Bitcoin Has an Inherent Flaw Called Blockchain

Fireside Chat — Bryan Best — 2021

Not long ago, I expressed this thought as a short post on LinkedIn. The longer I have thought about it and watched too many get sucked into the hype I have decided to expand on that thought with this post.

So let’s start with my view that blockchain, which Bitcoin is based on, was not created specifically for cryptocurrencies. It was created as a generic secure ledger and nothing else. More or less a document store that is encrypted on both sides using the content of previous transactions and the current transaction to lock the current transaction. There are a lot more gritty details about how that works, but that is basically how it works.

My short answer as to why Bitcoin is not maintainable is the very essence of how blockchain works, the ever-growing cryptography chain. You cant compress it, you can’t shorten it, you cant fork it, you cant start a new one. Well, you could start a new chain if you started a new currency, but you would run into the same problem eventually.

For the slightly longer answer, follow along. The problem with using blockchain this way is that once a transaction is entered into the chain, it can never be removed. In the beginning, it only took a handful of computers to process the encrypted chain as it was quite small. As the chain has grown, it takes exponentially more computers to process the chain in a timely manner. Even Bitcoin transaction #1 is still in the chain at the position it was when that transaction happened. Same thing with transaction number 1,000, 100,000, 1,000,000, the numbers don’t matter. The point is that they are still in the chain, and they always will be. Even if you get rid of all of your Bitcoin and close all of your accounts vying to never use it again, every transaction you ever made using Bitcoin is permanently stored in the blockchain ledger. Do you see where this is going?

The Bitcoin ledger will never decrease in size. There is no way to decrease the size. Making any changes to the chain breaks the chain and the whole foundation that blockchain is built on. New cryptocurrencies use multiple ledgers and other claimed enhancements to get around this issue. But in the end, the bulletproof encryption offered by blockchain technology is limited by the amount of power available to process it.

If Bitcoin were to become a mainstream currency, the size of the encryption chain would grow exponentially with the number of people using that cryptocurrency. Even now, it takes hundreds of thousands of computers to process the chain. These cryptoprocessor farms range from a few extra systems in someone’s garage to full-blown server farms built to do nothing but process cryptocurrency. But where will it end? Well, it will never end. As the chain gets larger, more server farms will be required to process their chunk of the chain that we know from above never gets any smaller.

Bitcoin is an infinite idea in a finite world.

One way to more deeply express the point of the number of transactions already in the Bitcoin ledger is the fact that now one Bitcoin is worth more than $30,000USD, maybe much higher by the time I write this. But the point is that this one Bitcoin is broken down into more than 30,000 pieces that are then multiplied by the number of transactions. There is a hard limit on the number of Bitcoin that will be released; this limit is 24 million coins. This number means nothing except when the system will stop giving out Bitcoin to coin miners. The real number to focus on are the number of transactions in the ledger that we already know can not be compressed, sliced, shrunk, or anything else except continually getting bigger.

Once the final Bitcoin is released, which could be any time in the next ten years, the whole system switches over to transaction processing fees to pay the mining farms. This brings its own set of problems. As it currently stands, if half of the Bitcoin processing farms went offline, the time it takes to process one transaction would grow tremendously, minutes to hours to process one transaction. As the ledger grows, it takes more and more computers to process it in a timely fashion.

Eventually, the ledger will become so large there will not be enough computers to process the chain. This is inevitable. The only question is, when would this happen? Remember, the Bitcoin ledger is ever-growing. Even as I write this, the Bitcoin ledger has probably grown by thousands if not tens of thousands of transactions. Every coin that is traded, every account that is opened, everything that is bought or sold. Everything that touches Bitcoin adds to that ledger. The strength of blockchain is also its bane in a high transaction environment.

This is my view on why Bitcoin is unsustainable.

Leave a Reply

Powered by

Up ↑

%d bloggers like this: