Is Bitcoin Australia’s next game changer? Released from the restraints of double taxation this year, cryptocurrencies are now treated like money, with the expectation that new blockchain fintech startups will soon take ground and that the Australian Bitcoin exchange market will catch up to neighbouring competitors in South Korea and Japan.
While most consumers are still a bit lost amidst the Bitcoin jargon, others have been intrigued by the cryptocurrency’s meteoric gains (up nearly five times in price this year). Fans have been further buoyed by ASIC chairman Greg Medcraft who recently predicted traditional bank accounts may be unnecessary within a decade as central banks begin issuing their own Bitcoin-style digital fiat currency.
The disruptive potential of this technology has won a fan following who believe blockchain will change the world because it is low cost and hack free. But since 2011, there have been several hacks to the blockchain system causing an estimated cumulative loss of over a billion dollars in bitcoin.
While we can assume that some of regulation and security protocol will eventually protect investor money in the bitcoin age – is it going to really change the world?
The answer is - not yet – bitcoin mining using blockchain technology cannot be sustained with the technology infrastructure currently deployed.
It is all about Power: Bitcoin mining is energy hungry. To put it in perspective, bitcoin’s current network needs electric power equivalent to 154,000 times that of the world’s fastest supercomputer – Sunway TaihuLight, China. Thus, extrapolating the power consumption by Sunway TaihuLight (15 MW), bitcoin network’s electric power requirement is equivalent to powering 300 countries as populous as Australia (about 25 million).
This kind of requirement calls for specialized datacenter design. The data centers should be able to receive electricity from multiple sources and detect when to switch between grids or receive simultaneously from different grids. This is not the norm in current datacenter design.
Downtime is NOT ok: Bitcoin mining runs on a peer to peer system. So, every transaction in the system needs to be approved by other nodes (and really fast). Every minute, on average, 208 bitcoin transactions take place in the world, worth roughly about $500,000 and about seven million bitcoins are expected to be mined in the next 10 years.
Downtime simply cannot be allowed. Recovery requires specialized cooling techniques (to minimize failures) and effective data mirroring to get the backup system upright. It should take about five minutes for the least loss but the current industry average is 95 minutes. Downtime with respect to a virtual currency is akin to demonetization of physical currency - expect complete chaos.
The Data Fabric of Financial services: Bitcoin is an idea that rebels against the centralized currency system controlled by a single authority such as Government or regulator. However, being based on a distributed public ledger means that data is spread heterogeneously across datacenters around the world. The key to successful bitcoin implementation is the ability to seamlessly move and mine data to and from these centers. The more heterogeneous and diverse a ledger, the lesser chances of its failure. So the specialized requirements described above will also need to be across the world and across multiple data centers. If the bitcoin revolution is to grow, many datacenters across the world will need to recast their storage, backup and recovery, power efficiency, and collaborative access.
While Flash based storage technologies might just be part of the answer, there are several other variables that need to be deployed adding up to what will be a vast investment on what is currently an unregulated sector.
Bitcoin still faces many challenges to becoming a globally accepted currency, but whichever way the value goes, the cryptocurrency is bound to keep experts and investors guessing and fingers crossed.