I am personally of the opinion that China swiftly killing off its cryptocurrency mining industry overnight would be to the great benefit of humanity. The sheer amount of electricity it wastes is an environmental disaster.
Let alone the psychological damage to the society that any kind of speculation and a flood of "get-rich-fast" schemes incur.
Strict measures are not always bad. If China did not handle the SARS epidemic years ago the way they did, things could have been more similar to the Ebola epidemic.
The likely reason Bitcoin has been taking off in China is because the available traditional investing options for people there are terrible as a result of government meddling. In particular, the whole country's economy is in the middle of a terrifying debt-fuelled bubble in which bank lending has effectively become an arm of the state, leading to a rather terrifying debt-to-GDP ratio and a banking system that may well collapse the moment the growth pauses. Combine that with increasingly strict capital controls that restrict the ability of most people to invest their money outside of China and a lack of trust in the government not to seize less favoured people's businesses for the benefit of insiders, and you have a strong recipe for Bitcoin popularity.
Can't agree more. Also I am getting pretty sick of the impact crypto trading is having on office conversations. All I hear these days are inane conversations about getting rich quick. Everyone is an expert in technical analysis these days.
At best, trading these currencies is a zero-sum game where you take money from others without providing any intrinsic worth to humanity. At worst is a pyramid scheme plain and simple.
Naysayers would point out that trading increases liquidity which ostensibly increases the ability of a market to parlay information into value.
But I'd be likely to agree with you. While blockchain technology /does/ have a future and will enable forms of socio-economic organization that were previously impossible, it's not there yet, and at the moment we're mostly passing tulips off to the greater fool.
> Naysayers would point out that trading increases liquidity which ostensibly increases the ability of a market to parlay information into value.
And increasing opioid supplies, increases the ability of the market to efficiently parlay money into an altered mental state. Doesn't mean it's a net positive for society.
The "liquidity" argument is such a terrible and simplistic justification for so many things.
I have no problem with valid criticism of cryptocurrency, and especially of its fanatics, but I’d be curious to hear you back up your claim that at best it’s a zero-sum game. That seems to me to be clearly incorrect.
Person A mines 1 BTC. Since a Bitcoin has no intrinsic value (as distinguished from market value), Person A has not created any value. They have created $0 worth of goods.
Person A sells their coin to Person B for $1,000. A is $1,000 richer and B is $1,000 poorer.
B sells the bitcoin to C for $2,000. A is still $1k richer, B is $1k richer, and C is $2k in the hole.
C sells to D for $3k. A, B, and C are all $1k richer, but D is out $3k.
At no point in the chain is any actual value created or destroyed; it merely changes hands. So even though the price keeps going up, the total value across all participants never goes up. The sum of the gains and losses of all participants is $0.
(Note that I'm using "$" to represent a generic indicator of value. Feel free to substitute € or ¥ or gold or shares of Facebook stock or whatever.)
===============
There are two simplifying assumptions above, both of which make Bitcoin not exactly zero sum.
Good news first. Bitcoin can and does create some value in the same way that other currencies do: by facilitating mutually beneficial exchanges of goods and services. Commercial use appears to only be a tiny fraction of all Bitcoin transactions (and an even smaller fraction that wouldn't have been facilitated anyway using some other means of exchange), but it does happen so credit where credit's due.
The bad news, though, is that all of the above requires electricity. A lot of electricity, as it turns out. Both the initial mining and every transaction thereafter require someone, somewhere to burn some amount of power in order to generate proof of work. Since proof of work is explicitly designed to be useless, all that spent power is essentially deadweight loss.
I haven't seen any good numbers on the first recently (and I would love to have my assumptions proven wrong), but given the ginormous estimates of electricity consumed by the second I have a hard time believing the network as a whole isn't substantially worse than zero sum.
and rightly so! the boom of ICO's is proof of concept if I've ever seen it, even though almost every single one is a scam as far as I've seen. I've had to discourage friends from investing in obvious scam ICO's, unfortunately. And my mother who is the most gullible sucker ever.
It's pretty strange to see people so consumed with it. It reminds me of beanie babies, and my horrible step-grandmother who would send me in to buy them once she had hit her limit. She was an awful speculator and probably has a worthless collection today for all the money she spent on ebay back then. She'd drive to Vegas to buy them, neighboring towns, all over the place. Totally consumed by speculation gambling. It sickens a person to see someone so...lost in that temptation. I'm not sure how else to put it.
The proof of work needs to be “useless” in order for it to protect the blockchain (there are proposals that dispute this, and I won’t claim to be an expert, but that’s the fundamental idea behind Bitcoin).
When you say that the net value is negative even if the network itself has some positive benefit, what is the negative component there? The only negative component of all that electricity usage is externalities, which apply equally to each unit of energy regardless of what it is used for. Pricing externalities into the cost of electricity is obviously something I approve of, but that’s a separate issue, and I doubt the externalities of electricity usage are anywhere near the magnitude of the positive impact of bitcoin.
Electricity isn't free. In the US it's about $0.12/kWh. If I spend a kWh of electricity mining Bitcoin, I owe the electric company in my town another $0.12. Presumably the electric company uses most of that $0.12 on the fuel and maintenance costs necessary to generate and provide me a kWh, costs which they would not have incurred but for my choice to mine Bitcoin.
