Inspired by, and paying homage to, the quintessential 1958 essay on free-market economics, “I, Pencil”, by Leonard Read (https://fee.org/resources/i-pencil/), Dr. Stephen Castell adapts and refashions its lyrical narrative to illuminate bitcoin’s multidimensionality: the cryptocoin’s digital complexity, existential vacuity, absence of the Invisible Hand, and potentially damaging environmental impact.
I am Bitcoin, the extraordinary cryptocurrency, digital money, familiar to many millennials, but puzzling to others – even those happily trading stocks, shares, and bonds, or ordinary currencies on the foreign exchanges. Being bought, sold, and “hodled” is both my vocation and my avocation. Please be clear: that’s all I do. I serve no other useful purpose1.
Judged by the mainstream media coverage, learned journal papers, online blogs, financial press analysis and social media chat that I, Bitcoin, have generated since the first of my species was born in January 2009, my story is clearly very interesting. But, despite all this, I remain more mysterious than a US dollar bill or a lottery ticket, or a swish of a contactless debit card. Many financial regulators feel I should never have existed; and, frankly, I fear that some may even be intent on eliminating me entirely!
They may actually have a good point, as I will explain. I am, however, a perfect example of a modern electronic digital wonder. And I could even become a thousand times more valuable than precious metals, a kind of ‘virtual super-gold’!
I, Bitcoin, submit, therefore, that I merit your wonder and awe. If you can become aware of my miraculousness, you will perhaps help establish the independent financial freedom and strength that the enthusiasts for me and my brother and sister bitcoins say mankind so richly deserves, as a vibrant part of what they call the “new cryptoeconomy”.
Yet… I wonder, equally, and with good cause, if I may eventually perish.
Complex, but Simple
I thus have a profound – but sad – lesson to teach, which I can do better than any technology wonder, such as a car, aeroplane or mechanical dishwasher: I am as complex technically as any of those marvels, but conceptually, financially and socially, I am so much simpler than they are.
Simpler? Well, only one person, the mysterious Satoshi Nakamoto, can claim to have been my ‘genesis’ – the one and true originator of my cryptocurrency species2. A ‘sole creator’ sounds fantastic, but what could possibly be simpler than that? Furthermore, there are only twenty-one million of me that can ever be created in total!
And, even more simply, if you could pick me up and look me over, what would you see? Well, nothing meets the eye; I am contained in something that is virtual, rather than anything physical, a Bitcoin wallet, essentially the equivalent of a bank account. If you own me, think of the wallet that contains me as your personal interface to the Bitcoin network. This wallet contains a private key, a secret code, that allows you to trade me.
A Tree but not a Tree
Now, you perhaps cannot trace your family tree back very far, nor name and explain all your antecedents. By contrast, I can reach back very precisely to my forbears – indeed, right back to the genesis of my species by its sole creator, Satoshi Nakamoto. But my digital family tree begins not with an actual growing, living tree; for example, Calocedrus decurrens, the straight grain incense cedar variety that grows in Oregon, the splendid tree once the species of choice for the US manufacture of that ubiquitous wooden writing instrument, the pencil. No, I, Bitcoin, owe my existence not to any such lofty, real, wooden conifer, swaying in the wind, but to an intellectual, mathematical-algorithmic arboreal species, the Merkle Tree, the basic concept of creating blockchain signatures, hashing 3.
I invite you to appreciate the digital complexity of my mathematical-Merkle-Tree-generated background by contrasting my purely digital, electronic intricacy with the human richness of the US manufacturing process in the heyday of that actual-tree-built Oregon cedar pencil.
Analyse that wooden pencil construction, and you readily appreciate all the saws, trucks, rope and other gear used in harvesting and carting the incense cedar logs to the railroad siding. Plus all the people and numberless skills that went into their fabrication: the mining of ore, the making of steel and its refinement into saws, axes, motors; the growing of hemp and bringing it to heavy and strong rope; the logging camps with their beds and mess halls, the cookery and provision of all the foods. Why, untold thousands of persons had a hand in every cup of coffee the loggers drank! Can I, Bitcoin, match such extensive human activity in my creation?
