Genuine question: how much does this matter if much of it is renewables and cheap hydro? I feel like the negative externalities of using a lot of electricity are very very tied to where that electricity came from
Is there reason to believe even a majority comes from renewable sources? And then, how much of that clean energy could be powering other things which are instead using fossil fuels?
At least in Europe, the lowest prices (even negative sometimes) for electricity are when renewable energies are producing a lot (e.g. when there's a storm in the north sea). If bitcoin mines are plugged on the real time market of electricity they would have an incentive to turn on when there's a lot of renewable energy produced. Assuming mines optimize their mining schedules on that, there's a scenario in which it could even help soak up the low prices and push investments into renewables.
Maybe, but only running miners when electricity is cheap doesn't work for a proof of work currency. 51% attacks would consist of an individual turning on their ASIC on a windless day. You need a large base load for it to be secure.
I’d half remembered mining clusters near large hydro projects in China. As to the opportunity cost, getting the electricity from one place to another where it can be used if you have a local glut isn’t easy, aiui
A lot of mining is done close to hydro dams, this power was in some cases waste power that would be unused. So it is swings and roundabouts, I don't think any new coal power stations are being built to mine bitcoin but bitcoin miners have taken advantage of excess electricity production to site their mines where power is cheapest.
That would depend on how much heat the computations/mining itself generates - has to be some - and the total effort to make graphics cards or other hardware for a lot of clients that would not really exist if crypto wouldn't be a thing
This is a bit too hypothetical: the most generous estimate I can find is that Bitcoin is still using 61% non-renewable energy, in as much as farms are favourably set up in places with cheap energy (somewhat but not entirely correlated with renewable energy).
According to their mining map[1], 35% of the global hashrate happens in Xinjiang. From Wikipedia, it looks like most major power stations in Xinjiang are coal driven[2].
10% is in Sichuan, which appears to be largely hydro-driven[3].
If you made it a crime to fly to tropical islands to enjoy the beach in the winter, you would enjoy a reduction in fossil fuels too, and people would be more productive than loafing about on the beach.
End of the day, people choose to spend resources on things that provide utility to them.
Even if all of Bitcoin uses renewables, that's demand for renewable energy that drives prices up, which will lead other energy consumers to either pay more or pick less expensive non-renewable energy sources instead.
If energy demand suddenly halved, I do think we would choose to turn coal plants off before solar panels. Of course Bitcoin isn't half of any country's energy, but proportionally it works the same way. There is no reason not to turn it off except some daredevils' get-rich-quick scheme falls apart.
One argument I've heard it's that it increasing the power demand beyond what renewables can handle. Reducing total power consumption would be more ideal.
No but you could use the money you save on electricity to buy bitcoin if you really want to own it (a better question is why anyone would want to hold bitcoin?).
Electricity is one of the most inefficient ways to heat a dwelling. I think natural gas is still considered to be several times more efficient but I haven’t looked at it in a few years. Of course if you are also getting benefits from the crypto you mined that will offset the cost.
Electricity is 100% efficient in a resistance heater, in that all the electricity used is turned to heat. However, it is considerably more expensive per unit heat than natural gas, even though you may only get 70-90% efficiency with your boiler or furnace. A heat pump can be even more efficient, though. An electric heat pump can be more than 100% efficient, in that each watt of electricity can be used to move more than 1 watt of heat into your home using the heat pump.
If electricity is made combusting fossil fuels at a power plant at say 40-50% effciency thats the problem.
If your using fossil fuels for heat its more efficient to burn them directly at point needed and capture the heat, rather than use the heat to convert to mechanical then electrical then back into heat.
Air source heat pumps are basically solar assisted, they move heat from outside air into heated space using electricity which also contributes resistive heat in compressor friction. The outside air is heated by the sun.
This depends on what you’re measuring the efficiency with respect to though, right? Cost-wise, yeah, natural gas outperforms electricity everywhere I’m aware of. On a grid powered entirely by renewable energy though, there’s a meaningful sense in which the electrical method is “more efficient”
>Electricity is one of the most inefficient ways to heat a
dwelling.
This is not true. Resistive heating is inefficient indeed but not all forms of conversion of electricity are inefficient. Geothermal pumps are very efficient for instance and use electricity only, they can be assisted directly by solar (PV) too.
Indeed it's waste heat (and not only in the semiconductors, the conductors/wires/traces and the metal in mosfets have minor contributions). The remark was about heating in general, hence the quote.
Resistive Heating is literally the most efficient form of heating where 100% (ie, all of) of the electric watts you put in are turned into thermal energy.
Doesn't mean that the generator on the other end is efficient but that is a separate concern that can benefit from economies of scale (a big gas turbine would be more efficient than a swarm of small gas ovens producing the same energy).
A gas oven is not 100% efficient. If yours says it is, it's a lie sold to you by gas oven manufacturers. It's 100% efficient compared to some previous oven sold.
Simple proof by example; if the exhaust air of your gas oven is warmer than ambient energy, it cannot be 100% efficient. (A few other laws of thermodynamics also play in here)
A gas turbine has the advantage that it can use higher temperature gradients within, as well as high speeds and other mechanisms to take advantage of larger burnoffs of gas.
A gas turbine is 60% efficient at base load and largely will be able to maintain 60% efficiency while being maintained at this load. A gas oven has a rough efficiency of around 70-90 % in AFUE. AFUE does not measure actual thermal efficiency, you can usually subtract between 10-35% depending on your boiler system, which ends you between... 40-60% just like a gas turbine in a worst case. The better cases of 60-80% are unlikely to be a steady state efficiency and more likely to be achieved if you have a boiler with great heat capacity that can hold onto the heat for longer. The efficiency here is ruined by ignition each time the furnace has to start running.
Turns out you can't cheat thermodynamics, but you can certainly market like you did.
I would not call that a 100% efficiency. The efficiency of a heatpump is expressed in Watt per Watt, ie, how many watts of thermal energy are moved per watt of electric energy.
The reason is that simply a heat pump does not convert electrical to thermal energy, so it has no comparable efficiency in that process.
No, Heat Pumps are measured in COP (Coefficient of Performance), not thermodynamic efficiency or "the definition of efficiency for home heating". Which of the 5 definitions do you want to use?
In theory. Remember that the motor of the heat pump isn’t 100% efficient. It’s still an electric motor. That’s is of course offset by it not generating heat but rather transferring it. So say you’re electric motor is 33% efficient. That means you need a 3x multiplier to break even with a resistive load. And the multiplier depends on the temperature difference between inside and outside. If it’s 70F inside and 50F outside you are golden. If it is -10F outside, you are better off using a resistive load.
From thermodynamic standpoint every process is 100% efficient. It is a useless metric. Normally we measure desired energy over certain consumed energy. Heat pumps achieve >100% efficiency.
Furthermore, that 100% efficiency of a resistive heater is only true under very specific high school level circumstances. Under no practical circumstances (e.g. source resistance, reactive load) resistive heater is 100% efficient (though it can get close).
From a thermodynamic standpoint, yes, but nobody with an honest face will claim that makes measuring wasted energy as efficiency a bad measurement.
In cases of heating, resistive is 100% efficient as you loose none of the energy put in to waste heat, only effective heat, while a gas oven or heater will loose heat to it's exhaust gases, thereby being less efficient.
I wouldn't say this is "high school level" circumstances. The waste heat in the wires of your house feeding into the heater will also heat up, no?
The only energy lost is outside the system we're trying to measure, hence, not relevant.
I think you are conflating active and reactive loads. Reactive load is basically EM, not heat.
Yes, reactive current is still current and any series active load (wiring) will experience that current and heat up. The reactive load itself is "imaginary".
I'm aware it's EM but I'm pointing out it's dissipated as heat through wire current. I'm aware it's imaginary, doesn't mean it doesn't produce electrical load in the wire.
Besides, for any reasonable heater arrangement, this loss will be negligible compared to any other heating mechanism.
Heat pumps move heat around, that has to come from somewhere. Their performance is not measured in efficiency but the performance coefficient, which simply measures in Watt per Watt how much energy is moved.
The point is that I can heat my home by 10 degrees with a heat pump using less energy than electric resistive heating, except in specific conditions where it is too cold outside for the heat pump to function well. When I run my auxiliary heat (electric resistive heating), my bill skyrockets.
Where I lived until like a year ago, it was cheaper to heat via electric heating than the heatpump by about 3-4%, the maintenance costs of the heatpump compressor did the rest after a decade. That is in a temperate region with winter not going below -10 or so.
It isn't good for all regions. Just like swamp coolers aren't good for all regions. But the point is that "resistive heating is the best you can do if you want to heat your home" is just plain wrong.
Due to heat pump inefficiencies, they only make sense if you can get like a 3-4x multiplier out of them. Beyond that you break even energy-wise. Basically if it’s -10F outside, your heat pump isn’t going to be cheaper than a resistive heater. On the other hand when it’s 50F outside you do better than 4X.
And yeah that does seem to be "profitable". A 2070 Super card seems to net me a couple of bucks a day...enough to offset the cost. Probably not profitable in the true sense, but hey free heating is a win for personal finances.
I’ve actually seen a few startups which install small servers in homes for heating. The idea is to let the cloud heat your home. I think there’s still a cost to the home owner but their heating bill is reduced.
That serves a purpose, though. Relaxing after work is perfectly legitimate. Having an investment scheme where you issue numbered bank notes and agree to never use a bank note with a number higher than 21 million, then track on some forum who now owns which bank note, would work the same way as Bitcoin. So long as people keep buying, the price keeps increasing, as it does with Bitcoin. Except that Bitcoin also agrees to burn some Terrawatts for no added benefit.
And as Bitcoins get more scarce and get adopted by more and more banks and companies as reserves, the value of mining rewards is only going to continue rising, until Bitcoin will consume more electricity than the rest of the world combined. (Around the time it is worth $1.2 Million a coin.)
Change my mind.
Bitcoin rewards miners in Bitcoin, which is the ultimate deflationary “store of value”, and has the world mindshare as such. Even if a network arose that was better in every technological way, if it was a “sidechain” to Bitcoin, then BTC would just be locked up as people migrated to that network, so “unstaked” Bitcoins on the original network would become even more scarce, thus mining rewards would go up even more. Bitcoin would be a store of value / collectible just like gold, except its supply would always be shrinking and mining rewards rising.
PS: Consider I am right. How would governments even begin to stop it, if this use of electricity would net the provider more profit than powering a home?
It doesn’t. Proof of work is the wrong architecture. We started https://intercoin.org to solve the problem. Others started other projects. But it doesn’t do anything to demand for Bitcoin because nearly all of it is for Bitcoin as a store of value and deflationary investment that will go up, up, up.
Yes it was called a cash system in the original whitepaper - but somewhere around 2013 the narrative shifted from Peer to Peer Cash to Store of Value. And it has stuck. This is a copout but it works! Bitcoin has all the features to be a great store of value and nothing more...