Incidentally, this is (as far as I understand) where most of the transaction fees ultimately end up. They're paid out to the miner who actually commits a transaction. Mining's a relatively competitive field so people aren't going to be able to charge much of a premium. The miners then have to turn around and use those fees to cover their costs, which in practice means their hardware costs and their electrical bills.
> where you take money from others without providing any intrinsic worth to humanity
I beg to differ. Not all crypto projects are like that. For example Omise Go is a promising project that stands to make a difference to many people who have no access to banking services.
They have solid financials, already processing over $500m transactions per day with $110m investment.
They are making a completely decentralized open value exchange DEX based on the block chain. Any developer/provider will be able to build apps on top of it.
Any person with a phone will have instant access to essentially a bank account with no need to hand over social security and ID.
So basically giving 2 billion people who have no way to interact with financial systems a way to join in with global commerce.
> It’s not creating any value, any gains are at the expense of someone else.
Except, not in the case of Omise Go. You may earn a dividend simply by possessing the token.
By staking Omise Go tokens you will have the option to validate transactions (proof of stake) for which you will get paid.
Also note, with PoS there is no electricity burden on the system like Proof of Work with mining.
Couldnt agree more. All that wasted energy and carbon for nothing. All that power that could have been used for something useful like gene folding or SETI.
Could you clarify why those things are mutually exclusive? And to be clear: I don't know how to feel about Bitcoin and the attention it has received lately.
There's just nothing about the definition of a pyramid scheme that applies to Bitcoin, not even close. There's no organisation, recruiting, directors, membership or promise of payments. It doesn't have to grow forever. It's not illegal. The amount of ignorant Bitcoin comments on HN is just baffling.
There's no organisation, recruiting, directors, membership or promise of payments.
But those definitely exist, just not via any singular organization. There very much is organization and organizations, recruiting, would be directors, unofficial membership in the club of ownership, and lots of promises of payments.
When people make that comparison, what they're really saying is Bitcoin is mostly funny money which above all else has enriched early adopters and will probably lose a lot of late adopters lots of money. It's ceased to even be a useful currency.
You don't have to squint very hard to see the comparison, even if it isn't flattering or technically the same thing as a pyramid scheme. This is from your link:
In a pyramid scheme [Bitcoin], an organization compels individuals who wish to join to make a payment [purchase Bitcoin]. In exchange, the organization promises its new members a share of the money taken from every additional member that they recruit [to the moon]. The directors of the organization (those at the top of the pyramid) also receive a share of these payments. For the directors, the scheme is potentially lucrative—whether or not they do any work, the organization's membership has a strong incentive to continue recruiting and funneling money to the top of the pyramid.
Such organizations seldom involve sales of products or services with value. Without creating any goods or services, the only revenue streams for the scheme are recruiting more members or soliciting more money from current members. The behavior of pyramid schemes follows the mathematics concerning exponential growth quite closely. Each level of the pyramid is much larger than the one before it. For a pyramid scheme to make money for everyone who enrolls in it, it would have to expand indefinitely. This is not possible because the population of Earth is finite. When the scheme inevitably runs out of new recruits, lacking other sources of revenue, it collapses. Because in a geometric series, the biggest terms are at the end, most people will be in the lower levels of the pyramid (and indeed the bottom level is always the biggest single layer).
In a pyramid scheme, people in the upper layers typically profit while people in the lower layers typically lose money. Since at any given time, most of the members in the scheme are at the bottom, most participants in a pyramid scheme will not make any money. In particular, when the scheme collapses, most members will be in the bottom layers and thus will not have any opportunity to profit from the scheme, yet they will have paid to join the scheme. Therefore, a pyramid scheme is characterized by a few people (including the creators of the scheme) making large amounts of money, while most who join the scheme lose money. For this reason, they are considered scams.[2]
Sounds like many cryptocurrencies and Bitcoin is approaching that if it hasn't hit it already.
> In a pyramid scheme [Bitcoin], an organization compels individuals who wish to join to make a payment [purchase Bitcoin]. In exchange, the organization promises its new members a share of the money taken from every additional member that they recruit [to the moon].
There is no such thing. In that respect, Bitcoin is no different from real estate, stock or gold investors which do tend to sometimes promote their investment of choice. Pyramid scheme has a precise definition which does not fit Bitcoin at all and using it to describe Bitcoin is just misleading and intellectually dishonest. If it was a pyramid scheme, it would be deemed illegal in many, many countries. I agree with one thing however: as with every single investment ever, early adopters, which take on more risk, stand to profit more than late adopters.
I don't want to get into the debate on the definition of a pyramid scheme, but what was anyone risking by mining bitcoins for essentially nothing in 2009-2010?
Of course, many of the early adopters got very lucky while taking almost no risk. This happens with gold and oil too. However, those that chose to hodl started taking real risks as soon as Bitcoin hit 1$. Bitcoin hodlers today are obviously taking substantial risk as the price could drop massively at any moment.
The Bitcoin product is garbage, just like in a pyramid scheme. People buy in to Bitcoin so they can profit from the people who buy in later and not because there's a valuable product to invest in, just like a pyramid scheme. If Bitcoin was useful in commerce, it wouldn't be useless as it is now.
Sigh. The only sense in which it "solves" the Two Generals Problem is the sense in which it will, over the course of decades, create a rainbow table for it. None of the work being done is in any way socially useful (a crypto coin based on, say, folding proteins actually produces a social good and so could be equity based).