Consider next the millworks in San Leandro, California, where the cedar logs were cut into small, pencil-length slats, kiln-dried, and tinted to look pretty; then waxed and kiln-dried again. How many skills went into the making of the tint and the kilns, into supplying the heat, light and power, belts, motors, and all the other things the mill required? I, Bitcoin have no such countless hard-working folk in the journey of my creation!
The Pencil – Complicated Machinery, and No Single Person. Nevertheless, a Clear Utility and Purpose
And, of course, do not overlook those who transported sixty carloads of slats across the USA from California to Wilkes-Barre!4. Once in the dedicated equipment and buildings of the pencil factory, each slat was given eight grooves by a complex machine, then another laid leads in every other slat, applied glue, and placed a further slat atop.
By contrast, I, Bitcoin, have no such bespoke plant and buildings in my journey of creation; I emerge, in company with my fellows, from nothingness, in an instant digital ‘flash’, a silent, unemotional moment of arid creation compared to the noisy, bustling human community effort involved in fashioning a wooden pencil. It is true my algorithmic, digital production does rely on a complex virtual machine, the computer software implementation of public key cryptography mathematics; plus actual physical hardware, the network of computers and communications, the internet, on which this software is run and connected. However, at their core, these networked hardware and software products and devices are essentially general-purpose digital computers that have no need to be designed wholly or specifically for just the special purpose of my cryptocurrency creation and distribution.
No, whilst there may be dedicated software and hardware components agglomerated intensively in electricity-hungry configurations to ‘mine’ me 5, they are essentially created from standard ‘Von Neumann Architecture’ commercial computer software and systems, digital storage and processing elements. The systems and processing at the heart of their routine, unremarkable CPU-cycle click-over of 1s and 0s are indistinguishable from the execution of any other (non-cryptocurrency) computer program’s algorithms.
Returning to the wooden pencil, note further that its ‘lead’ – actually containing no lead at all – was complex. The graphite came from Ceylon, thanks to miners and their tool-makers, makers of the paper sacks in which the graphite was shipped, those who made the string that tied the sacks, and those who put them aboard ship. By now, sipping on a strong cup of coffee, you of course discern that the pencil’s graphite was mixed with clay from Mississippi, where ammonium hydroxide was used in the refining process. Then wetting agents were added such as sulphonated tallow – animal fats chemically reacted with sulphuric acid.
By comparison, I, Bitcoin, am almost facilely ‘constructed’ of entirely a series of colourless, boring 1s and 0s embedded electronically into computer storage, needing no refining, wetting or sulphonating. You can therefore understand why I feel forlornly inadequate contemplating the paucity of human numbers involved in my procreation.
Considering the pencil further, you realise that its cedar received six coats of lacquer, and the processes by which the lacquer was made a beautiful yellow involved the skills of more individuals than one could enumerate! And then there was the pencil labelling, a film formed by applying heat to carbon black mixed with resins. How was that resin made, and what, pray, was carbon black? And the pencil had a bit of metal – the ferrule, of brass. Contemplate with awe all the people who mined zinc and copper and those who had the skills to make shiny sheet brass from those products of nature. And finally, come to the crowning glory of the wooden pencil, in the trade known as ‘the plug’, but widely known as the ‘rubber’, used to ‘rub out’, to erase, any errors made by the writer, the pencil’s accuracy-seeking creative, industrious, artistic, recording, communicating human user. An ingredient called ‘factice’ did the erasing, a rubber-like product made by reacting rape seed oil from the Dutch East Indies with sulphur chloride.
I, Bitcoin, feel sure that by now you have come to this stunning conclusion: no single person on the face of the earth knew how to make a pencil. By sharp contrast, any single person, with intelligence and training, can readily discover and acquire full knowledge of the mathematics and algorithm of how I, Bitcoin, am made from my Merkle Tree.