Bitcoin is now a store of value and you dont need it to scale if once in a while someone wants to move $50K from their savings account to their checking account to actually use. They can also have Nexo, BitPay etc as debit cards backed by BTC reserves.
So why do you need Bitcoin to be a good currency too?
SpaceX could probably help usher in a new age where we have mining nodes in space, big solar arrays (100 or so) powering a small 100-GPU cluster or ASIC cluster....
It would be far cheaper and easier to do this on Earth. There's plenty of sunny desert, heat dissipation is much easier, broken things can be repaired, etc.
Dissipating heat into space is very challenging (vacuum makes a great insulator). On Earth the solar energy is arriving here already, so converting it to electricity and using it to perform calculations won't directly contribute to global warming.
Combined world governments going after miners is the best thing could happen to Bitcoin. Difficulty would drop allowing people to mine from general purpose computers again, which is a huge incentive. Then things will scale up again.
The toothpaste is out of the tube. Nothing can be done.
Well, personally, I'm still convinced Bitcoin is going to crash at some point. It doesn't work well as an actual currency because transfer times/fees are too high.
I don't know if that will happen in one year or 20 years though.
But that’s not it use anymore. Yes it was called a Peer to Peer cash system but it failed at that. Somewhere around 2013 the narrative shifted to it being a store of value. And that has stuck.
It is the ultimate store of value.
You think people will let governments destroy their store of value so that the world can use electricity for other uses? Let’s explore that shall we.
One third of the world farmland is desertified, today.
Insects are dwindling and other species are experiencing an extinction on unprecedented scales today.
Fossil fuels are being extracted at rates that are not stopping anytime soon. We never switched to electric cars yet.
We couldn’t even switch to biodegradeable plastic and instead polluted all the bodies of water on earth.
You really think humanity will be able to stop this runaway economic effect designed to get bigger and bigger until it consumes the world’s use of electricity? Why is this any different?
PS: with exponential growth, by the time you note the electric use is one quarter of the world, it’s too late.
> But that’s not it use anymore. Yes it was called a Peer to Peer cash system but it failed at that. Somewhere around 2013 the narrative shifted to it being a store of value. And that has stuck.
Yep, a "store of value" created out of thin air, just like tulip petals! I don't expect it to last myself.
Bitcoin is barely two decades old, whereas gold has been used for centuries as a way to means of storing wealth. Gold was literally used as currency for much of that time, and today the price of gold is far more stable than Bitcoin.
None of that means Bitcoin couldn't be the next gold, I just think the odds are overwhelmingly stacked against it.
> Bitcoin, which is the ultimate deflationary “store of value”
Inflating the supply of bitcoins is a value in a config file + buy-in from miners, who are the ones with all the capital to benefit from inflating the supply. Unsure why you think the miners are just going to go home when it’s all mined and sell off their expensive equipment at firesale prices when they can collaborate to increase the amount of Bitcoin?
Miners benefit from deflating the supply. If there were only 50,000 bitcoins and the rest was locked up in sidechains, then every mining reward would be worth far more. They would like more sidechains to Bitcoin.
(Somewhere Joel Spolsky is yelling: “Commoditize your complements!”)
> Inflating the supply of bitcoins is a value in a config file + buy-in from miners
Please learn about how consensus rules work.
"The consensus rules are the specific set of rules that all Bitcoin full nodes will unfailingly enforce when considering the validity of a block and its transactions. For example, the Bitcoin consensus rules require that blocks only create a certain number of bitcoins. If a block creates more bitcoins than is allowed, all full nodes will reject this block, even if every other node and miner in the world accepts it." [0]
Because users must consent to run full-node software with a particular version of consensus rules, miners cannot simply change the rules. This was shown in 2017 with Segwit2x and UASF(User Activated Soft Fork).[1]
In other words,
"If securing Bitcoin requires consensus on what Bitcoin is, and Bitcoin is a database of values assigned to keys, and Bitcoin has a protocol for reassignment of keys, then securing Bitcoin can only be done by … your node!" [2]
> [Miners] are the ones with all the capital to benefit from inflating the supply.
You're not thinking clearly about supply and demand. Because bitcoin has a fixed supply (21M), its price movement is a pure result of demand. If someone were to start inflating the supply, the price would drop, devaluing the coins for everyone including those doing the inflation because created coins are instantly visible to everyone. (Incidentally, this also creates a disincentive for Satoshi to ever move his "lost" 1M BTC. Moving them would instantly make them appear available to the market/network and be a massively inflationary event. Prices would immediately drop in response to this perceived increase in supply.)
> Unsure why you think the miners are just going to go home when it’s all mined and sell off their expensive equipment at firesale prices when they can collaborate to increase the amount of Bitcoin?
Miners work for the block reward (which halves every four years) but also for transaction fees (an auction in which you bid for blockspace for your transactions). The question for the distant future is: will transaction fees be sufficient to ensure the security of the network?
"the value of mining rewards is only going to continue rising" is not consistent with the design of Bitcoin. There is a finite number of BTC left to mine (15% of the eventual total?) and the amount of BTC received from mining is designed to halve every four years, so in the long run BTC processing will have to be funded more by transaction costs and less so by mining.
"How would governments even begin to stop it" - I don't thing that governments will choose to try it, but if they did want to do so, a simple ban on all sale and barter in BTC would work. It wouldn't stop all trade, but making exits difficult would reduce investment interest sufficiently to get a huge decrease in price, especially since current price seems mostly defined by "store of value" i.e. investment arguments, not based on usefulness for transactions. If many investors can't exit, then it ceases to be a good store of value for them, reducing the demand.
For example, Tesla $1.5B purchase was a big pressure upwards; but if it's known that no such purchases are ever coming again, and that Tesla's holding is now worthless (unlike some small-scale drug trader, a US company like Tesla can't really use a black market or person-to-person transactions to exhange it for anything), that would kill the short-term price; this would mean that the mining costs much more than their electricity costs (there is an inherent lag in block difficulty adjustments that's potentially huge in case of a rapid slowdown in mining rate) which may cause many miners to cease mining.
Criticism a about bitcoin power consumption betrays an understand of even elementary economics. Replace bitcoin with beanie baby, and one could have made a similar argument in the late 90s about beanie babies causing a fabric shortage or fabric being wasted on toys that could instead be used for better purposes. When the beanie baby market crashed, the problem effectively fixed itself, as there was this sudden glut of fabric. Additionally, increased demand for bitcoin production means more power will generated, similar to how increased demand for cloth due to beanie baby production lead to more total cloth being produced overall. It is not like cloth for clothes was diverted to create beanie babies. The increased production of power to mine bitcoins is funded by bitcoin profits, and represents a consensual economic transaction between two parties, not wastefulness.
Of course, then you can talk about externalities such as climate change but I am ignoring this for now and just talking about the criticism of wastefulness.
That doesn't explain how humanity can reach collective consensus to burn energy to further ruin our planet because we can't reach collective consensus on how to efficiently exchange goods and services.
That's what, you know, governments are supposed to be fixing.
I am being brainwashed on a daily basis to turn off electronic devices, I pay extra for electronic devices to be marginally more energy efficient, I am crossing local law if my car idles for more than 60 seconds but it is fine to be burning energy on massive scale as a detail of computing algorithm.
Not to mention I can't buy decent graphics card because of how prices are inflated by miners.
Let's face it. If you are mining bitcoin you are effectively engaging in a destructive operation where you accept small extra payment for burning much larger amount of energy away. While the rest of the world tries to minimize our carbon footprint you are wasting part of the infrastructure that makes it possible for a cut.
- Consider the small plastic pellets, which will eventually work their way into delicate ecosystems and devastate the ecology for a millenium or more.
- Since beanie babies were considered a store of value, countless tons of plastic storage bins and millions of cubic feet of climate controlled storage space are consumed to store beanie babies.
- Back of the napkin calculations indicate that over a billion dollars has been spent heating and cooling beanie babies since 1996.
- Beanie babies take up alot of space, driving demand for self-storage facilities.
- When sold on the internet, consider the electricity, excess heat, etc generated by Ebay, as well as the carbon footprint of producing and disposing of cardboard, tape, labels, etc and the carbon consumed in shipping them.
- The human toll is real as well. At least a dozen UPS drivers have been seriously injured while delivering beanie babies.
Question that came to mind after reading the headline: could this become a future reason for governments to criminalise the trading / use of Bitcoin because of negative environmental effects?
On the surface it seems the value of Bitcoin is directly tied to its energy consumption and thus environmental harm.
I get that Bitcoin itself is decentralised and cannot be banned outright. But could it be neutered in such a way that renders it more and more worth / useless?
If governments banned the on/off ramps to normal currency, then yes it would be effectively neutered. There is an audience that wouldn't care, but it's a small audience.
Yes, but the narrative is that Bitcoin is innovation and any government against it is basically against innovation.
If I wanted to neutralize it, I would do something like Bait&Switch. Support banks running own cryptos until point where general public will see no difference between BTC and private cryptocurrencies and leave BTC users with their wallets and even when it will remain legal and everything, the "crypto revolution" would be taken by usual suspects (the establishment).
However, I wouldn't like to see it. I prefer world currency to be run by nerds over bankers and politicians.
Canada actually tried that, at least once - maybe twice. When it became clear that the government was talking about a pre-mined, non-transparent, centralized fedcoin - everybody laughed and then ignored it.
As the other commenter says - nobody would care about those, because the only reason people are interested is the speculation. Stable cryptocurrencies are really only of interest to a small group of decentralisation fetishists, and stable, centralised cryptocurrencies are of interest to basically nobody.
There might be some concerns (eg. "wow gold mining is dirty, we should do something about it"), but I personally haven't seen anything close to "we should ban gold".
Almost half of the world gold demand is for speculative/investment purposes[1]. If you consider jewelry to be speculative as well (at least partially, since if you only cared about appearance you could just plate it), the vast majority isn't "useful".
> Almost half of the world gold demand is for speculative/investment purposes
fair (and I think gold as a "beautiful" metal is dumb), but the other half of the usage (on your claim) is for an array of productive things. I don't see wires, heat reflectors, etc being made out of bitcoin.
There are. They're not super present in the public consciousness because they're drowned out by the concerns about the prevalence of child labor in many countries' gold mines.
After all the Bitcoin is mined, it will be the greenest crypto currency, yes?. What if we just accelerated the mining, or made them all available at once. Problem solved? Truth be told, I really don't know what I'm talking about. It just sounded good in my head.
Impossible due to how cryptocurrency works. In any cryptocurrency there is something called an "emissions target" which will only up to X amount of coins to be "released" on the discovery of a new block. This is also compounded by the fact that even if you did try to accelerate the mining by adding more powerful nodes into the network, the network would automatically adjust the difficulty in order to keep blocks spitting out at the predetermined time of 10 minutes per block.