Decentralized proof of a transaction having occurred is in principle valuable, but the token itself is not the store of value. The reason it is accurately described as a pyramid scheme is because holding bitcoin for the purpose of reselling it is exactly like holding a baseball card, or a share in Bernie Madoff's hedge fund: it is based on the premise that someone will come along and pay you more for it than you paid, despite no actual appreciation in any fundamental value.
> Sigh. The only sense in which it "solves" the Two Generals Problem is the sense in which it will, over the course of decades, create a rainbow table for it. None of the work being done is in any way socially useful (a crypto coin based on, say, folding proteins actually produces a social good and so could be equity based).
That is by design. Doing useful work would hurt the network's security.
> Decentralized proof of a transaction having occurred is in principle valuable, but the token itself is not the store of value. The reason it is accurately described as a pyramid scheme is because holding bitcoin for the purpose of reselling it is exactly like holding a baseball card, or a share in Bernie Madoff's hedge fund: it is based on the premise that someone will come along and pay you more for it than you paid, despite no actual appreciation in any fundamental value.
What you described more closely fits the definition of a "bubble", not a "pyramid scheme". I agree that Bitcoin could be qualified as a "bubble" in the way you describe it. That is, similarly to paper money or gold, its price is completely disconnected from its "intrinsic" value.
> Doing useful work would hurt the network's security.
Yeah, no. Any "proof of work" system that meets simple criteria is acceptable: Hard to solve, easy to verify. Hashes are just the easiest to implement, but they're not the only one that could work here.
Factoring RSA keys of different lengths would also fit the bill. If the "difficulty" could be arbitrarily adjusted it'd be no different from SHA2 in terms of effort required.
Do you have any idea how rainbow tables actually work and what it would take to "create" one for the SHA-256 hash used by Bitcoin mining? In order to create such a rainbow table, you would have to do about 2^256 SHA-256 computations. All of the Bitcoin mining ever done so far has carried out somewhere in the order of 2^87.
To put this in perspective, the most power-efficient miners available right now require 0.1 J/GH of energy. There are roughly 10^24 stars in the visible universe putting out about 10^27 watts each. If you could use the entire energy output of all those stars to mine Bitcoins with the most efficient mining hardware currently available for the entire lifespan of the universe to the present day, you'd still get less than 2^210 hashes, about 1/10^74th of what you'd need to create a rainbow table for SHA-256. I'm pretty sure that even upgrading this hypothetical universe-wide computational machinery to hypothetical mining hardware that's as efficient as the laws of thermodynamics allow wouldn't get you close.
First, I am not asking anyone to invest in Bitcoin, I'm just stating facts.
Second, it would depend on whether I believed the stock was currently under valued.
Third, Satoshi is likely dead, lost access to his early coins or has little interest in spending them (given he disappeared and hasn't touched them in years).
While valid, that argument focuses on a different issue. It is not the identity that matters for success of a technology.
Satoshi specified 1MB block size temporarily, and advocated increasing that limit to accommodate higher volumes of transactions on the network. The current Bitcoin Core developers, for whatever reason, have refused to compromise on any scaling issue - the blame lies with them.
As for locking away funds, there are a few things to consider:
1. If any of Satoshi's keys were to be used, intense attention would be attracted.
2. The identity and location of such use would likely be discovered by government intelligence agencies.
3. Even if all of that were to be dumped on the open market, the effect would be temporary with the eventual result bring increased availability of unit supply. It will be effectively impossible to transition away from Bitcoin without an overwhelmingly improved alternative once it is embedded in global systems, even if there's a serious shock.
I posit that the actual use of Bitcoin will not be as a transactional currency; it will be a reserve similar to the IMF's SDR. Therefore, only big money will be able to access it - institutions, governments, billionaires... normal people will have to make use of a transactional currency, perhaps Litecoin.
In conclusion: we cannot look for what we intend the usage to be; we have to observe that the the market may decide on a different purpose.
Since it requires everyone to be connected all the time for anything to get done, that's hardly a complete solution. At best it's a hack that partially solves the problem under some very specific circumstances, like having a robust network that allows the nodes to communicate and achieve consensus for each new block on the chain.
If part of the network gets cut off from the rest they can't participate, they're instead left with an orphan blockchain that will eventually have to be reconciled, and all their changes will get rolled back. Far from ideal.
BitTorrent, by way of example, is resilient even in situations where the network has been split or damaged. If you can connect to a single seed you're good. If you lose that seed, but you can find another, you're still good, you can pick up where your transfer left off. There's no single point of failure: There's multiple trackers, multiple seeds, multiple everything and if any part of this fails, the whole thing can muddle along in a degraded but still functional state.
Please don't comment on things you don't understand.
Take a little of your own advice. It doesn't solve the Two Generals Problem, which is intractable. It is a solution the Byzantine Generals Problem, of which there are many.
You started a flamewar with this low-quality dismissal. Although I'm sure you didn't mean to, in effect this is vandalism. Please post more thoughtfully to HN.
Here is a relevant site guideline:
* Comments should get more civil and substantive, not less, as a topic gets more divisive.*
I don't get winging about mining crypto currency and "wasting power", it's not really a waste, it's proof of work. Besides, we humans waste energy on way worse things than mining Bitcoin.
What about running Facebook, the tens of thousands of high end servers running globally just to figure out what useless junk to feed people, in a way that is detrimental to their health. I don't hear many people complaining about that side of it personally and it's a way bigger waste of electricity IMO.
