Brad Ideas

Robocars & More

Everybody knows about bitcoin, but fewer know what goes on under the hood. Bitcoin provides the world a trustable ledger for transactions without trusting any given party such as a bank or government. Everybody can agree with what's in the ledger and what order it was put there, and that makes it possible to write transfers of title to property -- in particular the virtual property called bitcoins -- into the ledger and thus have a money system.

Satoshi's great invention was a way to build this trust in a decentralized way. Because there are rewards, many people would like to be the next person to write a block of transactions to the ledger. The Bitcoin system assures that the next person to do it is chosen at random. Because the winner is chosen at random from a large pool, it becomes very difficult to corrupt the ledger. You would need 6 people, chosen at random from a large group, to all be part of your conspiracy. That's next to impossible unless your conspiracy is so large that half the participants are in it.

How do you win this lottery to be the next randomly chosen ledger author? You need to burn computer time working on a math problem. The more computer time you burn, the more likely it is you will hit the answer. The first person to hit the answer is the next winner. This is known as "proof of work." Technically, it isn't proof of work, because you can, in theory, hit the answer on your first attempt, and be the winner with no work at all, but in practice, and in aggregate, this won't happen. In effect, it's "proof of luck," but the more computing you throw at the problem, the more chances of winning you have. Luck is, after all, an imaginary construct.

Because those who win are rewarded with freshly minted "mined" bitcoins and transaction fees, people are ready to burn expensive computer time to make it happen. And in turn, they assure the randomness and thus keep the system going and make it trustable.

Very smart, but also very wasteful. All this computer time is burned to no other purpose. It does no useful work -- and there is debate about whether it inherently can't do useful work -- and so a lot of money is spent on these lottery tickets. At first, existing computers were used, and the main cost was electricity. Over time, special purpose computers (dedicated processors or ASICs) became the only effective tools for the mining problem, and now the cost of these special processors is the main cost, and electricity the secondary one.

Money doesn't grow on trees or in ASIC farms. The cost of mining is carried by the system. Miners get coins and will eventually sell them, wanting fiat dollars or goods and affecting the price. Markets, being what they are, over time bring closer and closer the cost of being a bitcoin miner and the reward. If the reward gets too much above the cost, people will invest in mining equipment until it normalizes. The miners get real, but not extravagant profits. (Early miners got extravagant profits not because of mining but because of the appreciation of their coins.)

What this means is that the cost of operating Bitcoin is mostly going to the companies selling ASICs, and to a lesser extent the power companies. Bitcoin has made a funnel of money -- about $2M a day -- that mostly goes to people making chips that do absolutely nothing and fuel is burned to calculate nothing. Yes, the miners are providing the backbone of Bitcoin, which I am not calling nothing, but they could do this with any fair, non-centralized lottery whether it burned CPU or not. If we can think of one.

(I will note that some point out that the existing fiat money system also comes with a high cost, in printing and minting and management. However, this is not a makework cost, and even if Bitcoin is already more efficient doesn't mean there should not be effort to make it even better.)

CPU/GPU mining

Naturally, many people have been bothered by this for various reasons. A large fraction of the "alt" coins differ from Bitcoin primarily in the mining system. The first round of coins, such as Litecoin and Dogecoin, use a proof-of-work system which was much more difficult to solve with an ASIC. The theory was that this would make mining more democratic -- people could do it with their own computers, buying off-the-shelf equipment. This has run into several major problems:

• Even if you did it with your own computer, you tended to need to dedicate that computer to mining in the end if you wanted to compete
• Because people already owned hardware, electricity became a much bigger cost component, and that waste of energy is even more troublesome than ASIC buying
• Over time, mining for these coins moved to high-end GPU cards. This, in turn caused mining to be the main driver of demand for these GPUs, drying up the supply and jacking up the prices. In effect, the high end GPU cards became like the ASICs -- specialized hardware being bought just for mining.
• In 2014, vendors began advertising ASICs for these "ASIC proof" algorithms.
• When mining can be done on ordinary computers, it creates a strong incentive for thieves to steal computer time from insecure computers (ie. all computers) in order to mine. Several instances of this have already become famous.

