Can't botnets generate a near-infinite supply of bit gold?
The bigger problem is that everyone has a incentive to run their computers day and night cranking out solutions, which burns up lots of natural resources and processor time for a zero-sum result.
The economics in this regard are the same as for gold. With gold only the most efficient gold mines can make a profit, so only those profitable operate -- nobody tries to mine all the gold in the world. With bit gold, only those with the most efficient processors and most spare time will be able to make a profit, so again there will just be a handful of a few powerful computers, or many small computers but just using the spare CPU cycles (like SETI@home), solving the mathematical puzzles to generate the bit gold.
But an algorithm is easier to share than a gold mine. Fixed and marginal costs are lower.
If you could find gold by scraping your bathroom tiles or filtering water for gold dusta gold standard would be terribly inefficient.
No, the bits are solutions to hard computational puzzles, and they are securely timestamped and published, so that you always know exactly what the money supply is. More on the markets and economics of bit gold here:
I admit that my understanding of some of these concepts like futures contracts is negligible, but it still seems bad if, say, 90% of all bit gold is generated by criminals at no cost to them, while regular people have to expend their own resources to create (or buy) bit gold.
Are you kidding? Just one little P=NP proof and the whole economy collapses!