The other issue is the fact that electricity is produced using fossil fuels, again, not enough protesting about that issue.
> The value provide by these systems is trust, which literally requires proof of work to establish.
This is going to go on a tangent but I do not see why proof of work has anything to do with trust. Does your trust in me increase somehow if I give you a string whose hash ends in twenty zeros? i.e. if I subsequently told you I had found a number whose hash ended in thirty zeros but didn't give you the number, would you somehow trust me more than someone else who hadn't shown you proof of work for twenty zeros? Not really.
If anything, proof of work is not producing trust, but eliminating it (and the need for it).
It's computationally expensive to trick the network by rehashing all blocks in the chain, which is essentially needing to re-do all the proof of work operations since the begging of the BTC ledger. This is how POW adds integrity, for bitcoin and how you can trust your not dealing with a tampered system.
I'm not saying it's efficient, but it's worked well so far.
Proof of Work is better described as Proof of (resource) Waste (for late adopters).
The only thing PoW attempts to do is increase the amount of capital wasted via wasting electricity and computational cycles as time progresses.
Ironically if you actually look at the protocol, miners are rewarded less and less yet have to work harder and harder. The vast majority of the supply sits with less than ~100 of the early miners who put in the least amount of work for the most amount of coins.
What's verifiable is that you wasted a lot of work.
Is anything useful actually being done with all those calculations that are being performed? It seems the only purpose is to prove that you performed this amount of useless work, because the system is built on rewarding new bitcoins to those who waste the most work this way. It's intentionally wasteful just because the system needs something that isn't easily gamed without massive investment of equipment and energy.
Other cryptocurrencies manage to exist without being designed around wasting energy.
Facebook buys servers to meet their needs, not to grind away on useless "proof of work" systems.
They're also interested in aggressively optimizing how that capacity is used, and where possible work to reduce power consumption, compute requirements, and other such things. They can alter how their software interfaces with their systems, how many requests it makes, what kind of data they return and how often.
Facebook can also power down systems that aren't needed at their current load.
Bitcoin is the opposite: The more work you put in, the more you stand to benefit. You must run your systems flat out, all the time, no breaks. Apart from more efficient mining hardware, there's no way to optimize how it mines, it's 100% utilization all the time.
You might be aware that, outside of the world of cryptocurrencies, people have been exchanging money and other assets totally fine without proof-of-work since we stopped living on trees.
A better argument would be to point toward proof of stake or other consensus systems like that used in Ripple. Until there is a more effective method, Proof of work is a highly effective alternative to physical security.
Trying to pass off counterfeit government currency has consequences that involve work by numerous individuals and organizations - and they don't always succeed. Proof of work in a crypto system is effectively successful all of the time, instantly.
The same applies to any form of money and fraudulent activity since the beginning of history. There is always work involved, and the effectiveness of that work has never been greater than with crypto... the consequences of which must be kept in mind - just like existing governments and systems, crypto can be used to control its participants.
I believe if you're a serious miner, then you're just as interested in building the most energy efficient system possible [1], that way you will receive the greatest return on your investments. Just like FB, Amazon, Google etc. I would also say the majority of miners buy their own servers, so I don't get your point on that front.
> You must run your systems flat out, all the time, no breaks. Apart from more efficient mining hardware, there's no way to optimize how it mines, it's 100% utilization all the time.
Do you have the same problem with other projects such as SETI@Home and Folding@Home? How about serious gamers or people who watch a really big screen TV all night while on their phone hardly watching it?
I also think that you're making assumptions about these large tech companies by thinking they really do care about energy efficiency as an absolute top priority. While I'm sure it's a consideration, it doesn't mean it always gets the front seat. Remember these companies had time to make this a focus just like new coins are making energy efficiency a priority [2].
Crypto currencies are a new technology and need time to evolve,they will become more efficient in the near future.
SETI@Home and Folding@Home actually solve real problems. Are the calculations done by bitcoin miners actually applied in a way that accomplishes anything other than being used as a score to decide who gets a new bitcoin?
The problem with bitcoin is not that it costs energy, but that it's specifically designed to waste energy. If it was designed to help SETI and Folding, every conceivable @Home problem would probably have been solved by now.
As long as there's money to be made, which there undoubtedly is (right now), Bitcoin mining will just move somewhere else.
Also, as the Chinese proverb says, the mountains are high and the emperor is far away. Liberal use of the death penalty hasn't solved China's drug problem, a few Politburo decrees aren't going to stop China's Bitcoin mining.
I am personally of the opinion that cryptocurrency swiftly killing off the (central) banking industry would be to the great benefit of humanity. The sheer amount of electricity, human energy, infrastructure, material and real estate it wastes is an environmental disaster.
I have no idea, actually. But bitcoin consumes more energy than a small country (Denmark, I think?), which is quite a lot, yet it's much less useful than all current financial institutions combined.
I'm all for shrinking the carbon footprint (or social footprint, even) of banks and other institutions, but I don't think bitcoin can do that.
Comparing China's National People's Congress to the US Congress is ludicrous. The NPC holds one annual session lasting less than 2 weeks, and passes legislations often with 99% Yeas. Every Chinese knows that the NPC is largely a show and holds no real power despite what the constitution says. Wikipedia summarizes it pretty well [1]:
> In theory, the NPC is the highest organ of state power in China, and all four PRC constitutions have vested it with great lawmaking powers. However, in practice it usually acts as a rubber stamp for decisions already made by the state's executive organs and the Communist Party of China.
