternative will spring up.
• An EMP will destroy enough Internet infrastructure to seriously disrupt it.
• Naughty hackers will commit massive fraud.
• Normal people will be too confused to even start consider it.

All are a possibility. The most likely is ignorance and apathy generate by crappy execution on lack of focus on the normal user.

PayPal

Before it became big and a bit crap, PayPal started off with a very simple idea.

1. Send money to an email address.
2. Receive money sent to your email address.

Pretty damn simple. If I have money in a PayPal account, I can send it to alice@example.com . Alice receives an email saying she now has money in her PayPal account (and if she didn't have one previously, an account has been created).

Now, there are caveats, and charges, and edge cases, and multiple points of failure. But the idea is simple.

How Bitcoin Works In Practice

1. Install software onto your PC.
2. Configure it.
3. Find some way to convert cash into BitCoins.
4. Copy and paste long, incomprehensible random strings, with no user-friendly error detection.
5. Use the software to send coins with no out-of-band communication for confirmation.

Now, each of those points in of itself isn't insurmountable. But taken together they present a rather formidable challenge. With PayPal, Google Checkout, or regular bank transfer, the flow is

1. Get recipient's ID (either an email or a short string of number)
2. Create an instruction via web, mobile, voice, SMS, or in person.
3. Recipient receives confirmation.

I've left off the "set up" stage because most people already have at least one method of payment at their disposal. Even if they don't, setting up a PayPal account is trivial compared to setting up Bitcoin.

Designing For Humans

Bitcoin, at the moment, isn't designed for normal people. It's designed for geeks like me. And even I can't be bothered to set it up.

But if Bitcoin - or any other currency - wants to fulfil its destiny and revolutionise "money", it needs to be easy for normal people to understand and use.