Nope. Bitcoin transactions require wasting energy. It is built into the very fabric of bitcoin. Currently, the energy wasters ("miners") are compensated by the minting of new bitcoins, and some transaction fees. As the number of bitcoins asymptomatically approaches it's maximum, the energy wasters are still compensated, but more and more through transaction fees.
>Will anyone criminalise the US army because they use lots of energy?
Ah yes, the old trope that people use the US dollar because they are forced to.
Meanwhile, back in reality, people around the world are desperate to get their hands on USD for commerce, because it's easily transacted, accepted and valued anywhere. You know, kinda like Bitcoin purports to be, but way more common.
Arguably, modern currencies are backed by the ability of nation states to demand tax payments in them, creating a steady and stable (due to being directly proportional to economic activity) demand for them.
A currency having value abroad is arguably a side effect, not the main goal.
Of course, it is everyone's taste. One values USD more and other BTC more. Objectively, so far, BTC was a better investment. And given some 80% of BTC was already mined and there will be no more BTC ever while 20% of USD was printed this year (edit: sorry, in 2020), I undestand why some people stash Bitcoin. I have maybe 0.5% of my net worth in it, but I am very happy for those 0.5%.
The economical and political power of the US is the reason for that. And the military might is what backs up the political power.
The same pattern repeats itself in history: those with the biggest army popularize their culture, language and coin. The Roman Empire is a good example.
We can only hope so. There are new proof-of-stake cryptocurrencies that don't have this massive environmental downside. The only people who should oppose replacing BTC with some other technologically and ecologically superior coin are bitcoin bagholders trying to protect their "investment" in this Ponzi scheme.
I was thinking exactly the same. I would be in favor tbh.
If the government is allowed to dictate how my car must be built in order to make it more environmentally friendly, I don't see why it shouldn't be able to dictate how my blockchain must be built in order to make it environmentally sustainable.
This wouldn't mean banning blockchain altogether. It would entail banning only those forms of distributed consensus that are not energy efficient.
Proof of work (POW) is by definition inefficient from an energy perspective. You have to prove to have spent a lot of resources to be trusted. There's no excuse for this from an environment point of view, even if, admittedly, from a technological perspective is quite a marvel.
I wouldn't be surprised to know that those defending bitcoin on this front are biased because they hold some quantity of crypto based on POW.
Government regulation should focus on how electricity is produced, not how electricity is used. If Bitcoin created pollution or dumped toxic chemicals, I would agree with you. But Bitcoin doesn't do either of those things, the power plants do those things.
So save your regulations for the power plants and let the market figure out how to spend the electricity. If you wouldn't be in favor of the government regulating how much money can be spent on beef, or how much money can be spent on TVs, you shouldn't be in favor of the government regulating how much can be spent on Bitcoin's electricity bills.
The bigger issue with GP's comment is that, even if every major country on earth requires PoW systems to use renewable electricity (which won't happen any time soon in the first place) and can't run on the regular mixed grid, then after switching to countries without such laws (until there are none left), the renewable energy will be bought up at the source and the coal and gas plants will continue to supply everyone else. Nothing changes.
We need to change everything else to renewable before this starts to be effective. It would make a much bigger impact if some countries, where users want to use cryptocurrency, make it illegal to use proof-of-work-based goods or currencies (whatever it's classified as). Suddenly a coin with PoS or something else becomes much more popular and we might, perhaps, shift over to a digital coin that is not a climate disaster.
> Is there no way to slim down the resource requirements to cut electrical use?
To put it bluntly (not meant to sound blunt, I just can't think of a better example without reiterating a technical explanation of how bitcoin works), that's like asking if people living in the Sahara can't simply drink less water to solve the unavailability of fresh water. And even that's a bad comparison because the human body actually can actually make due with less water. Perhaps it's like an electric heater (not heat pump, just a plain old heater), if you know how these things work: if you make it use fewer Watts, you get less heat, because there is no "waste heat" because heat is what you want in the first place. So fewer Watts is always less heat no matter how you spin it.
Similarly, putting more power into Bitcoin makes you earn more money (as a miner). If we make the hashing algorithm more efficient, then the hash rate will just raise proportionally to meet the new supply (supply being the block reward + transaction fees, both in bitcoin (or whatever proof-of-work currency you're mining) that you receive when finding a block as a miner).
No, the alternative is moving away from proof of work. I've been hearing stuff about proof of stake for years now, and afaik there are some currencies already using it. Not sure why Bitcoin doesn't switch to it, I'm not keeping up. Lost interest back when it became clear what a disaster it is and that it won't be able to fulfill its original purpose anyway. I'm very surprised the price is still soaring, shouldn't the best currency win? I guess people just don't give a fuck about their non-direct impact and see it as a way to get rich quick.
For future reference go with the technical explanation. We're on hacker news and I'm not a simpleton, I'm just not into Bitcoin haha. Analogies are always awful.
I think both the article and this comment miss the point.
If we generated power cleanly in the first place, there would be far less environmental damage everywhere.
The fact that Bitcoin now uses half the power of Youtube (from a terribly unreliable estimate) should not be such a distraction from the real problem IMHO.
> could this become a future reason for governments to criminalise the trading / use of Bitcoin because of negative environmental effects?
The whole point of Bitcoin is resistance to adversity. Bitcoin value is directly correlated to its resistance against governments/agencies/bankers/regulation or anything else that wants to shut it down. If you can wrap your head around that, you'll understand why making bitcoin more eco-friendly from a centralized government or organization will suddenly make it less valuable.
Slightly off topic, but does anyone have any good resources on how alternative consensus protocols work, like proof of stake and proof of importance? I either see really simplistic explanations or ones that assume a lot of domain knowledge. I also recently saw a crypto coin that claims to be energy efficient, and I don’t quite understand how that’s possible without the possibility of a 50.1% attack.
You're perhaps thinking of https://nano.org ? A brief description of it's Open Representative Voting (ORV) consensus mechanism:
"A consensus mechanism unique to Nano which involves accounts delegating their balance as voting weight to Representatives. The Representatives vote themselves on the validity of transactions published to the network using the voting weight delegated to them. These votes are shared with their directly connected peers and they also rebroadcast votes seen from Principal Representatives. Votes are tallied and once quorum is reached on a published block, it is considered confirmed by the network."
I'm a huge Nano fanboy since the RaiBlocks days. It definitely deserves more attention, since it's a pretty solid technology and was distributed pretty fairly.
But even in this crypto bull market, everybody seems to ignore it, except for the fanboys on Reddit.
Proof of stake is relatively simple. You agree to stake a minimum amount of tokens (decided on by the network) and you get to run a node and validate transactions. If you attest to a malicious block and other validators call you out on it, you get slashed (i.e. you lose some portion of your stake, if not all of it): https://ethereum.org/en/developers/docs/consensus-mechanisms...
One of the problems with it is that it's difficult to bootstrap a network on a proof-of-stake system with a fair distribution. You end up with the pre-sale participants (i.e. VCs or founders) having the majority of the tokens.
I think what Ethereum is doing is a decent approach. They started as Proof of Work, so they were able to bootstrap the network for 6 years and now ETH is widely distributed and no single holder owns more than 1% of ETH, for example. So now they can migrate to Proof of Stake and they won't suffer from the centralized allocation problem.
That page does not explain how the correct chain is chosen...
I searched and found a blog that claims a chain is chosen by trusting other nodes:
“In PoS systems, weak subjectivity arises because the longest chain rule is not sufficient to determine the main chain due to the (nearly) costless process of creating an up-to-date chain.
Creating up-to-date competing chains would take little effort in PoS as opposed to in PoW. Therefore, new nodes or nodes that have been a long time offline have to trust the information they receive from other nodes about which chain is the valid one, causing weak subjectivity.
In the case of weak subjectivity, to ensure that the information about the valid chain is accurate, a node that is new or comes online after a significant period would have to get a recent block hash from a reputable source, such as a blockchain explorer, and insert that as a “checkpoint” into their blockchain client. This is the method of dealing with weak subjectivity, which relies on the trust with a reputable source. Although not completely in line with a trustless system, it shouldn’t really be an issue unless the reputable source is compromised.” - https://medium.com/better-programming/the-problems-that-ethe...
In distributed networks, a transaction has "finality" when it's part of a block that can't change.
"To do this in proof-of-stake, Casper, a finality protocol, gets validators to agree on the state of a block at certain checkpoints. So long as 2/3 of the validators agree, the block is finalised. Validators will lose their entire stake if they try and revert this later on via a 51% attack."
In ETH2 2/3 of 128 randomly selected validators have to agree. You also get slashed if your validator goes offline, so they factored for that case:
Determining a valid block isn’t the same thing as determining the correct chain. A node validates blocks by staking, but how does the node know it’s validating a block on the correct chain? As far as I can tell, PoS projects don’t have a trustless solution to this problem.
Imagine a net split, where the network becomes briefly partitioned. Nodes in each partition would keep adding blocks. When the network converges, there would be two conflicting chains. Using proof-of-work the chain with the most work (longest chain) is the valid chain.
Another scenario: Using proof-of-stake I can create my own alternative chain easily (if I don’t want stake money I could create new genesis block), and broadcast blocks to nodes that join the network. When those new nodes receive blocks from conflicting chains, which one is correct? From what I understand of Ethereum, new nodes have to choose trusted nodes when they join the network.
I wonder, if one is going to consider trust a non-problem, then why stake at all? A network like Nano works the same way, by trusting a quorum of voting nodes, but there’s no staking or inflation, which has the benefit of allowing anyone to participate without the rich getting richer.
>no single holder owns more than 1% of ETH, for example
Curious about this statement. Is this something that can be looked up online? I know wallets/transactions are entirely public so I guess its just a question of whether someone has made a tool to do this with ETH or other cryptos. How do other coins fair in the same regard? What's BTC distribution? LTC? Or any of their forks?
#1 has 5%, but it's the wETH ("wrapped ETH") smart contract, that allows people to deposit ETH as the native token and receive wETH in return. wETH is more easily used for things like decentralized exchanges (https://weth.io/). So that's really a utility contract used by many applications and users.
#2 is the ETH2 Deposit contract, with 2.6% of supply. These are stakers receiving mining rewards for participating in ETH2 beacon chain validation.
#3 is Binance, with 2.5% of supply. They are the largest centralized exchange, so that 2.5% represents Binance's customer accounts.
#4, #5, #6, are also exchanges.
#7 is Compound Ether (@1.08% of supply). Compound is a decentralized finance savings & loan protocol, so again, that 1.08% represents tens of thousands of Compound users.
I believe it's fairly well established that Joe Lubin holds somewhere around 10% of the Eth supply. Anyone with large holdings is incentivized to spread those holdings across many accounts to avoid scrutiny.
Pretty much every coin has substantial gini coefficient issues.