Maybe these operations will incorporate solar + battery storage into their systems if they want to stay alive... Be less efficient and less productive, but be legal, environmentally and socially responsible (sucking this much power from the public system is not responsible), and still profit.
As to mining farms owned by smaller players, especially those in the mountainous areas of Sichuan and Yunnan provinces, simply locating the miners is a near impossible task. A growing number of private owners of hydropower plants in the two regions have begun to operate mining machines themselves as the price of bitcoin has surged, Du Jun, founder of Node Capital, a Beijing-based venture-capital firm focusing on the blockchain industry, told Quartz prior to news of the latest crackdown. “How can you find them?” he asks.
Couldn't they be found by looking at their IP address?
The Chinese state has tremendous resources. It seems like if tell people to stop mining bitcoins, the vast majority would do so and any minority which didn't would be very vulnerable.
Also, it seems like China could stop bitcoin mining by blocking the protocol using the Great Firewall or otherwise filtering bitcoin out.
Miners find a block and distribute them to the P2P Bitcoin network. Blocks do not carry IP addresses, and everyone running a Bitcoin node contributes to sharing blocks, so you'd have a hard time finding out who is mining just from the IP.
If the Chinese miners are using a public mining pool, you may be able to see who is connected to the pool. If they're pool mining, they do not even have to run a Bitcoin node in the first place.
Miners also do not need to be part of the p2p network. A mining pool for example will distribute the block for you and send you the bitcoins. There's also a tool to send transactions [1] so you do not even have to be part of the network to send/receive transactions.
[1] https://insight.bitpay.com/tx/send - These still require your signing key, so you can use Bitcoin without ever being on the network. It just requires you to trust all the block explorers that you have actually received payment.
Any way you want to slice this, there is data travelling, and China has the deep packet inspection and machine learning technology to identify what type of connection it is even if it's encrypted or tunneled.
The average lifespan of an unauthorized VPN connection transiting the Great Firewall is a few minutes or less, depending on how much data you try to push across it. It's really not hard to fingerprint a connection just based on traffic analysis, even if you can't see the actual data travelling across it.
If China wants it shut down, it'll be shut down, full stop.
That's a naive view of networking. The physical location of an IP address can be very difficult to track down (and of course IP addresses aren't part of the bitcoin protocol).
Bitcoin is also super low bandwidth, and it would be very easy to build a custom proxy to circumvent the firewall. We are effectively talking about 3 megabytes (or even less) every 10 minutes (5 kBps). It could also be obfuscated with stengraphy rather than encryption (e.g. a valid webpage, where the spacing, or css properties are the (also encrypted) bitcoin blocks).
> That's a naive view of networking. The physical location of an IP address can be very difficult to track down
Unless you are the Internet provider … And I do believe that Internet providers in China would answer to Chinese government requests without troubles (I doubt they would sue the government like they would in the US).
Mongolia is also investing in renewable energy. For example the solar park in Darkhan and the Salkhit wind farm, but of course these are not closely enough to cover Mongolia's need yet. In the meanwhile the population of Ulaanbaatar has to breathe some of the most toxic air in the world.
However, Mongolia seems to be one of the few countries, where Bitcoin mining seems to make sense, because of cheap energy and it's complicated economic situation that makes producing and exporting goods very hard. With Bitcoin they don't have to ask China or Russia for permission to cross the borders.
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[ 2.5 ms ] story [ 158 ms ] threadStrict measures are not always bad. If China did not handle the SARS epidemic years ago the way they did, things could have been more similar to the Ebola epidemic.
At best, trading these currencies is a zero-sum game where you take money from others without providing any intrinsic worth to humanity. At worst is a pyramid scheme plain and simple.
But I'd be likely to agree with you. While blockchain technology /does/ have a future and will enable forms of socio-economic organization that were previously impossible, it's not there yet, and at the moment we're mostly passing tulips off to the greater fool.
And increasing opioid supplies, increases the ability of the market to efficiently parlay money into an altered mental state. Doesn't mean it's a net positive for society.
The "liquidity" argument is such a terrible and simplistic justification for so many things.
If you're trying to stand on some kind of anti-opiate moral ground for why cryptocurrency is evil it's a poor hill to die on.
At least tulips have some intrinsic value, I.e. They can be quite pretty!
Person A sells their coin to Person B for $1,000. A is $1,000 richer and B is $1,000 poorer.
B sells the bitcoin to C for $2,000. A is still $1k richer, B is $1k richer, and C is $2k in the hole.
C sells to D for $3k. A, B, and C are all $1k richer, but D is out $3k.
At no point in the chain is any actual value created or destroyed; it merely changes hands. So even though the price keeps going up, the total value across all participants never goes up. The sum of the gains and losses of all participants is $0.
(Note that I'm using "$" to represent a generic indicator of value. Feel free to substitute € or ¥ or gold or shares of Facebook stock or whatever.)
===============
There are two simplifying assumptions above, both of which make Bitcoin not exactly zero sum.
Good news first. Bitcoin can and does create some value in the same way that other currencies do: by facilitating mutually beneficial exchanges of goods and services. Commercial use appears to only be a tiny fraction of all Bitcoin transactions (and an even smaller fraction that wouldn't have been facilitated anyway using some other means of exchange), but it does happen so credit where credit's due.