Furthermore, you have doubtless discerned that there is a clear, practical purpose for the creation and production of a pencil: for a human to write something, and thereby to create and record ideas, data, thoughts, words and pictures, and display and communicate them to other humans. By comparison, however, I, Bitcoin, have no practical, utilitarian purpose whatever. No, my existence has no useful characteristic, nor rationale, other than simply the financial profits (or losses) humans derive from trading me. The stark and sad reality is that I, Bitcoin, exist only to exist!
Furthermore, this vacuous existence – simply to act as a store of financial value – is fundamentally flimsy. My shaky existence persists only insofar as humans are confident I can continue to provide this limited functionality. The moment that humans suspect that this is no longer true, the instant that confidence is lost in me to carry out my singular tenuous function, I will almost certainly perish, become valueless, and die.
The 1s and 0s of which I am created will, in effect, ‘become lifeless’ in the computer servers or media containing me. No human will have further financial motivation to run the software to activate me and transfer me, wallet to wallet. And the ‘mining’ computers algorithmically bringing my new bitcoin brothers and sisters to birth will be switched off, to save electricity.
Without the confidence of humans in the reliability of my sole, flimsy functionality as a store and transmitter of financial value, my bitcoin species is in constant danger of becoming extinct. I wish I could be sure this will not happen. But I, Bitcoin, ask myself: why should this extinction not come to pass, when I exist so vacuously, so purposelessly?
The Pencil – No One Knows
This dilemma is why I, Bitcoin, am humbled by the further staggering realisation that, though millions of human beings had a hand in the creation of every pencil, no one of them knew more than a very few of the other humans so involved.
There wasn’t a single person in all those pencil-creating millions who contributed more than a tiny, infinitesimal bit of know-how. The only difference between the miner of graphite in Ceylon and the logger in Oregon, between the labeller and the pencil company CEO, was in the type of know-how. Neither the miner nor the logger, nor the labeller, nor the CEO could have been dispensed with. Furthermore, astoundingly, neither the workers in the oil field nor the chemists, nor the diggers of graphite, nor anyone on the ships, trains or trucks, nor the ones who ran the machines that did the knurling on a pencil’s end, nor even the CEO of the pencil company, performed their singular tasks because they themselves needed or wanted a pencil. Indeed, some among that vast multitude never saw a pencil, nor would they have known how to use one. Their motivation was other than creation of a pencil. All of those millions simply exchanged their individual elements of know-how for the goods and services that they themselves needed or wanted.
And there is yet a further, breathtaking fact that I, Bitcoin, find still more astounding: the absence of a mastermind, of anyone dictating or forcibly directing these countless actions which brought a pencil into being. No trace of such a person can be found. Instead, I, Bitcoin, discern in the journey into life of each handy pencil product the Invisible Hand at work, the legendary, mysterious actor who actually does not exist, nor does anything, yet whose very inaction and non-existence results in the creation of each pencil as an in-demand, useful finished article, with a clear utilitarian purpose and function6. By contrast, I, Bitcoin, owe my creation to no such Invisible Hand.
No, my existence happens deliberately, through a fully discernible, coordinated process. The motivation, and actions, of the relatively small minority of humans involved in my production and trading are far from invisible; they are focused, clear, obvious and overt. There is but one declared and identical objective, entirely known to all involved: simply to produce me, to ensure that I ‘exist only to exist’, so that they can invest in me, trade me, buy and sell me.
I, Bitcoin, have concluded that I cannot see how, in any truly worthwhile way, I can continue to exist and thrive and be generally and extensively recognised, known and welcomed, become ubiquitous and be useful, just like the wooden pencil, without the Invisible Hand.
And here is why! I have discerned, and you, please, must also understand, this important fundamental truth: the Invisible Hand arises and comes into necessary being only because it is founded upon, and cannot exist without, Trusted Third Parties. By contrast, however, the core principle of the consensus mechanism that underpins the crypto-economic proposition – indeed, that underwrites my very existence – is at odds with this verity. The claim among crypto-enthusiasts – almost an article of faith – is that this ‘trustless consensus mechanism’ makes redundant the need for Trusted Third Parties. But I, Bitcoin, have concluded that this ‘trustless’ claim is essentially nonsensical, as vacuous as my practically purposeless existence7.