No, I mean people. Unless you count centralized exchanges that represent thousands to millions of users' pooled ETH, as people. Even then, the largest of these has about 2.5% of ETH supply.
For one, there's some risk in spreading your tokens across many wallets as an individual. That's more keys to keep up with that could be lost. Is it theoretically possible someone out there has spread their ETH holdings across 100 wallets and secretly hold 4% of the ETH supply? Sure, but it's unlikely given the distribution of exchange and smart contract wallet balances. If Binance, the world's largest centralized exchange for crypto has only 2.5% of supply, what are the odds there's an individual out there with more than that? They'd have had to be one of the earliest participants in ETH, but even Vitalik, the main founder only ever held about 1% at most (and from what I understand, currently holds less than 0.5%). Even the big ICO contracts that raised hundreds of millions in 2017 before the price really took off, never held that big of a supply. So either someone secretly mined 4% of ETH all these years while strategically accruing them in multiple wallets and never sold (so how did they fund their mining operations?)...or there's just not a whale out there like that.
Nothing about Proof of Stake is relatively simple lol. Not the incentives, not the threat model, not the trust model, not the impact on the economics, not the implementation, not the scalable byzantine fault tolerate research.
There are plenty of people who understand it well, I'm not saying it's outside of reach of a normal human being. But understanding proof of stake is not a 30 minute journey. (nor is understanding proof of work for that matter)
I think it is relatively simple compared to proof-of-work don't you? And it's not really hard to get at a conceptual level even if the implementation level is far more complex.
I post a deposit that says I'll be honest. If I'm caught being dishonest, I risk losing my whole stake.
You've left out a whole bunch of key ideas in proof of stake, for example the idea that the amount of voting power you have is proportional to the percentage of the money supply that you own. Which in turn means that your consensus system is ultimately controlled by the wealthy.
How do you know that someone has been dishonest? A consensus system can only enforce rules within that consensus system, if the consensus system has been compromised the dictator can censor any evidence of dishonesty, even if most people are aware that dishonesty has occurred.
You can draw the line anywhere you want for "conceptually simple". We could easily say that proof of work is equivalent to building a tower, and that the tallest tower is used to determine what consensus is. That's also very simple, but also leaves out a bunch of ideas.
> Which in turn means that your consensus system is ultimately controlled by the wealthy.
Yes, well how is this different than Bitcoin's massive multibillion dollar mining farm operations? Hard to avoid the rich getting richer. At least with Ethereum, it has launched hundreds of derivative tokens that have been able to experience exponential growth and have made a lot of retail investors very wealthy.
> How do you know that someone has been dishonest? A consensus system can only enforce rules within that consensus system, if the consensus system has been compromised the dictator
You're getting into implementation details. Almost nothing is ever easy to implement even if it is easy to conceive. Ok, a dam or a bridge is easy to understand, but building one is a highly technical challenge that involves a myriad of engineering tradeoffs, so if you want to read more into the particular tradeoffs the Ethereum Developers have settled on, go read the documentation. Everything is a rabbit hole, go as deep as you want.
Yet the amount of environmental destruction and pollution done by Argentina to support their massive livestock industry is something Bitcoin will never achieve.
It's a bit hard to begin arguing against someone who thinks that a country of people is less deserving of using energy than a massive online gambling scheme riddled with scams, that happens to consume as much energy as 45 million people.
I'm not sure where I said what you believe I think.
My opinion is that using more electricity than Argentina is not as dramatic as the comments make it out.
Bitcoin is never going to be as destructive to the environment as these countries.
Saying that PoW is immoral or that Bitcoin is horrible because of electricity use is fine. But the immorality or horribleness is magnitudes away from what the rest of the stuff using electricity does to the world.
If we want to optimize something, make reductions, Bitcoin is at the bottom of the list, rationally.
Does anyone have any figures on what regular banking systems use for accepted/official currencies? I feel like this has blown up so much that it makes sense to compare and contrast.
Bitcoin provides very few of the services that regular banking systems do, and to a far, far smaller audience. Unless that's taken into account, such a comparison is meaningless.
I doubt counting this per transaction volume will yield close results, mining is computation intensive by design.
Absolutes are a curiosity, but comparing those is not constructive imho
Argentina has 45 million inhabitants. Bitcoin has like 300k transactions per day. Every person in Argentina could do three transactions per year (300e3/45e6×365) and it would already exceed the transaction count of Bitcoin. Yet Argentina's banking system uses less energy than Argentina, and so their banking system must be more efficient than Bitcoin.
That's assuming that a transaction comparison even makes sense, which it doesn't really because:
Bitcoin is not a currency. People use it as a way of getting rich, which they could also do with any other currency by just having a limited number of numbered paper bills, some guarantee that no more will ever be printed (e.g. agree that nobody will use a bill number higher than 10 million), and publishing on a forum who owns a specific bill number. It doesn't need proof-of-work to function as an investment scheme.
Damn, I knew the governments hated cryptocurrencies and will try to shut it down at some point, but I haven't realized there was such hostility towards it.
Consider the position of someone who believes bitcoin adds zero(or even negative) value, but consumes astronomical amounts of, often dirty, electricity while the world faces a climate emergency. Further, since this is a technical forum, all of this work to compute trillions of SHA hashes. On the flip side you have a bunch of peopple who rely on bitcoin as an investment vehicle and are therefore very invested in its continued growth.
It's understandable that emotions run high about this topic imo
It has attention, so it's a sexy thing to snark at.
When the Elon boom bursts, folks will be back to complaining about cow flatuence, birds getting killed by solar panels, or whatever the shiny environmental crisis of the day is.
I still don't see how. When we bought our house in the UK I sent the entire transfer from my phone, paid 0 fee, and it arrived 30 seconds later. Why would I use bitcoin for it?
I’m currently buying a house internationally. International wire transfers take multiple days and I have to produce all sorts of documents for the receiving country’s government showing the source of the money. It’s an annoying and lengthy process. I’d much rather send BTC to a wallet than this.
It would be easier, this TX came from my work's hotwallet & this one was part of my inheritance, you can see these TXs where that address sent to the tax authority assuring all tax has been paid as opposed to being passed around a call centre to talk to "Bob" so the bank can provide those details.
So......exactly the same way it works with a bank nowadays? When I did it it was just a printed statement from my bank(that I printed myself), showing money arriving from X account, Y amount paid for tax, document from solicitor confirming inheritence, 3 copies of my payslip, done. How exactly is that easier with bitcoin?
The main reason for a lot of that documentation is know your customer/anti-money-laundering laws. Even if you were sending BTC, you would still have to provide that documentation to not break the law.
No they don't? I frequently send large(about £50k/month) amounts of money between one EU country and UK, we always pay extra(50 euro) to have the transfer done as an express transfer and the money arrives within 60 minutes in the UK bank. Or if you don't mind doing a SEPA transfer then it's 15 minutes. And no, I was never asked to prove any source of anything, it's an invoice payment, it goes straight through.
Maybe by "international" you mean something else, but at least in the EU(and EEA and UK) transfers can be incredibly quick.
Apologies, I thought I was being clear. A payment system that lets people transfer unlimited amounts of value to 14x more people than SEPA (presuming internet access), without censorship, irreversibly, and effectively for free, has, it seems to me, substantial value.
Even if it's less useful than, say, access to SEPA, it'd have to be 14x less valuable to break even (again, presuming internet access available to everyone, which isn't a thing yet).
If you are buying and selling real estate in a functioning jurisdiction, hiding your identity by making the payment opaque is not going to do much for you.
There are title deeds and tax rolls. In many jurisdictions you have obligations like building codes that need to be inspected and an owner needs to be held to account. If you need privacy, you have to set up shell companies to act as the legal owner, not hide the payment from your bank or government.
Speaking of showing the source of the money, if you bought my house from me with bitcoin, I would have to speak to a lawyer about not running afoul of money-laundering regulations. And no, I won’t take the internet’s word for it that somehow, those laws only pertain to fiat currency.
Something tells me that the cost of fighting my government in court would far exceed the value of my home regardless of whether I was technically in the right not to fill out all those same forms.
You can't just buy a house with a suitcase full of cash these days, it's not possible. The gov will be asking where that money came from, to prevent money laundering and to ensure it's not proceeds of crime. Whether not you agree with that, this is the situation.
The idea that somehow they'll let you buy something with Bitcoin without requiring the same level of disclosure is a complete fantasy.
While I think technically there isn't anything stopping you from buying a house with hard cash in the UK, I very much doubt that either side's solicitor would agree to it without extensive documentation as to where how and when you got that cash.
> You can't just buy a house with a suitcase full of cash these days, it's not possible
I must point out I know a couple people who did that in Hungary in the last ten years, just because it seemed absolutely insane to me (cheques don't exist here, either..).
I am reasonably sure this isn't that common though, and the government still tracks the transaction :)
Meanwhile, if I want to donate over $25,000 to charity in the US, I have to go into the bank (in person even during the pandemic) spend half an hour while they fill out forms, pay a $12 fee (still negligible, granted), and they'll process it within 12 hours.
Bitcoin might not be as good as the UK, but you have to understand that the consumer US financial system remains stuck in the 1980s.
> if I want to donate over $25,000 to charity in the US, I have to go into the bank (in person even during the pandemic) spend half an hour while they fill out forms, pay a $12 fee (still negligible, granted), and they'll process it within 12 hours.
You can do it from home for a negligible fee ($0-$3) if you're ok with ACH instead.
(Same-day ACH has a max of $100k, though it used to be $25k. Next-day ACH is something like $100M, though your bank likely has a lower limit.)
Well I mean, clearly they make their money elsewhere. I don't pay anything for having an account, debit card for it, or for making any transfers - that's with barclays. So their entire money making process is elsewhere.
In what way? As in financiers will pay with BTC? I don't know many people who pay for their cars or houses in one payment. Or is the suggestion that scheduled recurring monthly payments are viable?
I want Banks and Regulators involved when I buy a house. I understand that these 3rd parties can make things take longer or add extra fees, but that gives me legal protections I don't get with bitcoin.
It will. Via second and third layers. It'll scale just fine. An example second layer that you can use right now is the lightning network https://lightning.network/
Lightning is a joke, with insoluble routing problems, a need for always-on nodes, the requirement to lock funds in channels, and the requirement for on-chain transactions to start and close channels. The BTC network can't process enough transactions to make even that viable.
Haviong trouble finding it now, but google "lightning network routing problems" and you'll get a lot of results. IIRC the fundamental issue boils down to a hard mathematical problem about node traversal that is not yet solved. I am having trouble recalling the name right now, apologies.
> AFAIK if you're not a payment hub (ie. you want to route other people's payments) you don't need to be always online.
There have been ways that a counterparty can close a channel in their favour if you aren't online. Perhaps this has been fixed by now.
