We don't accept Bitcoin. It’s not because we’re lazy or scared of it. It’s because we're not fans of how it works.
Yes, Bitcoin provides a layer of anonymity, but paying for key duplication with Bitcoin is like paying for nine gallons of Sudafed in cash at corner store. You might have a legitimate reason to do it, but we’d prefer not to get involved in your project.
Maybe you’re about to trust us with your house key and an address, and you’re not sure we should also have your credit card number or billing address. Fair enough. We ensure our servers never see your credit card information. Only our card processor knows your credit card number, let alone your billing address or your real name. In all, we’re very careful about your security when duplicating keys.
Bitcoin is an extremely wasteful way to transfer or print money.
Bitcoin’s proof of work mechanism: Every Bitcoin transaction is verified by a network of computers called “miners”. Anyone can join this network of accountants, which makes Bitcoin more democratic than traditional currencies. To prevent any one entity from taking over the accounting system and cooking the book in their favor, Bitcoin requires each miner to perform a hideously complex computation after it updates the books.
The math problem involves the transactions conducted so far. Once enough accountants agree on the solution, the result is stamped on the books, which are then sealed, and certified as consistent.
This computation is so complex that a computer spends significant time and electricity on it. So much so that anyone who tries to dominate the Bitcoin network would spend more money on its hardware and electricity bill than there is money in the Bitcoin system.
Proof of work mechanisms with real benefits: A lot of other proofs of work could have done the job. The computation just needs to involve the string of transactions, be hard to carry out, and easy to verify. Why not use one that helps humanity?
For example, the miners could solve a protein folding problem, which helps find a cure of a disease, or run SETI@home searches to deepen our understanding of the universe. Both of these problems can be slightly modified to incorporate transaction information, and solutions to both of them are easy to verify.
Actually, the proof of work doesn’t even need to be a computation. Any work that can be quickly verified and that uses a finite resource would work. And that resource doesn’t have to be electricity.
Resources are distributed unevenly across the globe. If the proof of work is labor-intensive, countries with cheap labor will thrive as miners. If the proof of work is computational, countries with bigger computers and tighter technology export controls will thrive. At a large enough scale, the proof of work mechanism picks global economic winners and losers.
As cryptocurrencies become popular, they’ll generate tremendous need for proof of work, and the particular proof of work mechanism will matter. Instead of merely demonstrating that the miner’s dissipated electricity, I’m holding out for a proof of work that makes the world better.