The last point is challenging. It's almost impossible to fix. If mining can be done on ordinary computers, then they will get botted. In this case a thief will even mine at a rate that can't pay for the electricity, because the thief is stealing your electricity too.

Five years ago, I posted a rant about the excess of customer service surveys we're all being exposed to. You can't do any transaction these days, it seems, without being asked to do a survey on how you liked it. We get so many surveys that we now just reject these requests unless we have some particular problem we want to complain about -- in other words, we're back to what we had with self-selected complaints.

Some recent press and talks:

Earlier in June I sat down with "Big Think" for an interview they have titled "Robocars 101" explaining some of the issues around the cars.

So far it's been big players like Google and car companies with plans in the self-driving space. Today, a small San Francisco start-up named Cruise, founded by Kyle Vogt (a founder of the web video site Justin.tv) announces their plans to make a retrofit kit that will adapt existing cars to do basic highway cruise, which is to say, staying in a lane and keeping pace behind other cars while under a driver's supervision.

On my recent wanderings in Europe, I became quite enamoured by Google's latest revision of transit directions. Google has had transit directions for some time, but they have recently improved them, and linked them in more cities to live data about where transit vehicles actually are.

I'm in the home stretch of a long international trip -- photos to follow -- but I speak tomorrow at Lincoln Center on how computers (and robocars) will change the worlds of finance. In the meantime, Google's announcement last month has driven a lot of news in the Robocar space worthy of reporting.

25 years ago, on June 8, 1989, I announced to the world my new company ClariNet, which offered for sale an electronic newspaper delivered over the internet. This has the distinction, as far as I know, of being the first business created to use the internet as a platform, what we usually call a "dot-com" company.

I've been on the road for the last month, and there's more to come. Right now I'm in Amsterdam for a few hours, to be followed by a few events in London, then on to New York for Singularity U's Exponential Finance conference, followed by the opening of our Singularity University Graduate Studies Program for 2014.

It's not too surprising that the release of images of Google's prototype robocar have gotten comments like this:

Revolutionary Tech in a Remarkably Lame Package from Wired

A Joy Ride in Google's Clown Car says Re/Code

In what is the biggest announcement since Google first revealed their car project, it has announced that they are building their own car, a small low-speed urban vehicle for two with no steering wheel, throttle or brakes. It will act as a true robocar, delivering itself and taking people where they want to go with a simple interface. The car is currently limited to 25mph, and has special pedestrian protection features to make it even safer. (I should note that as a consultant to that team, I helped push the project in this direction.)

News from Google's project is rare, but today on the Google blog they described new achievements in urban driving and reported a number of 700,000 miles. The car has been undergoing extensive testing in urban situations, and Google let an Atlantic reporter get a demo of the urban driving which is worth a read.

Many states and jurisdictions are rushing to write laws and regulations governing the testing and deployment of robocars. California is working on its new regulations right now. The first focus is on testing, which makes sense.

Unfortunately the California proposed regulations and many similar regulations contain a serious flaw:

I wrote earlier on how we might make it easier to find a lost jet and this included the proposal that the pingers in the black boxes follow a schedule of slowing down their pings to make their batteries last much longer.

I read a lot of feeds, and there are now scores of stories about robocars every week. Almost every day a new publication gives a summary of things. Here, I want to focus on things that are truly new, rather than being comprehensive.

A recent Surpreme court case which struck down limits on the total amount donors could provide to a large group of candidates has fired up the debate on what to do about the grand problem, particularly in the USA, of the corrupting influence of money on politics. I have written about this before in my New Democracy Topic, including proposals for anonymous donations, official political spam and many others.

Look at the skyline of any growing city, and what do you see, but a sea of construction cranes. The theory is that each crane will go away and be replaced by an architectually interesting or pleasing building, but the cycle continues and there are always cranes.