>There have been ways that a counterparty can close a channel in their favour if you aren't online. Perhaps this has been fixed by now.
AFAIK the fix is to have a service (or multiple) stay online for you, and I believe it could be done without requiring access to your private keys. If your counterparty broadcasts a stale transaction that's in their favor, your service will broadcast a newer transaction that reverts it.
While I agree with him that Bitcoin is a terrible currency, I think the "store of value" thing is nonsense as well. Stores of value need to have relatively stable value. Bitcoin is hugely volatile. That's great for speculation, but nobody with any sense would use it as the equivalent of a savings account.
You're appealing to future data that are not available yet. Bitcoin has never been stable in its existence. You are positing without evidence that it will become stable in the future.
Many assets start volatile and become more stable over time. As more money comes into bitcoin and the market cap goes up, it's reasonable to assume that volatility will go down.
To be clear, there is no mechanism, logic or reason (at least revealed to me) why this would be true. Vice versa, increased amount of trading typically increases volatility.
I am not sure I follow the logic. Bitcoin becomes "bigger" when there are more big actors not using it but just hoarding it? And thus less volatile - until one of these big actors decide to dump their holdings to the thin market used to trade only scraps left from these big actors... Sorry, not convincing.
The idea is that bitcoin is something you prefer over fiat currency in your bank account. The same idea that gold bugs have.
If that's the case, then bitcoin owners will only dump their holdings if a) they fear that the bitcoin network is about to collapse for some reason or b) they need to put the value stored in those bitcoins to use.
increased amount of trading typically increases volatility.
Define amount. If you mean number of trades, then the effect is decreased standard deviation if the average trade is smaller as a percentage of total market capitalisation. That seems completely logical.
Trading volume. It was taught to me so long time ago and I have thought it so obviously true that I haven't questioned it ever. If you want sources, here is one example (TBH, I only read abstract) I quickly googled. To me, number of trades does not sound a reasonable measure for analyzing markets in macro level, even if for HFT it may be interesting, I know nothing about that.
It's true everywhere already. Compare the SPY to a large cap stock to a small cap stock, and you'll see tail events decrease monotonically along market cap. Compare BTC to a shitcoin. Compare the USD to a smaller currency. It's known to be a true thing and rather universal. Compare BTC now to many years ago.
The mechanism is that you get flows hitting both sides simultaneously (56 buyers vs 44 sellers) that tend to cancel out, instead of a single player (3 buyers vs 1 seller or vice versa) dominating the flow.
I think you're confusing cause and effect. People value stability, so more money goes into those things. E.g., SPY is an synthetic asset engineered to be lower vol.
I don't think it's at all clear that Bitcoin adoption will go up. It's never been useful as a currency for most people, and Tesla aside, merchant adoption has been in retreat for years. KYC/AML laws are reducing its utility for financial crime. Its only real advantage is in speculation and market manipulation. But both of those depend on volatility.
Large cap stocks weren't engineered for stability, but they're lower tail-risk than mid cap stocks, which are lower tail-risk than small cap stocks, and so on.
The same phenomenon has been broadly true across all markets over all of human history, and the underlying mechanism (heterogeneous flows) is well understood and rather intuitive.
Whether or not BTC adoption increases is not relevant to what I was saying. My only claim is that volatility will decrease if adoption increases, counter to the misplaced scepticism of the post I was replying to
If BTC adoption decreases instead, then volatility should increase, ceteris paribus.
"1 Tulip bulb will always be 1 tulip bulb. It's just that people but them with a bunch of different currencies and all the other currencies have been really volatile relative to tulips (though not relative to one another)."
>Bitcoin is hugely volatile. That's great for speculation, but nobody with any sense would use it as the equivalent of a savings account.
Consider the classic store of value asset: gold. It's up 17% compared to a year ago, and down 11% compared to its peak last august. Sure, it's less volatile as bitcoin, but it's hugely more volatile compared to t-bills or a FDIC insured bank account. Does that mean gold also isn't a good store of value?
Yes, that's exactly what it means. Very few people actually use gold as a value store - they put their savings in various USD-based (or Euro, etc) savings vessels - money market, CDs, etc.
Gold is generally considered a last resort for the case where the US completely falls apart. But if that happens, I'm not sure gold is going to be much use - the global economy will be screwed enough that everybody suffers, gold or no gold.
If civilization collapses then I'm pretty sure bitcoins would be worthless as the whole mining chain collapses. I guess it is a good store of value in the more cyberpunk dystopia where large corporations continue to grow in influence and power and it is used to funnel funds for the shadow economy. I mean it is valuable because people with money are convinced it is valuable and that whole feedback loop.
> If civilization collapses then I'm pretty sure bitcoins would be worthless
If all civilisations collapse, yes. But if your civilisation collapses, a neutral store of value is easier to own than e.g. a portfolio of foreign bonds in a handful of offshore accounts.
Sure, but any crypto coin could do that, and I doubt we would be using a currency as "mainstream" as bitcoin at this point to do it at that point because we could not afford the transaction costs. Probably be some privately issued Zaibatsu coin or something, with bitcoin use being reserved for the upper classes that had made it out. (OK I guess I've been reading too much Gibson lately)
There is $8 trillion held in gold. Whether you believe that qualifies as a store of value or not, if Bitcoin reaches the same level, each Bitcoin will be valued at $500,000
One thing I don’t understand is how will gold retain its value during a societal collapse when most of the industrial demand - and the trading/insuring/transporting infrastructure around it - disappears? It doesn’t really make sense as a post-apocalyptic currency since most people won’t have any and it’s utility to help you survive is limited.
It is pretty, and easy to form in stone age processes. Thus it is actual useful unlike dollars.
Even if gold isn't a means of currency, you can still trade for it because someone will be interested in buying it. After the collapse bonds and paper money will be worthless, but you can still trade gold for things.
Currency is whatever we use to avoid having to create 10-way exchanges. (Baker offers the cobbler 600 loafs off bread for a pair of shoes, but cobbler doesn't want that many because they will obviously go stale, so we need to bring in dozens of other people who need bread and can trade something else to the cobbler). Gold is a good choice for this, but is isn't the only possible choice.
I’m still trying to understand why someone in the aftermath societal collapse would be interested in gold. It’s something that would be useful after society rebuilds. If I am trading it why am I trading it? What are people doing with it? If it’s just a currency, why assume it would be adopted when it would be a relatively scarce resource.
why did society collapse? It is hard to come up with something realistic. There are a lot of shocks that will make things bad for a few weeks, but society will recover - or at least the survivors will.
I can think of two, but perhaps you can think of more.
First is the local society collapse because of war. Could happen to everyone, and while your armies might win in the long run, you might be forced to flee. At that point gold is useful because it is small enough to hide on your person, thus meaning you have a chance to get it out to a safer area. You might not be able to prove you own foreign bonds (or maybe you can, but it takes years of paperwork). Gold still has value to the rest of the world in this, so if you can get out with it that is a good thing.
A nuclear nation decides to end it all and shoot randomly targeted ICBMs everywhere. In this case the few percent of the world that survives by luck will need to start over. It is just your village, you can't travel far because of the wastelands surrounding you. Gold is useful because it can be formed into tools. Iron is better, but harder to form, and you may not have fuel to spare to heat it (proper heat treatment of steel is one of the things that makes iron useful). Gold also is pretty and so there will still be the jewelry aspects.
Neither of the above require the gold be currency, though it is a good choice for currency in general in the latter case when starting over. (not the only good choice) Scarcity is part of what has always made gold useful. You could get it in enough quantities that most travelers could carry their wealth around in that form (when not in the form of trade goods - traveler implies trader in those historical days)
Both of the above are long shots. I don't personally invest in gold because I find the risks of the above low enough that I don't bother to insurance against them.
One great thing you can do with gold without the rest of society is paint. A little gold leaf goes a long way. I think religious icons will be very popular in event of societal collapse. Or you can add a little gold leaf to the pages of your books to add some holiness to the message.
Of course, signalling your importance and status is also necessary in primitive society, and wearing a little gold does the trick.
EDIT oh found another cool one,
"Gold, with its malleability and incorruptibility, has also been used in dental work for over 3000 years. The Etruscans in the 7th century BCE used gold wire to fix in place substitute animal teeth."
You have to take into account that we are at the birth of a new asset class which means volatility is part of it. Look at the birth of the stock market, for example, the birth of industry or real estate, the list goes on.
Gold has been used as a store of wealth since at least ancient times. So it’s not quite a fair comparison.
And the whole economy doesn’t need to collapse for an asset to be valuable. The reason Bitcoin is up is because people looking to maintain wealth are looking to broaden portfolios. S&P is overvalued for some, the US dollar is weak for some. Fed rates are still low, bond yields are low. If you take into account inflation those CDs and Money Markets you mention lose money. An extremely good CD will currently earn you 1% interest, meanwhile inflation will remove 2%.
So it doesn’t need to be nonvolatile for it to be seen as part of a portfolio of wealth management, and it definitely doesn’t need to only be a last resort against complete economic failure since almost nothing qualifies.
If you don’t already have a fully balanced and diversified portfolio, you may not need or be ready for Bitcoin yet... but that doesn’t mean there’s not trillions of dollars that are ready for it.
Again, valid useful discourse just gets downvoted nowadays. Not HN of past.
Usually constructive comments would get some actual criticism or disagreement rather than just downvotes.
I get it... BTC sour grapes just downvote. Same thing happened when I called out the GME fiasco when that was $300 a share.
But pro tip so you’re not sour grapes in the future. Put aside you’re egos, and instead of downvoting things here that scare you or you simply disagree with. Try using HN as a learning tool.
If you disagree with something.. comment first... then downvote. Discourse, discussion, debate. Those are the paths to learning and understanding.
Unfortunately, your replies suggest replying is not worth the effort, because you have a fixed set of beliefs and are here to argue them. Downvoting and moving on is the better approach.
Believing that you don't have beliefs, just a direct line to the mind of God, is a great reason to downvote and move on. It's much more time-efficient.
It is a fact that the sky is blue due to Rayleigh scattering of light.
That is a fact. I don’t “believe” the sky is blue due to light scattering ... I know it. And it doesn’t require “a line to the mind of God”. It’s called science, knowledge... education.
It is a fact that cryptocurrencies have value as a store of wealth and are not ponzi schemes.
Just because you don’t understand it doesn’t make it a belief on my end. Just like if you don’t understand why the sky is blue from how light interacts with nitrogen molecules, doesn’t make it a belief on my end.
We could debate the current price of Bitcoin. We could debate whether it’s in a bubble (which happens all the time in legitimate asset classes like real estate or the stock market). We could debate if the fact that only certain sectors of the population have access is detrimental. We could even discuss if Tether is pumping up Bitcoin through manipulation. (My opinion, since I and everyone currently have very limited data on it, is that it is, but ultimately to a very small degree). And tether in the way you brought it up, is a red herring here because one lone bad player doesn’t negate everything.