The Key Matter of Trust
By now you will appreciate that the wooden pencil is a complex combination of physical miracles: real trees, tangible zinc, material copper, graphite, all naturally growing or bequeathed by prehistory. And to those miracles of nature, an even more extraordinary miracle is added: the configuration of creative human energies, millions of tiny know-hows assembling naturally and spontaneously in response to human necessity and desire and in the absence of any human masterminding!
I, Bitcoin, am in awe, like you, that a single person could no more direct these millions of know-hows to bring a pencil into being than he or she could put molecules together to create a tree. Equally, each of those tiny know-hows rests on the assurance that, in the multiplicity of the mutual two-party contractual bargains and arrangements needed for the production supply chain of all the components of the pencil to run smoothly, the Trusted Third Party, in the form of, ultimately, the Rule of Law, is always there to underpin and progress their productive relationships and deliveries, and to resolve, if needed, any disputes over delays, performance, quantities, quality or ‘fitness for purpose’.
In the production and availability of the exquisitely useful pencil, the multiplicity of these know-hows naturally, yes, automatically, arranged themselves into creative and productive patterns in response to human necessity and demand – and in the absence of governmental or any other dictated or coercive masterminding. I, Bitcoin, hope that you have discerned the wisdom that this reveals: the absolutely essential ingredient for freedom – a faith, and trust, in free markets, and in the Trusted Third Party that the Rule of Law provides in the fair and equitable underpinning of those free markets.
Freedom is impossible without this faith, and this trust; and such confidence is therefore impossible without the Trusted Third Party, and the Rule of Law.
The lesson learnt, that I, Bitcoin, endorse, is this: leave all creative energies uninhibited; and organise society to act in harmony with it. Let society’s Rule of Law be designed and organised so as to remove all obstacles the best it can. Permit these creative know-hows freely to flow. Have faith that creative and entrepreneurial people will respond to the Invisible Hand. Trust in this faith and it will be confirmed.
I, Bitcoin, applaud the miracle of the creation of the humble pencil as testimony that this is a practical faith, as practical as the sun, the rain, a cedar tree, the good earth. And, when underpinned by the Rule of Law, and founded on trust in the harmonising acts, fiduciary duties and self-interests of Trusted Third Parties, it is a powerful and robust faith.
Anguish, and Hope
I, Bitcoin, therefore reflect with all the more anguish on my own bleak emptiness. Please come forward with an idea as to how the Invisible Hand, and thus market freedom and faith, underpinned by Trusted Third Parties, and secured by the Rule of Law, can be made manifest and operationally practicable in the procreation and utilitarian, purposive functioning of me, Bitcoin, and my cryptocurrency brothers and sisters! Without emergence of this underpinning ‘free, responsible and trusted market’ model for a practically useful crypto-economic existence, I will remain in existential vacuity. And I therefore fear that I, Bitcoin, will inevitably wither, become valueless, and die – if not meantime regulated into irrelevance and obscurity.
As you employ that elegant and exquisitely useful physical instrument, the wooden pencil, for purposive and productive activity, whether creative, industrious, artistic, recording or communicating reasons, please think of me. Reflect on the sadness of my vacuous existence as a purely virtual financial instrument, ‘existing only to exist’. Do not be ashamed to cry for me, bereft as I am of any Invisible Hand in my creation, forlornly cut off from any Trusted Third Party in my digital electronic trading transactions, and existentially marooned in an uncertain wasteland outside the Rule of Law.
Your tears are an understandable human reaction, and I, Bitcoin, am grateful for them, for your compassionate response to the vacuity of my digital existence, for your concern for my limited, meaningless functionality. Yes, I am an electronic wonder, ‘secured’ by a decentralised blockchain ‘trustless consensus mechanism’; yet, in the absence of Trusted Third Parties, I, Bitcoin, am practically useless, devoid of serious, robust utility for humanity at large, socially and commercially irrelevant outside of my “hodling” tribe of crypto-fanatics.