The bad news, though, is that all of the above requires electricity. A lot of electricity, as it turns out. Both the initial mining and every transaction thereafter require someone, somewhere to burn some amount of power in order to generate proof of work. Since proof of work is explicitly designed to be useless, all that spent power is essentially deadweight loss.
I haven't seen any good numbers on the first recently (and I would love to have my assumptions proven wrong), but given the ginormous estimates of electricity consumed by the second I have a hard time believing the network as a whole isn't substantially worse than zero sum.
It's pretty strange to see people so consumed with it. It reminds me of beanie babies, and my horrible step-grandmother who would send me in to buy them once she had hit her limit. She was an awful speculator and probably has a worthless collection today for all the money she spent on ebay back then. She'd drive to Vegas to buy them, neighboring towns, all over the place. Totally consumed by speculation gambling. It sickens a person to see someone so...lost in that temptation. I'm not sure how else to put it.
Agreed, I've yet to see an ICO that seemed legit.
When you say that the net value is negative even if the network itself has some positive benefit, what is the negative component there? The only negative component of all that electricity usage is externalities, which apply equally to each unit of energy regardless of what it is used for. Pricing externalities into the cost of electricity is obviously something I approve of, but that’s a separate issue, and I doubt the externalities of electricity usage are anywhere near the magnitude of the positive impact of bitcoin.
Incidentally, this is (as far as I understand) where most of the transaction fees ultimately end up. They're paid out to the miner who actually commits a transaction. Mining's a relatively competitive field so people aren't going to be able to charge much of a premium. The miners then have to turn around and use those fees to cover their costs, which in practice means their hardware costs and their electrical bills.
I beg to differ. Not all crypto projects are like that. For example Omise Go is a promising project that stands to make a difference to many people who have no access to banking services.
They have solid financials, already processing over $500m transactions per day with $110m investment.
They are making a completely decentralized open value exchange DEX based on the block chain. Any developer/provider will be able to build apps on top of it.
Any person with a phone will have instant access to essentially a bank account with no need to hand over social security and ID.
So basically giving 2 billion people who have no way to interact with financial systems a way to join in with global commerce.
> It’s not creating any value, any gains are at the expense of someone else.
Except, not in the case of Omise Go. You may earn a dividend simply by possessing the token.
By staking Omise Go tokens you will have the option to validate transactions (proof of stake) for which you will get paid.
Also note, with PoS there is no electricity burden on the system like Proof of Work with mining.
Bitcoin is a distributed database that solves the "Two Generals Problem". Please don't spread misinformation on things you do not understand.
There's no organisation, recruiting, directors, membership or promise of payments.
But those definitely exist, just not via any singular organization. There very much is organization and organizations, recruiting, would be directors, unofficial membership in the club of ownership, and lots of promises of payments.
When people make that comparison, what they're really saying is Bitcoin is mostly funny money which above all else has enriched early adopters and will probably lose a lot of late adopters lots of money. It's ceased to even be a useful currency.
You don't have to squint very hard to see the comparison, even if it isn't flattering or technically the same thing as a pyramid scheme. This is from your link:
In a pyramid scheme [Bitcoin], an organization compels individuals who wish to join to make a payment [purchase Bitcoin]. In exchange, the organization promises its new members a share of the money taken from every additional member that they recruit [to the moon]. The directors of the organization (those at the top of the pyramid) also receive a share of these payments. For the directors, the scheme is potentially lucrative—whether or not they do any work, the organization's membership has a strong incentive to continue recruiting and funneling money to the top of the pyramid.
Such organizations seldom involve sales of products or services with value. Without creating any goods or services, the only revenue streams for the scheme are recruiting more members or soliciting more money from current members. The behavior of pyramid schemes follows the mathematics concerning exponential growth quite closely. Each level of the pyramid is much larger than the one before it. For a pyramid scheme to make money for everyone who enrolls in it, it would have to expand indefinitely. This is not possible because the population of Earth is finite. When the scheme inevitably runs out of new recruits, lacking other sources of revenue, it collapses. Because in a geometric series, the biggest terms are at the end, most people will be in the lower levels of the pyramid (and indeed the bottom level is always the biggest single layer).
In a pyramid scheme, people in the upper layers typically profit while people in the lower layers typically lose money. Since at any given time, most of the members in the scheme are at the bottom, most participants in a pyramid scheme will not make any money. In particular, when the scheme collapses, most members will be in the bottom layers and thus will not have any opportunity to profit from the scheme, yet they will have paid to join the scheme. Therefore, a pyramid scheme is characterized by a few people (including the creators of the scheme) making large amounts of money, while most who join the scheme lose money. For this reason, they are considered scams.[2]
Sounds like many cryptocurrencies and Bitcoin is approaching that if it hasn't hit it already.
There is no such thing. In that respect, Bitcoin is no different from real estate, stock or gold investors which do tend to sometimes promote their investment of choice. Pyramid scheme has a precise definition which does not fit Bitcoin at all and using it to describe Bitcoin is just misleading and intellectually dishonest. If it was a pyramid scheme, it would be deemed illegal in many, many countries. I agree with one thing however: as with every single investment ever, early adopters, which take on more risk, stand to profit more than late adopters.
I don't want to get into the debate on the definition of a pyramid scheme, but what was anyone risking by mining bitcoins for essentially nothing in 2009-2010?