But dismissing cryptocurrencies as Ponzi schemes, tulips or beanie babies is simply ignorant and without fact. If there were facts that could support that conclusion, that would be worthy to discuss, but “extraordinary claims require extraordinary evidence”
Here are facts:
COVID is a pandemic.
Bitcoin is a store of value.
Here are opinions based on fact:
The COVID pandemic has caused enormous suffering.
Bitcoin is a good store of value.
Here are beliefs:
COVID is humanity’s punishment.
Bitcoin is going to ruin the world.
Here are prejudices:
COVID is a caused by 5G or Chinese conspiracy.
Bitcoin is a Ponzi scheme.
> You have to take into account that we are at the birth of a new asset class [like] the stock market
Or it could be like tulip bulbs, beanie babies, or International Postal Reply Coupons (what Charles Ponzi sold everybody on investing in). Or it might not be a new asset class at all. It's not like there's a finite supply of integers.
The are fundamental differences to all of those things versus Bitcoin, and lots of really good sources of information about why they are different.
It doesn’t matter if there are a finite supply of integers. I’m guessing you are alluding to being able to “print more Bitcoin” by moving decimal places or changing code or some such. That’s probably not going to happen, since you’d have to convince 51% of Bitcoin holders to dilute their own stake, since that’s how the consensus algorithm works. And if you don’t, we’ll then you have a fork, and as we’ve seen with Bitcoin cash etc, those typically don’t hold value, because fundamentally the value of a store of wealth is that everyone agrees that it’s a store of wealth.
No one ever agreed or assumed beanie babies or tulips were stores of wealth. Those were speculative bubbles based on the assumption that tomorrow you could sell it for more.
Bitcoin doesn’t need to be worth more tomorrow to make it valuable. It simply needs to hold wealth in a convenient, transferable, counterfeit proof manner that’s also not easily manipulated. And it does all of those things very very well. Ethereum likewise stores value, and also permits useful decentralized finance systems that also provide for storage and transfer of wealth.
If you told dollar holders 100 years ago, that the money in their pocket would only be good based on the good faith of the US Federal Reserve they’d look at you cock eyed, because back then the dollar was gold backed. To the average joe, that gave them confidence in its value.
And don’t get me wrong I’m not a gold bug that thinks we should go back to the gold standard. Just the opposite. Instead what the US did was brilliant. They simply said “trust” “believe” that the dollar is valuable and will remain valuable.
And it’s been incredibly successful, again because it comes down to faith in the ability to hold wealth and have others respond in kind when transferring that asset.
So do you believe the US dollar will hold value over the next 20 years? If you base it on the word of the government then that’s not as different as the the word of millions of Bitcoin miners. (Democratic consensus) If you base it instead on the value of the underlying economy using the dollar as a wealth exchange medium, well then again, Bitcoin currently does 87 billion USD worth of transactions per day.
So it should be pretty clear that it’s incredibly different than tulips or beanie babies. If it’s not clear, I’d research a little more about the concepts of wealth historically, along with macro economics and monetary policies the world over.
Your notion that people who disagree with you are just ignorant is tedious as well as wrong.
Bitcoin is also a speculative bubble. It has no use value. It is not in any way living up to its original goal as electronic cash. (Contrast transaction volume and adoption with MPesa, for example.) Its main practical uses are speculation and some financial crime.
I have no notion that people who disagree with me are ignorant.
I only have a notion that ignorance is ignorant.
I can back up all my arguments with facts, information, research study and understanding.
Your articles on Tether is just red herring fallacy since your original argument has no merit.
As for Bitcoins uses, there are many. For instance I recently acquired large amounts of bullion at a steep discount via bitcoin. Why? Because it’s cheaper and less trouble transaction wise for the bullion seller. All above board. All taxes reported. Nothing criminal.
Defi loans allow collateralization of crypto assets. People in business are currently using them to secure extremely large multimillion dollar notes in minutes to do business transactions. I’ve been in the rooms when these occurred. Again all above board, all tax legal.
Simply using banks for certain situations are a pain.
Clearly you’ve never experienced such situations, hence why it seems a scam to you.
I guess you’re smarter than me and Elon Musk. I would absolutely believe it if you had facts and arguments that didn’t have logical fallacies.
There’s political arguments on both sides of the crypto currency debate. Your arguments seem politically motivated. I have no political agenda.
The discovery of fission changed the world. There was no keeping it under wraps or going backwards after the physics were discovered.
The ability to transfer and store wealth online via blockchain and consensus algorithms will exists from now on. There’s no going back. It’s simply a fact of information science and physics.
Remember this discussion. Think on it when in 30 year’s cryptocurrency is considered a norm, and when multiple governments finally transition to digital currencies.
Or you know... you can quote more non relevant, poorly educated sources to support a point you wish for. It’s like the old timers laughing that the internet was just a play thing in the 90s... Now if the internet went down it would be a national emergency.
Oh... and here’s an actual intelligent article from a fairly respected source rather than some random blogger. Here’s the important point
“Many people think that bitcoin is a bubble, and that's predicted on the concept that bitcoin has no value. But there's reason to believe that that just isn't true. By definition, bitcoin is scarce. And the cryptocurrency may have utility as a superior way to store and exchange wealth.”
Edit: I also hope you understand that this debate is an intellectual exercise, not a personal issue. So I am somewhat annoyed that you would call my comments tedious :). No one should accept ignorance. And disagreement is wonderful, but it should be an educated discourse. Silent downvoting or flagging of things that are unpleasant isn’t the way forward. I tend to only downvote comments that are provably factually incorrect, make comments that are based on ignorance or misunderstanding, non constructive, or outright hostile.
If you truly are interested in open understanding, it’s not a bad thing to say “I am ignorant on this subject.” In the past when I have said that, I have learned a lot.
Cryptocurrency and Bitcoin causes emotions or brings up political divides for a lot of people... I can only begin to guess at the reasons why. But burying your head in the sand or listening to the “bubble” crowd chorus is doing yourself a disservice.
Buddy, I'm not here for "debate". Debate is a construct where people stake out arbitrary positions and defend them in hopes of "winning". It's a zero-sum, dominance-driven approach to discussion, and is poisonous to actual understanding.
That you think a pseudo-debate is a good idea explains why you're flooding the zone with nonsense, condescension, and a refusal to even look at what you're saying and how you're saying it. Which is indeed tedious. Maybe you don't have any better ways to spend your time, but I sure do.
Damn... guess that Socrates was a dominance driven asshole then huh?
It’s only “dominance driven” if you take it personally. If instead you realize that strong conversations are a way to elucidate clear logical thought and arguments on both sides, then you see it as a tool for understanding.
> condescension, and a refusal to even look at what you're saying and how you're saying it
That’s not me. I’ve been adding to the discussion with fact, and discourse. You’re the one who has quickly taken to dismissive ad hominem attacks.
> Maybe you don't have any better ways to spend your time, but I sure do
Says the man who’s cultivated a karma of 38876. You clearly spend wayyyyyyy more time on here than I do. Again, you turned this personal quickly... why?
Look if your so badly triggered by a discussion on HN about bitcoins, to the point where your thinking this is condescending and dominance driven on my half then do yourself a favor and read this book or at least the article.
And maybe that’s condescending? Or maybe I’m trying to actually help (which I am).
You don’t know me... I don’t know you. But I recognize areas when I know less than someone else and I open myself up to it. Did your teachers in school “condescend to you”?
Reread all the discussions and you’ll simply see that I attempted to shine information and fact where there was ignorance.
Not every human being has equal knowledge and understanding of all fact. I know for a fact I have a greater understanding of this than you do.
And when you post ignorant things, or post conspiracy theories then I respond in kind. And yes, I do have better things to do. But honestly it pains me there is so much ignorance, and conspiracy stuff online rather, retweeted and reposted without thought, than actual facts.
If enough people sat down with those Trump supporters who marched on the capital and actually condescended to them for a bit to get them to face reality and fact, you could get through to some of them. Not all. But some. And that’s the start of change.
So which kind of person are you. Do you take criticism and seek more knowledge, or will you come away from this never questioning yourself and only seeing condescension in differing opinions?
Good luck, and if you believe it or not, I do wish you the best.
> Very few people actually use gold as a value store - they put their savings in various USD-based (or Euro, etc) savings vessels - money market, CDs, etc.
Do you mean that very few people use gold as their only/primary store of value? I am sure many people have small amounts of their net worth in gold. Similarly I think Bitcoin is a promising technology but that doesn't mean I think users should allocate a significant percentage of their portfolio to it.
Gold is potentially useful AFTER things get back together again. If there is a major disaster - US falls apart, as does the rest off the world. 95% of the world population dies, but by luck you are one of the survivors (this luck seems to be a factor most survivalists don't think about). For a few years there is chaos as people try to figure out how to get food without the supply chains in place. (worse in the cities, but even rural areas are dependent on the supply chain for fuel, fertilizer, seed, repair parts, and lots of other things)
After a few years things start to settle down. Trade with your neighbors becomes possible for some division of labor. However trade works better if there is a currency. Paper money is either degraded (the most common bills last a couple years), and the replacements are all obviously bad copies. What is needed is something that is easy to verify, that is hard to copy, has some intrinsic value, isn't so common that you need vast quantities, and something you are willing to trade. There are many choices for this, but gold is one of the better ones. Even if something other than gold is chosen, it is rare enough, and valuable enough (for good looks, and it is somewhat easy to for into useful shapes) so you can expect to find a market for your gold. Many of the things you can choose instead are either useless (computers without the entire power grid can't do anything), or so common that nobody will care (why would I want your iron when there are junk cars everywhere with plenty)
Note that in order for this to work you need to actually have the gold in hand. If you invest in gold without a safe to store it in, then it does you no good. Even if you can get to Fort Knox, whoever is there first won't recognize your claim to the gold inside.
You also need to consider inflation, thousands is a nest egg. millions is more than the local economy needs. People don't need to accept your gold, unless you are the local warlord, and then you don't need gold.
Not really, no? When the monetary system itself is as unstable as it is, I struggle to think of what could be a good store of value.
Maybe we should all just acknowledge that money is made up and any security it provides depends on tons of interconnected systems made up of people largely unaccountable to the layman.
Edit: I think the mistake people make is trying to create stability on unstable ground.
In other words if you're a goldbug, you now have an even worse option.
> Does that mean gold also isn't a good store of value?
You answered your own question. There's a good reason to prefer FDIC insurance. If your fashion choices require you to avoid fiat currency, that's on you.
If you consider the amount of investment dollars parked in gold and metals relative to the amount of total investment dollars/flows in other financialized assets, isn't the answer kind of self evident? Sure, there are worse stores of value but there are better, more stable (and modern) ones that are more prevalent in actual practice. Much of the total interest in gold is emotional or speculative too.