Can you find a way to save me and my cryptocurrency species, vacuously and pointlessly existing, commercially and legally dangerous, operating outside the Rule of Law? Is there not someone, who, understanding me and the miraculousness which I symbolise, can establish, on a firm commercial and regulatory footing, with rigorous operational and legal reliability, with solid trust and transparency, a truly viable and robust new crypto-economy – one of course driven by the Invisible Hand! Alas, I suspect not; I, Bitcoin, bereft of practical utility, may one day no longer exist – no longer even simply to exist. I will become just another abandoned human artefact, like the spinning jenny, the bearer share, the analogue television, the telex, the video recorder, the junk bond, the fax machine, the non-digital mobile phone, the non-electric, non-autonomous road vehicle…
Meanwhile, the splendidly utilitarian wooden pencil will usefully persist, on and on, majestically continuing to write, record, amend and communicate. It will continue to be created, produced, finished and delivered by the magnificently powerful Invisible Hand into the enterprising individual human hands of each of its purposive owners and users. That is something which I, Bitcoin, sadly conclude that I am unlikely ever to achieve.
About the Author
Dr Stephen Castell CITP CPhys FIMA MEWI MIoD, Chairman of CASTELL Consulting, is an award-winning ICT expert and project management professional, with also a track record as a technology entrepreneur, fintech visionary and thought-leading innovator. As an acknowledged international expert witness, he has acted in the largest, longest and most complex software development cases heard in the English High Court and Sydney Supreme Court. He authored ‘Forensic Systems Analysis: A Methodology for Assessment and Avoidance of IT Disasters and Disputes’, a Cutter Consortium Executive Report, Enterprise Risk Management & Governance Advisory Service series (Vol. 3, No. 2, March 8, 2006); and the best-selling Computer Bluff (1983, Quartermaine House, ISBN 0 905898 15 X), “The Which Computer book for people who know nothing about computers … and would like to have left it that way”. Dr Castell has been honoured with an interview for Archives of IT – Capturing the Past, Inspiring the Future: In-depth experiences of the people who influenced the development of IT in the UK. https://archivesit.org.uk/interviews/stephen-castell/, [email protected], http://www.e-expertwitness.com/
The author neither offers nor provides investment advice. and has no commercial interest in or management connections with any cryptocurrencies, or associated businesses.
- I, Bitcoin, am in a wallet pointing to address 1ExAmpLe0FaBiTco1NADr3sSV5tsGaMF6hd, mined by Slushpool, Sichuan, China. Amounts of me have been traded 31,416 times. At June 15, 2021, my value was US$40,612.66 (https://www.coindesk.com/price/bitcoin).
- https://en.wikipedia.org/wiki/Satoshi_Nakamoto Satoshi Nakamoto is the name used by the pseudonymous person or persons who developed bitcoin, authored the bitcoin white paper, and created and deployed bitcoin’s original reference implementation … also [devising] the first blockchain database. … Nakamoto was the first to solve the double-spending problem for digital currency using a peer-to-peer network. … Well before the Satoshi Nakamoto paper ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ of 31 October 2008, there were e-commerce payment mechanisms and digital currency paradigms envisioned. Some were launched commercially, including David Chaum’s 1989 virtual currency DigiCash (https://en.wikipedia.org/wiki/DigiCash). Dr Stephen Castell proposed: “As cybertrading grows, the new, powerful, common electronic trading currency will be ‘owned’ by no single physical nation state, central bank institution, economic or political grouping. … the ECU … the Electronic Cash Unit” (‘What the ECU stands for’, Stephen Castell, Letter published in Computing, 20 July 1995). Much earlier, ‘Ye Nom De Das Geld’, Stephen Castell, GONG Magazine, December 1971, pp. 16-18 (the University of Nottingham student magazine), introduced the conceit of a ‘Post-Purse Paradise’: “Brothers and sisters, I welcome you to the post-purse paradise. … Geld is in heaven, all’s well with the world. … I … put into practice … the tenets of the Quasicurrency Theory which I had been formulating over the preceding twenty-five years. … .”
