842 

   843 \subsubsection*{Isn't there anything good with Bitcoins?}

   844 

   845 As you can see, so far my argument was that yes the Bitcoin system is

   846 based on a lot of very cool technical ideas, but otherwise it is a big

   847 scam. You might wonder if there is not something good (in terms of

   848 valuable for civilisation) in the bitcoin system? I think there is

   849 actually: diamonds are quite valuable and because of this can be

   850 used as a form of `money'---just remember the song with the line

   851 `diamonds are forever'.

   852 

   853 The problem with diamonds is that in some places where they are found,

   854 they also fund some stupid wars. You like to set up a usable system

   855 whereby you can check whether a diamond comes from a reputable source

   856 (not funding any wars) or from a dodgy source. For this you have to

   857 know that `clearing houses' for diamonds can engrave with lasers

   858 unique numbers inside the diamonds.  These engravings are invisible to

   859 the naked eye and as far as I remember these numbers cannot be removed,

   860 except by destroying the diamond. Even if it can be removes, diamonds

   861 without the number cannot (hopefully) be sold.

   862 

   863 How do bitcoins come into the picture? The idea is called

   864 \emph{coloured coins}, where you attach some additional information to

   865 some `coins'. In the diamond example the bitcoin transactions are

   866 supposed to act as a certificate where diamonds are from (reputable

   867 sources or not). For this you have to know that you can attach a very

   868 short custom-made message with each bitcoin transaction. So you would

   869 record the diamond number inside the message.

   870 

   871 Now, you would set the system up so that a trusted entity (which

   872 exists in the diamond world) buys with their public key bitcoins (or

   873 smaller amounts).  These trusted entities are essentially the places

   874 that also cut the raw diamonds. The idea is whenever you buy a

   875 diamond, you like to have also the corresponding bitcoin

   876 transaction. If you want to sell the diamond, you make a transaction

   877 to the new owner. The new owner will ask for this message, because

   878 otherwise he/she cannot sell it later on.

   879 

   880 The advantage is that for each diamond you can trace back that the

   881 transaction must have originated from the trusted entity. If yes, your

   882 diamond will be sellable. If you do not have the message, the diamond

   883 comes from a dodgy source and will (hopefully) not be sellable later

   884 on. In this way you skew the incentives such that only legitimate

   885 diamond are of value. The bitcoin system just helps with being able to

   886 check whether the message originates from the trusted entity or

   887 not....you do not have to consult anybody else and pay money for this

   888 consultation. Or in any way reveal your identity by such a consultation

   889 (the police might just keep a particularly close an eye on who contacts

   890 such a clearing house).

   891 

   892 Since we hopefully all agree that funding stupid wars is bad, any

   893 system that can starve funds for such wars must be good. Piggy-bagging 

   894 on the trust established by the bitcoin system on the public block chain

   895 makes such a system realisable. 

   896