But the point is, it's not an exclusive choice. BTC will coexist with other commodities. It won't be the be-all-end-all of financial transactions, but it will probably endure.
Gold isn't the best store of value if stability of value is the only concern.
In places like India, gold jewelry has a prominent cultural value (a part of most wedding rituals, for example). So its desired and even required no matter its price - though demand is, I imagine, pretty elastic. The volatility of gold prices competes with 8% inflation,
Even if gold is volatile, it competes favorably in an investment environment where
1) cash inflates at 8% a year
2) private banks can often be risky, with many going bankrupt over the years
3) the average person has no access to US T-bills
4) gold can be melted any time to make jewelry anew, so one can always be fashionable (keeping the use-value of the material fresh)
5) gold can be pawned in emergencies, in practically every town
6) where access to digital banking may be spotty, transporting jewelry is an easy way to transport wealth
A store of value has many attributes that make it a good store of value - ubiquity, tradability, use-value, transportability, its value relative to the other options in the investment environment.
Gold has a reputation for being a 'safe haven' asset, which is not quite the same as a 'store of value'. Gold returns are supposedly negatively correlated with those of stocks and other financial assets and so holding gold provides a sort of protection against market downturns.
Y is like X to a lesser degree, and no it's not as good as Z, but does that mean Y is bad? We're only talking about X and no it's not a good store of value given the other options.
Currently, miners get the block reward plus transaction fees. Miners get to pick which transactions to include in the blocks they are processing, so of course they only include the ones with highest fees. Once there is no more block rewards, they would would have to survive off transaction fees alone.
If the economics of verifying transactions is no longer sustainable, the code will be updated to allow more mining. That's something no one wants to admit, but the SegWit soft fork confirmed the influence concentrated miners have on development. The idea that somehow Bitcoin just works outside of any social influence is a complete fallacy.
Exactly. Miners will decide to continue mining. Probably in just the right amount such that inflation/deflation is controlled enough to create sustained profits for them. Thus basically acting like a central bank.
> What incentive will there be for the community to continue verifying transactions after all the bitcoins are mined?
How are these questions still being asked, and more amazingly, still being upvoted? First off, there will not be a time when "all the bitcoins are mined". Mining rewards are on a geometric curve that approaches 21 million but never touches it. Second, transaction fees also go to miners, so even when mining emissions are negligible, transaction fees will keep the miners incentivized to keep mining.
This is all pretty much in the intro of the whitepaper, and the first thing you should learn if you spend 5 minutes looking into this technology.
Honest question: if there is little transactions because it's a "store of value", and if the mining reward continuously go down, why would anyone be incenticized to be a miner?
> How are these questions still being asked, and more amazingly, still being upvoted? First off, there will not be a time when "all the bitcoins are mined". Mining rewards are on a geometric curve that approaches 21 million but never touches it.
These questions are still being asked because people like you still spout the wrong answers. There will be a time when "all the bitcoins are mined" - its in the source[0].
What competes with these stores of value? As a high-risk-high-return investment, it makes a lot of sense. I'd count it in the same category as artwork as an investment.
The counter-counter-argument is that it's volatile because it's still in its infancy. Gold used to be that volatile too, when wars were commonplace and new sources were found quite often. It can still swing significantly.
I've come around to the idea. I don't hold any bitcoin anymore, and the best chance to get rich is gone, but I can see a future where something digital (hence fundamentally ethereal) acts as dense and largely unregulated store of value, for the people who need it. In the same way the drug trade currently uses artworks and commodities when it needs to move value across national boundaries, they can use hashes or something like that. Transaction costs to convert those from/to cash are actually higher and slower than bitcoin will likely ever be (i.e. a week or two, and several hundrend USDs, will still be acceptable).
We'll never pay taxes or coffees with bitcoin, or hold savings accounts, but it will still act as a commodity.
Such a strategy is dangerous when you're looking at a Ponzi scheme, or a pump and dump, or anything else that is designed to leave the late entrants as the bag holders.
I'm not saying that's what Bitcoin is, just that it's dangerous to be a late entrant to an investment and you should be more wary
Afaik no developed-country government “backs” gold in any meaningful way. There are some reserves here and there, some historical, but they are not directly linked to liquidity. It’s just a market for a commodity that happens to be fairly practical to store value in. Whether governments will start using digital commodities in the same way, is really a political question. I agree that it might be a cornered market, but the fact that forks do seem to happen might well turn out to be the way out of that problem.
That’s not “backing”: nobody buys specifically to keep gold prices up or to legitimise the trade, they just use it as a commodity to make their creditworthiness believable and storing their value in a practical way. They are leveraging a pre-existing market, not backing it.
(As a side note, this role for gold is clearly legacy: look at how little gold China stores, compared to their overall reserves.)
Bitcoin makes sense as a store of value because it is likely to survive dramatic global economic failure. The short term volatility is higher, but it's counter-correlated with almost everything else and is a great hedge against societal collapse.
Perhaps not the most fun thing to hedge against, but just like buying life insurance it's a good idea.
That's only because of fund degrossing. The idea that it's a safe haven for a near-world ending event (but not so disastrous as to wipe out all miners), is still valid
Your theory is that a digital currency relying on a delicate, sophisticated international network and an even more delicate technology supply chain, plus massive amounts of wasteful energy consumption will do well in "dramatic global economic failure"? I think "likely" is doing an awful lot of work there.
Bitcoin only produces about 100 kilobytes of new data every minute, and only the consensus builders (the miners) need to have any sort of real time access to that data stream. Participants can have latencies of days or even months and still be able to correctly build consensus.
In extreme meltdown scenarios, you can broadcast Bitcoin over FM radio, the data rates are literally low enough. Spending bitcoin requires sending _hundreds_ of bytes, which again is small enough that you can drop down to very robust and simple technologies if you need to.
Bitcoin has no "wasteful energy requirement". It adjusts the amount of hashing you need to do based on the amount of competition that's doing hashing. If 80% of the hashrate suddenly disappears, Bitcoin runs slowly for a couple of weeks and then significantly drops the hashrate requirements for the network to progress.
For efficiency, many Bitcoin mining farms are established within a couple hundred meters of the power plants producing the electricity, which means that Bitcoin also generally has minimal dependence on the global electricity grid, even though it consumes an enormous amount of electricity.
Bitcoin's robustness to societal meltdowns is one of the things that makes it really interesting.
The notion that people will wait days or months to settle survival transactions after a catastrophe is absurd. As is the notion that after major global collapse there will be a robust global network so that planetary consensus can be achieved. Ditto that enough people will care about global transactions when global trade falls apart.
Bitcoin can't even build a significant user base now. Approximately nobody buys anything with it. Compared with debit cards or cash or mobile money systems like MPesa, it's a rounding error. If it's not better than any of the existing payment systems, it's not going to get better in some sort of prepper-fantasy collapse.
It's going to take some pretty big balls to dump your money into bitcoin instead of gold or cash the next time the stock market crashes. Then we'll see how good a store of value it is.
Big balls, surely, but are we waiting to see that happen, or haven't we seen that happen? The stock market has settled around ATHs, not pushing too far down or up. Meanwhile, 40% of all US currency ever minted has been printed in the last 365 days [1], and Bitcoin is worth nearly $50k.
Maybe it's just me, but it's clear to me that markets crashed, the shockwave just hasn't been felt by everyone yet.
No, I mean a depression. What we've seen is investors scrambling to find returns in riskier assets due to low interest rates, but the bubble hasn't burst yet.
Once it does, we're likely to see a depression at some point [1].
Since Bitcoin is famously volatile I'd bet that once there's a scare, people who've pumped the price up to the current highs will abandon it in droves. After all, there's a huge difference in risk between buying in <$5k vs ~$30-50k
I'd rather invest into something that is highly volatile but almost certainly appreciates over time rather than something that depreciates at a predictable yet increasing rate.
We could discuss the fact that BTC might be overpriced or underpriced, nobody really knows. But that it's going to go up in value (in terms of purchasing power) in the long term is, black swan events aside, almost a certainty because of its engineered stock to flow.
Scarcity is real whether it's physical or digital (as we've seen with art, collectibles or more recently NFTs). Gold is a good store of value because of historically predictable scarcity but it's not predictable with certainty. Bitcoin is. We'll know exactly how many bitcoins are in circulation 10 minutes, 10 days, 10 or even 100 years from now. If anything many will be lost, which will contribute to its scarcity.
Will Bitcoin be replaced by something else in the future? Almost certainly. But let's not forget that unbacked cash has been around for just half a century. Even if Bitcoin is replaced by something 50, 100 years from now that's plenty of time for a couple of generations to use it as a store of value (and payment system).
Extremely unlikely. Bitcoin has been around 12 years and it's just now starting to go mainstream. Most people still have no idea what it even is. You can count the number of publicly traded companies that have Bitcoin in their treasury on 2 hands and that's only destined to increase.
I can't give you an actual estimate of how long it will take for Bitcoin to lose its market share but I can confidently say it will take decades. At very least until it replaces a good chunk of gold's market cap.
Seems like an Is/Ought Fallacy. Also, governments won't willingly surrender their control of the money supply. I think that with one stroke of a pen they could let the price /10 as fast as it went x10.
Moreover, since technology is accelerating ever faster, five years from now is a lot longer than five years starting from 1980.
The question is, will people run to it as a safe haven in the event of a huge stock market crash, or away from it? Nobody knows for sure. It's a game of chicken - not having the heritage of gold, I don't think it'd take much for people to get scared and realise that all they have are a load of strings of characters (scarce or not) and want to dump it. After all, it's crashed before.
Until then, it's potentially a great investment in today's climate (especially if you don't care about the climate).
> all they have are a load of strings of characters
Most things valuable nowadays are strings of characters. It's not the byte sequence that's valuable, it's what it represents. Bitcoin is, conceptually speaking, an asset that is orders of magnitude better than most existing financial instruments and commodities. The fact that it's implemented using bits instead of atoms is completely irrelevant.
I really don't understand this urge of breaking down anything digital into its fundamental units to try and diminish its value. It's the equivalent of evaluating anything in the physical world as "just a bunch of atoms".
> I really don't understand this urge of breaking down anything digital into its fundamental units to try and diminish its value. It's the equivalent of evaluating anything in the physical world as "just a bunch of atoms".
Because in the good times, people think these things are great investments. But as soon as things go south they look at what they have from a different perspective. Something with some intrinsic value (e.g. a "bunch of atoms" that can be eaten or lived in) is likely to be much easier to rationalise holding on to in that scenario, rather than something that's only worth something due to consensus by a bunch of strangers.
And that's the risk - it doesn't matter if as an individual you see great potential. If everyone else disagrees, gets scared and sells, then BTC could be battered.