- https://medium.com/coinmonks/blockchain-terminology-d903758d6bd A merkle tree is the basic concept of creating blockchain signatures (hashing). It is called a tree because signatures are created from data and then combined with other signatures to create a new, overarching signature. This goes on and on and on, and can be seen as the mechanism used to ‘chain blocks’. https://en.wikipedia.org/wiki/Ralph_Merkle Ralph C. Merkle is a computer scientist … one of the inventors of public key cryptography, the inventor of cryptographic hashing …. US patent 4309569 (A) ― 1982-01-05, Ralph Merkle, “Method of providing digital signatures”, published 5 January 1982.
- In the heyday of the US-made pencil, its many ingredients were assembled and fabricated by Eberhard Faber Pencil Company, Wilkes-Barre, Pennsylvania.
- https://www.coindesk.com/elon-musk-says-tesla-is-suspending-bitcoin-payments-over-environmental-concerns Elon Musk Says Tesla Is Suspending Bitcoin Payments Over Environmental Concerns Zack Seward Danny Nelson May 13, 2021. In a tweet Wednesday, Tesla CEO Elon Musk said the electric-car company is discontinuing bitcoin payments. … Cryptocurrency “cannot come at great cost to the environment,” the electric carmaker said in a statement tweeted by Musk. … Bitcoin, a proof-of-work (PoW) blockchain reliant on energy-intensive mining units, has come under fire from environmental groups as its price has surged to all-time highs. … https://www.iea.org/commentaries/bitcoin-energy-use-mined-the-gap
Bitcoin energy use – mined the gap George Kamiya, Digital/Energy Analyst 5 July 2019 Of all the potential implications of blockchain for the energy sector, the energy use of cryptocurrencies – and bitcoin in particular – has captured the most interest. … A widely reported article in Nature Climate Change warned that Bitcoin emissions alone could push global warming above 2°C. …
- https://en.wikipedia.org/wiki/Invisible_hand The invisible hand describes the unintended social benefits of an individual’s self-interested actions … first introduced by Adam Smith in The Theory of Moral Sentiments … 1759 …
THE INVISIBLE HAND By directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain. . . . He is … led by an invisible hand to promote an end which was no part of his intention. . . . By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. ADAM SMITH, The Wealth of Nations
- The blockchain consensus mechanism no more magically underwrites, let alone ‘decentralises’, trust, in any meaningfully robust and legal way, than any other computer software system. Consensus algorithms are implemented on the same standard ‘Von Neumann Architecture’ computer software and systems, digital storage and processing, i.e. the same open architecture, as all other such commercial ICT systems. The ontological unreliability, and questionable legal standing and evidential probity, of such systems have been widely professionally analysed, researched and established for over thirty years. Nothing that anyone, before or since ‘Satoshi’, has introduced in the blockchain and cryptocurrency ICT systems space has altered, or can alter, this fundamental technical and legal truth.
For example, ‘The APPEAL Report’ (Dr Stephen Castell, 1990, May, Eclipse Publications, ISBN 1-870771-03-6), commissioned by the UK government’s CCTA (H M Treasury), extensively and carefully studied the admissibility of computer evidence in court and the legal reliability and security of IT systems and gave rise to: Castell’s First Dictum: “You cannot secure an ontologically unreliable technology by use of an ontologically unreliable technology”. (1990) ‘A computer of the simplest kind’ published in the Computer Law and Security Report, 10, May-June 1994, provides further key references, under ‘FOOTNOTES’, on this critical topic. https://doi.org/10.1016/j.clsr.2018.05.011
The foundational issue of trust and transparency in ICT systems is explored further in regard to artificial intelligence (AI) and machine learning, in ‘The future decisions of RoboJudge HHJ Arthur Ian Blockchain: Dread, delight or derision?’, Castell, S. (2018), Computer Law & Security Review, Volume 34, Issue 4, August 2018, Pages 739-753, which also notes Castell’s Second Dictum: “You cannot construct an algorithm that will reliably decide whether or not any algorithm is ethical” (2017)—“Talking about the ethics of machines might be like speaking of the happiness of water” (page 743).