Decentralized proof of a transaction having occurred is in principle valuable, but the token itself is not the store of value. The reason it is accurately described as a pyramid scheme is because holding bitcoin for the purpose of reselling it is exactly like holding a baseball card, or a share in Bernie Madoff's hedge fund: it is based on the premise that someone will come along and pay you more for it than you paid, despite no actual appreciation in any fundamental value.
That is by design. Doing useful work would hurt the network's security.
> Decentralized proof of a transaction having occurred is in principle valuable, but the token itself is not the store of value. The reason it is accurately described as a pyramid scheme is because holding bitcoin for the purpose of reselling it is exactly like holding a baseball card, or a share in Bernie Madoff's hedge fund: it is based on the premise that someone will come along and pay you more for it than you paid, despite no actual appreciation in any fundamental value.
What you described more closely fits the definition of a "bubble", not a "pyramid scheme". I agree that Bitcoin could be qualified as a "bubble" in the way you describe it. That is, similarly to paper money or gold, its price is completely disconnected from its "intrinsic" value.
Yeah, no. Any "proof of work" system that meets simple criteria is acceptable: Hard to solve, easy to verify. Hashes are just the easiest to implement, but they're not the only one that could work here.
Factoring RSA keys of different lengths would also fit the bill. If the "difficulty" could be arbitrarily adjusted it'd be no different from SHA2 in terms of effort required.
To put this in perspective, the most power-efficient miners available right now require 0.1 J/GH of energy. There are roughly 10^24 stars in the visible universe putting out about 10^27 watts each. If you could use the entire energy output of all those stars to mine Bitcoins with the most efficient mining hardware currently available for the entire lifespan of the universe to the present day, you'd still get less than 2^210 hashes, about 1/10^74th of what you'd need to create a rainbow table for SHA-256. I'm pretty sure that even upgrading this hypothetical universe-wide computational machinery to hypothetical mining hardware that's as efficient as the laws of thermodynamics allow wouldn't get you close.
If I was to tell you to invest in a company whose founder is 'invisible', yet controls a large chunk of the company's stock, would you do it?
Second, it would depend on whether I believed the stock was currently under valued.
Third, Satoshi is likely dead, lost access to his early coins or has little interest in spending them (given he disappeared and hasn't touched them in years).
Satoshi specified 1MB block size temporarily, and advocated increasing that limit to accommodate higher volumes of transactions on the network. The current Bitcoin Core developers, for whatever reason, have refused to compromise on any scaling issue - the blame lies with them.
As for locking away funds, there are a few things to consider: 1. If any of Satoshi's keys were to be used, intense attention would be attracted. 2. The identity and location of such use would likely be discovered by government intelligence agencies. 3. Even if all of that were to be dumped on the open market, the effect would be temporary with the eventual result bring increased availability of unit supply. It will be effectively impossible to transition away from Bitcoin without an overwhelmingly improved alternative once it is embedded in global systems, even if there's a serious shock.
I posit that the actual use of Bitcoin will not be as a transactional currency; it will be a reserve similar to the IMF's SDR. Therefore, only big money will be able to access it - institutions, governments, billionaires... normal people will have to make use of a transactional currency, perhaps Litecoin.
In conclusion: we cannot look for what we intend the usage to be; we have to observe that the the market may decide on a different purpose.
If part of the network gets cut off from the rest they can't participate, they're instead left with an orphan blockchain that will eventually have to be reconciled, and all their changes will get rolled back. Far from ideal.
BitTorrent, by way of example, is resilient even in situations where the network has been split or damaged. If you can connect to a single seed you're good. If you lose that seed, but you can find another, you're still good, you can pick up where your transfer left off. There's no single point of failure: There's multiple trackers, multiple seeds, multiple everything and if any part of this fails, the whole thing can muddle along in a degraded but still functional state.
Please don't comment on things you don't understand.
Here is a relevant site guideline:
* Comments should get more civil and substantive, not less, as a topic gets more divisive.*
https://news.ycombinator.com/newsguidelines.html
What about running Facebook, the tens of thousands of high end servers running globally just to figure out what useless junk to feed people, in a way that is detrimental to their health. I don't hear many people complaining about that side of it personally and it's a way bigger waste of electricity IMO.
The other issue is the fact that electricity is produced using fossil fuels, again, not enough protesting about that issue.
Every kind of waste I can think of is a proof of some kind of work. That doesn't make it a good thing.
Facebook news feeds don't require proof of work in the same sense.
This is going to go on a tangent but I do not see why proof of work has anything to do with trust. Does your trust in me increase somehow if I give you a string whose hash ends in twenty zeros? i.e. if I subsequently told you I had found a number whose hash ended in thirty zeros but didn't give you the number, would you somehow trust me more than someone else who hadn't shown you proof of work for twenty zeros? Not really.
If anything, proof of work is not producing trust, but eliminating it (and the need for it).
I'm not saying it's efficient, but it's worked well so far.
Good explanation here: https://decentralize.today/how-does-proof-of-work-um-work-f4...
The only thing PoW attempts to do is increase the amount of capital wasted via wasting electricity and computational cycles as time progresses.
Ironically if you actually look at the protocol, miners are rewarded less and less yet have to work harder and harder. The vast majority of the supply sits with less than ~100 of the early miners who put in the least amount of work for the most amount of coins.
Is anything useful actually being done with all those calculations that are being performed? It seems the only purpose is to prove that you performed this amount of useless work, because the system is built on rewarding new bitcoins to those who waste the most work this way. It's intentionally wasteful just because the system needs something that isn't easily gamed without massive investment of equipment and energy.
