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Economics: Bitcoin is also human matter - science.ORF.at

Economics: Bitcoin is also human matter – science.ORF.at

It is still very difficult for outsiders to understand how Bitcoin works. The negative aspects dominate the headlines mostly – lately, for example, when that happens The state of Carinthia blackmailed And she should have paid out $5 million in bitcoins. However, it is no wonder that criminals are drawn to “cryptocurrency”. Anonymous or aliased actions are logged into the system from the start.

To make it possible, the creators relied on technical solutions. They wanted to abolish and democratize the payment transaction hierarchy. Cryptocurrencies do not want to trade money using central banks and coinage, as with traditional currencies, but rather want to use the computing power of computers with equal rights in a decentralized way.

No trust trust

The creators of Bitcoin considered human quality to be the basic problem of ordinary money: trust. One newspaper stated: “The central bank should be trusted not to devalue the currency, but the history of paper money is full of betrayal of that trust.” Original Bitcoin Documents. In order to avoid disappointments of this kind, an electronic currency should be created that is “proof of cryptography and does not require trust in intermediaries”.

However, a new study shows that trust played a major role, especially in the foundation stage of Bitcoin studywhich was led by a team of data researcher Alyssa Blackburn Aidan’s lab from Baylor College of Medicine in Houston. The work, which appeared as a preface to print and has not been fully reviewed by the specialized community, contradicts a number of myths among fans of “cryptocurrency”.

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Bitcoin 64: a great concentration of power

First and foremost, the belief that Bitcoin creation and transactions are anonymous. The researchers examined leaks from the central bitcoin database (blockchain) from the first two years of its existence – from January 2009. From about 320 gigabytes of data, they were able to deduce who created the first bitcoins – called “digging” in jargon – was involved. Contrary to self-description, the power of the early prospectors was very unevenly distributed – anything but decentralized. Only 64 individuals were responsible for most of the events at this early stage.

“This concentration of power is not particularly surprising. However, the origin of the study is that it names names,” commented Pete Weber, crypto expert and economist at the Austrian National Bank (OeNB). Two names are specifically mentioned, both convicted criminals – Blackburn’s team could also unearth others from “Bitcoin 64”. “Because our goal was to examine socio-economic behavior and detect ineffective people, we do not cite any other identities,” the study states, but the method can be used by police and other authorities. hung New York times.

Altruism of the first “kings”

Anyway, in the early days of bitcoin, “very few people wore the crown,” as Alyssa Blackburn explained in a newspaper article, and “this falls short of the ethics of decentralized, trust-free cryptography.” Study: Not infrequently, Bitcoin was initially dominated by one or two people who could have used this position to their advantage. by 51 percent attack They could change the bitcoin database at will and use bitcoins for multiple transactions.

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But the early Bitcoin “kings” have just that no Done – they acted selflessly and did not abuse their power. By doing so, they confirm the results of empirical economics – game-theoretical simulations show how people behave in certain decision-making situations. In such experiences it was Christopher Huber from Vienna University of Economics and Business for current study.

APA / AFP / Marc Felix

The largest bitcoin mining facility in North America is located in Rockdale, Texas

Money has always been a social phenomenon.

The study summarizes: “Although Bitcoin was built as a decentralized network of anonymous, trustless individuals, its early success was the result of the collaboration of a small group of altruistic founders.”

This comes as no surprise to OeNB economist Pete Weber. He considers the rejection of human behavior propagated by crypto enthusiasts – summed up in the slogan “In the code we trust” – a technical misunderstanding. “Money is never just a natural or technical phenomenon, but it is always a social phenomenon. It only works when people are involved – and people are who they are. The project is human like any other.”

Weber adds that trust in human behavior by strangers remains essential to cryptography. And: “Decentralization in the sense of distributing a technical task over several competing computers does not mean equal distribution or absence of power. Nor does it have anything to do with people’s democratic voting rights.”

Speculative object, no money

Despite decentralization, Bitcoin and other “cryptocurrencies” are still highly concentrated entities – it is better to be big. Huge server farms have emerged that mine new bitcoins and migrate around the world depending on political requirements. Leading China has long banned mining, and Russia and Kazakhstan now produce a lot. Huge environmental costs arise here and there, because running a computer requires a huge amount of energy.

The question remains as to what Bitcoins and Co. Indeed: in the self-perception of its creators and fans, it is about money and currency. The Beat Weber economist at OeNB counters this: “If you agree to what money should be — a fairly stable standard of value by which you can calculate what is cheap and what is expensive; a means of payment that can be used anywhere and a reasonably predictable store of value – Then cryptocurrencies have nothing to do with it.” Cryptocurrencies are rather a speculative investment object. This is also confirmed by 90 percent of the people who use it. They want to buy cheap products and sell them dear ”- quite another human desire.