How Much Complexity Can Your Tribe Manage?

 I've heard of a Sci-Fi thought experiment: how many people do you need to ship on the 100 year journey to another solar system? We'd need some number of people to specialize in all of the things required for modern civilization, and some number of people to do all the farmer/plumber/electrician jobs to keep the world running. Some Sci-Fi brain thought the number was 10_000 people.

Ok, now think about your small company of 100 people. How much complexity can you manage? How many systems can you maintain?

I think I've worked a few small companies where the answer should have been 'fewer'. And a few less crucial things got neglected, and it was messy. Maybe there could have been a better way to consciously wind down the complexity and do fewer things better.

Bitcoin Must Die

Bitcoin is horribly wasteful. The University of Cambridge Bitcoin estimate is that it currently burns 150 terawatt-hours per year. (2023 US generation was 4178 TWh.)

Multiply that by $0.0773/kWh (March 2024 EIA cost to industrial sector) and we get the operational cost of Bitcoin (power alone! doesn't include cost of hardware!) at $11.5 billion dollars a year.

As of this morning (2024-06-20) Coinbase estimates that all Bitcoin is worth about $1.3 trillion. The electricity operating cost should be depreciating that value by 0.9% per year (hardware costs should take another chunk out).

According to blockchain.com, there were 153_415_993 bitcoin txns in 2023. Divide out the operating eletricity cost and that's $75.58 per transaction. Recent txn fees are more like $5-$6. The Bitcoin system loses $70 on every transaction. The $1.3 trillion valuation is based on hype and hope and a bubble and the inflow of new rubes on the broad base of the lowest run of the pyramid scheme.

What a sustainable blockchain would be

Transaction fees for moving value from here to there (I think we can do better than credit card ($0.30 + 3%) or FedNow $0.05).
Transaction fees for recording a fact (comparable to notarizing, or trademark/copyright filing fees).
If all those fees are enough to pay for operations, and an acceptible margin of profit, congratulations, you have a financial institution.

Those 153_415_993 transactions on Bitcoin in 2023 come to an average of 7 transactions per second. In 2019 I demonstrated the Algorand blockchain achieving 75 TPS running on three Raspberry Pi 3B+ toy computers. Algorand*, Aptos* and other newer blockchains continue to offer transactions for under a penny, and could be sustainable at this rate.

BUT, the regulatory environment around blockchains continues to be murky at best, crushing at worst. It remains to see how this will settle out in jurisdictions around the world and if those markets will continue to have enough business to support the several blockchains competing to grow their network effect and win in the market.

(* I have a stake in Algorand and Aptos, other blockchains are probably also technically competent ;-) )