Other cryptocurrencies manage to exist without being designed around wasting energy.
They're also interested in aggressively optimizing how that capacity is used, and where possible work to reduce power consumption, compute requirements, and other such things. They can alter how their software interfaces with their systems, how many requests it makes, what kind of data they return and how often.
Facebook can also power down systems that aren't needed at their current load.
Bitcoin is the opposite: The more work you put in, the more you stand to benefit. You must run your systems flat out, all the time, no breaks. Apart from more efficient mining hardware, there's no way to optimize how it mines, it's 100% utilization all the time.
Trying to pass off counterfeit government currency has consequences that involve work by numerous individuals and organizations - and they don't always succeed. Proof of work in a crypto system is effectively successful all of the time, instantly.
The same applies to any form of money and fraudulent activity since the beginning of history. There is always work involved, and the effectiveness of that work has never been greater than with crypto... the consequences of which must be kept in mind - just like existing governments and systems, crypto can be used to control its participants.
> You must run your systems flat out, all the time, no breaks. Apart from more efficient mining hardware, there's no way to optimize how it mines, it's 100% utilization all the time.
Do you have the same problem with other projects such as SETI@Home and Folding@Home? How about serious gamers or people who watch a really big screen TV all night while on their phone hardly watching it?
I also think that you're making assumptions about these large tech companies by thinking they really do care about energy efficiency as an absolute top priority. While I'm sure it's a consideration, it doesn't mean it always gets the front seat. Remember these companies had time to make this a focus just like new coins are making energy efficiency a priority [2].
Crypto currencies are a new technology and need time to evolve,they will become more efficient in the near future.
[1] http://www.ibtimes.co.uk/geothermal-gold-why-bitcoin-mines-a...
[2] https://www.prnewswire.com/news-releases/bitcoin-alternative...
The problem with bitcoin is not that it costs energy, but that it's specifically designed to waste energy. If it was designed to help SETI and Folding, every conceivable @Home problem would probably have been solved by now.
If I turn off any mining equipment I get nothing. Zero. I'm no longer participating in any meaningful capacity. I have no "vote", I have no upside.
> How about serious gamers or people who watch a really big screen TV all night while on their phone hardly watching it?
Let's not "whatabout" this.
The proof of work is a potentially valid argument but wouldn't it be better if the work was useful in some way?
[0] https://en.wikipedia.org/wiki/Whataboutism
https://ethereum.stackexchange.com/questions/118/whats-the-d...
So if electricity is the only reason to combat Bitcoin, many other cryptocurrencies should be fine.
Also, as the Chinese proverb says, the mountains are high and the emperor is far away. Liberal use of the death penalty hasn't solved China's drug problem, a few Politburo decrees aren't going to stop China's Bitcoin mining.
I'm all for shrinking the carbon footprint (or social footprint, even) of banks and other institutions, but I don't think bitcoin can do that.
> In theory, the NPC is the highest organ of state power in China, and all four PRC constitutions have vested it with great lawmaking powers. However, in practice it usually acts as a rubber stamp for decisions already made by the state's executive organs and the Communist Party of China.
[1] https://en.wikipedia.org/wiki/National_People's_Congress
Have you seen the electricity foot print for livestock?
Going vegetarian would allow us to live longer, cause less methane/co2 release and allow us to do Democratic banking.
Bitcoin (Cash) is The most efficient banking system in the world. (Large blocks will scale to trillions of tx/sec)
Couldn't they be found by looking at their IP address?
The Chinese state has tremendous resources. It seems like if tell people to stop mining bitcoins, the vast majority would do so and any minority which didn't would be very vulnerable.
Also, it seems like China could stop bitcoin mining by blocking the protocol using the Great Firewall or otherwise filtering bitcoin out.
If the Chinese miners are using a public mining pool, you may be able to see who is connected to the pool. If they're pool mining, they do not even have to run a Bitcoin node in the first place.
You just need to become part of the p2p network by yourself, and log the IP of people you communicate with …
[1] https://insight.bitpay.com/tx/send - These still require your signing key, so you can use Bitcoin without ever being on the network. It just requires you to trust all the block explorers that you have actually received payment.
The average lifespan of an unauthorized VPN connection transiting the Great Firewall is a few minutes or less, depending on how much data you try to push across it. It's really not hard to fingerprint a connection just based on traffic analysis, even if you can't see the actual data travelling across it.
If China wants it shut down, it'll be shut down, full stop.
Of course, the question is remain what authorities actually want to stop it and how much.
Bitcoin is also super low bandwidth, and it would be very easy to build a custom proxy to circumvent the firewall. We are effectively talking about 3 megabytes (or even less) every 10 minutes (5 kBps). It could also be obfuscated with stengraphy rather than encryption (e.g. a valid webpage, where the spacing, or css properties are the (also encrypted) bitcoin blocks).
Unless you are the Internet provider … And I do believe that Internet providers in China would answer to Chinese government requests without troubles (I doubt they would sue the government like they would in the US).
steganography
> Mongolia hosts 10% of the world's known coal reserves at an estimated 162 billion tonnes in 2011 with 17 operating coal mines
However, Mongolia seems to be one of the few countries, where Bitcoin mining seems to make sense, because of cheap energy and it's complicated economic situation that makes producing and exporting goods very hard. With Bitcoin they don't have to ask China or Russia for permission to cross the borders.