Why are there lines at airport security? I mean, we know why the lines form, when passenger load exceeds the capacity, with the bottleneck usually being the X-ray machines. The question is why this imbalance is allowed to happen?

The variable wait at airport security levies a high cost, because passengers must assume it will be long, just in case it is. That means every passenger gets there 15 or more minutes earlier than they would need to, even if there is no wait. Web sites listing wait times can help, but they can change quickly.

We've all learned a lot about what can and can't be done from the tragic story of MH 370, as well as the Air France flight lost over the Atlantic. Of course, nobody expected the real transponders to be disconnected or fail, and so it may be silly to speculate about how to avoid this situation when there already is supposed to be a system that stops aircraft from getting lost. Even so, here are some things to consider:

Bitcoin is hot-hot-hot, but today I want to talk about how it ends. Earlier, I predicted a variety of possible fates for Bitcoin ranging from taking over the entire M1 money supply to complete collapse, but the most probable one, in my view, is that Bitcoin is eventually supplanted by one or more successor digital currencies which win in the marketplace. I think that successor will also itself be supplanted, and that this might continue for some time. I want to talk about not just why that might happen, but also how it may take place.

Nobody thinks Bitcoin is perfect, and no digital currency (DigiC) is likely to satisfy everybody. Some of the flaws are seen as flaws by most people, but many of its facets are seen as features by some, and flaws by others. The anonymity of addresses, the public nature of the transactions, the irrevocable transactions, the fixed supply, the mining system, the resistance to control by governments -- there are parties that love these and hate these.

Bitcoin's most remarkable achievement, so far, is the demonstration that a digital currency with no intrinsic value or backer/market maker can work and get a serious valuation. Bitcoin argues -- and for now demonstrates -- that you can have a money that people will accept only because they know they can get others to accept it with no reliance on a government's credit or the useful physical properties of a metal. The price of a bitcoin today is pretty clearly the result of speculative bubble investment, but that it sustains a price at all is a revelation.

Bitcoins have their value because they are scarce. That scarcity is written into the code -- in the regulated speed of mining, and in the fixed limit on coins. There will only be so many bitcoins, and this gives you confidence in their value, unlike say, Zimbabwe 100 trillion dollar notes. This fixed limit is often criticised because it will be strongly deflationary over time, and some more traditional economic theory feels there are serious problems with a deflationary currency. People resist spending it because holding it is better than spending it, among other things.

Altcoins

While bitcoins have this scarcity, digital currencies as a group do not. You can always create another digital currency. And many people have. While Bitcoin is the largest, there are many "altcoins," a few of which (such as Ripple, Litecoin and even the satirical currency Dogecoin) have serious total market capitalizations of tens or hundreds of millions of dollars(1). Some of these altcoins are simply Bitcoin or minor modifications of the Bitcoin protocol with a different blockchain or group of participants, others have more serious differences, such as alternate forms of mining. Ripple is considerably different. New Altcoins will emerge from time to time, presumably forever.

What makes one digital coin better than another? Obviously a crucial element is who will accept the coin in exchange for goods, services or other types of currency. The leading coin (Bitcoin) is accepted at more stores which gives it a competitive advantage.

If one is using digital currency simply as a medium -- changing dollars to bitcoins to immediately buy something with bitcoins at a store, then it doesn't matter a great deal which DigiC you use, or what its price is, as long as it is not extremely volatile. (You may be interested in other attributes, like speed of transaction and revocation, along with security, ease of use and other factors.) If you wish to hold the DigC you care about appreciation, inflation and deflation, as well as the risk of collapse. These factors are affected as well by the "cost" of the DigiC.

The cost of a digital currency

I will advance that every currency has a cost which affects its value. For fiat currency like dollars, all new dollars go to the government, and every newly printed dollar devalues all the other dollars, and overprinting creates clear inflation.

One sign of how interest is building is the large reaction to some recent concept prototypes for robocars, two of which were shown in physical form at the Geneva auto show.