Most subjectively "useless" objects are used as a store of value. Only 7/8% of gold is used in the manufacturing industry, the rest is sitting there with no active purpose other than existing. Same goes for collectibles (you can't eat or live in a baseball card or a valuable artwork).
Also the "live in" is a big misconception. Real estate doesn't increase in value. What does is the land on top of which it sits. A house depreciates over time exactly like a car (prefabs on rented land are a great example of that).
The only question that matters is: is Bitcoin better than commodity X? Where X can be gold, silver, oil or whatever else. And if the answer is yes there's no reason to believe it wouldn't take over X in terms of market capitalization (and, therefore, value).
> The only question that matters is: is Bitcoin better than commodity X
No. The only question that matters is will people collectively continue to agree that it's worth something, lacking any intrinsic value?
If interest rates go up and people need to call in their assets to repay their debts, what do you think will happen? Would people rather lose their houses or their bitcoins?
I think people will dump stocks and risky "assets" like BTC and take flight into cash with some percentage in traditional safe havens with a proven track record (like gold) until things settle down. This is exactly what happened a year ago. There's no reason in my mind to believe anything would change regarding BTC's status now - I think it'll be dumped like it was last year. It may recover faster (I'd certainly buy it for a heavy discount), but I just don't buy the "store of value", "digital gold" argument.
It's an early-stage speculative asset IMO - let's not pretend it's a stable, low-risk store of value.
> A house depreciates over time
Tell that to people unable to buy because house prices have shot up. Property can also generate a good rental income - yield obviously dependent on the price paid. BTC doesn't provide any such perpetuity.
1. There is no such thing as "intrinsic value" and I explained clearly why in a different reply to your comment.
2. What goes up is the value of land, not houses. If houses themselves were valuable movable homes would also increase in value. They don't. The reason why land goes up in value is that (residential) land is scarce.
3. Gold isn't a safe haven because of its track record (in fact gold is relatively volatile [0] and if you had bought gold in 1980 you'd have lost money today, adjusted to inflation), it's considered a safe haven because it's the only commodity that has a historically predictable stock to flow and can (and normally does) act as a hedge against inflation. Bitcoin does that and more.
> It's an early-stage speculative asset IMO
So was gold in its early stages as a store of value. So is any valuable company's stock in the first few months after IPO. Speculation is uncorrelated with the lack of fundamental valuable features.
At this point I'm not sure your intent is to try to understand more about Bitcoin (or economy, for that matter) but rather to force a narrative that isn't at all obvious, unlike what you're trying to imply. And I'm not saying you're wrong, rather that you're unable to corroborate your statements with data and facts.
Please don't post in the flamewar style to HN. You've crossed noticeably into that here and it's not cool—we're trying to avoid that kind of thing on this site.
Again, I apologize. It was a knee jerk reaction to being told I don't understand something without proof. I believe that also violates numerous guidelines:
> Be kind. Don't be snarky.
> Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something.
And I disagree with:
> You've crossed noticeably into that here [emphasis mine]
I've only done that in 2 comments towards the same user who also behaved similarly towards me. All my other comments have been polite, constructive and filled with references.
There are many, many things other than Bitcoin which are also guaranteed to be finite in supply (more so in the case of physical goods, since they cannot be forked). BCash, most shitcoins and inactive ICO tokens, for example, are limited in supply in exactly the same way. Share certificates of bust companies are fixed in supply, and yet rarely worth more than the paper they're printed on. The creative output of every dead person is fixed in supply, and yet some dead people's work appreciates massively in value whilst others' is near worthless.
Price is the interaction of supply and demand, and there is no particular reason to believe that people will be more willing to pay over $45k to update ledgers to indicate possession of a particular alphanumeric string in a couple of decades' time than they are now.
Yep and that's Bitcoin's network effect. There is demand for Bitcoin. 2017 was the year of retail interest, 2021 is the year of institutional interest. It's easy to see that the price is now uncorrelated with the retail interest, using Google Trends as an example. [0]
> there is no particular reason to believe that people will be more willing to pay over $45k to update ledgers to indicate possession of a particular alphanumeric string in a couple of decades' time than they are now
Absolutely. Nobody can know with certainty what will happen but if you compare Bitcoin with something like gold you immediately realize that Bitcoin is better in any possible way. There is literally no reason to think that Bitcoin won't replace gold in terms of market capitalization (except for the 7.5% actually used in manufacturing) [1].
> Nobody can know with certainty what will happen but if you compare Bitcoin with something like gold you immediately realize that Bitcoin is better in any possible way.
Again, this is cargo-cult nonsense. Gold does not take the electricity resources of a large country to render it secure and make transactions possible. People cannot vote for a greater gold supply or fork gold, or create an alternative gold which lacks the need to use the electricity resources of a small country to secure it but is in every other respect functionally identical. Gold is pretty to look at and can be made into jewellery, not intrinsically worthless. Gold's price might be pushed higher than that intrinsic value by interest in its use as a store of value, but it's driven by millenia of desire to possess gold as a status symbol and currency substitute across a vast array of cultures, not a 12 year bull run propped up by counterfeit dollars and increasingly unrealistic claims that it will replace currency. There is literally no reason to believe that Bitcoin will ever 'replace gold in terms of market capitalization'
> Gold does not take the electricity resources of a large country to render it secure and make transactions possible.
Except it does [0].
> Gold is pretty to look at and can be made into jewellery, not intrinsically worthless.
The first argument is laughable, the second is simply incorrect. Oil is intrinsically worthless. It's worth something only if you can turn it into fuel, plastic or some other product for which there is demand. Same goes for gold.
And although it's true that you can turn a piece of gold into a piece of jewelry that piece of jewelry will decrease in value over time unless it gains intangible value because of its history. Try buying a gold necklace and selling it the next day at the same value.
Nothing has "intrinsic" value. All value is relative.
> Oil is ... worth something only if you can turn it into fuel, plastic or some other product for which there is demand. Same goes for gold.
You clearly don't understand what "intrinsic value" means if you believe this. The very fact it can be fabricated into something of value gives it some intrinsic value.
> The very fact it can be fabricated into something of value gives it some intrinsic value.
That's a plain contradiction. Oil is valuable because there is demand for products manufactured with it. In a world where there's no demand for gasoline, plastic or any other derivative of oil the "intrinsic value" of oil is zero, which proves there is no such thing as intrinsic value that isn't relative to a market.
Just to be clear we're discussing commodities and not company stocks, for which there is a very specific definition of "intrinsic value", according to fundamental analysis at least.
I'm pretty sure you're the one who's confused, but ok.
That energy is used in production, not securing the existing stock of gold. With the very significant consequence for gold's "store of value" role that if environmental activists succeed in curtailing gold mining, gold owners would see their gold go up in value, not transactions becoming incredibly difficult and prone to fraud and a price crash. (But FWIW I'm not saying that gold mining to use as a "store of value" isn't also wasteful)
> It's worth something only if you can turn it into fuel, plastic or some other product for which there is demand. Same goes for gold.
I'm sorry to hear you find the aesthetic preferences of virtually every culture in history and the role they have played in promoting gold as a symbol of wealth laughable. You'd be surprised how much harder it is to enthuse them about the aesthetic properties of Bitcoins though.
And no, oil or gold is not "intrinsically worthless" because it is possible to use oil or gold for purposes other than exchange, and thus people value them for those use cases independently of beliefs about their future price.
> And although it's true that you can turn a piece of gold into a piece of jewelry that piece of jewelry will decrease in value over time unless it gains intangible value because of its history. Try buying a gold necklace and selling it the next day at the same value.
And yet gold necklaces of a given design are invariably more scarce in supply than Bitcoin! Almost like the demand side of the equation actually matters! Luckily, people do not buy gold necklaces solely because they believe gold necklaces will go up in price, and are not motivated to sell them as soon as they fear the price will fall in future. The same does not apply to Bitcoins, because unlike Bitcoins, people hold necklaces for the intrinsic pleasure of having a shiny necklace.
> That energy is used in production, not securing the existing stock of gold.
Safes and transportation equipment have to be built too. And we already have layer 2 infrastructure that minimizes the amount of energy spent to secure transactions on chain. It needs a lot of work, sure, but it's not unfeasible for Bitcoin to use a fraction of the energy used today, at some point.
Furthermore mining gold requires mining equipment to use whatever source of energy is nearby or ship expensive tanks of fuel and/or batteries. With Bitcoin you could set up a mining rig where there's a source of energy that would otherwise be left unused. Meaning we could be using a lot of renewable resources that would otherwise be wasted to create and exchange value.
> I'm sorry to hear you find the aesthetic preferences of virtually every culture in history and the role they have played in promoting gold as a symbol of wealth laughable.
I don't and you took what I said out of context. Of course aesthetic properties are important. But quartz is arguably "prettier" than gold in most cultures. Gold is scarcer. That's why only considering the aesthetics is laughable.
> And yet gold necklaces of a given design are invariably more scarce in supply than Bitcoin!
Gold necklaces of a certain brand. Not any custom designed necklace. It's an important distinction. A brand is a very real and important source of intangible value. And a brand can be related to a company's IP or to other less predictable events (think Banksy).
> because unlike Bitcoins, people hold necklaces for the intrinsic pleasure of having a shiny necklace.
You seem to be unaware of how many people hold Bitcoin just because they like doing so (think GME and WSB). A strong niche of Bitcoin holders has ties with libertarianism and, therefore, attributes a non-zero intangible value to it in terms of it being an instrument against totalitarianism and governments in general.
> Safes and transportation equipment have to be built too.
Because gold will be worthless and useless if it is not possible to continue using as much energy as Argentina on a daily basis to build and maintain safes and Securicor vans?
> Meaning we could be using a lot of renewable resources that would otherwise be wasted to create and exchange value.
Because the world is famously short of use cases and storage media for electrical power? As I already pointed out, none of the energy used to mine new gold is essential (or even remotely helpful) to securing and transacting with the existing gold supply, gold mining being energy use is something of a moot point when considering possible advantages of holding gold instead.
> I don't and you took what I said out of context Of course aesthetic properties are important. But quartz is arguably "prettier" than gold in most cultures. Gold is scarcer. That's why only considering the aesthetics is laughable.
At no point have I even hinted at considering only the aesthetics, and no good faith reading of my arguments would conclude I did. I did, after all, include the clause "price is the interaction of supply and demand" in my opening post.
I noted that aesthetics were a factor creating demand for gold independently from its perceived resale value. You summarily dismissed this as "laughable". There was nothing substantive for me to "take out of context", but I'm glad you now agree that the intrinsic aesthetic properties of gold are important.
> Gold necklaces of a certain brand. Not any custom designed necklace. It's an important distinction
Yes. I am aware that brands exist. Sometimes brands even produce limited editions so "we'll know exactly how many [necklaces] are in circulation 10 minutes, 10 days, 10 or even 100 years from now", but even this doesn't guarantee their gold necklaces retain their value. The fact that scarcity of particular designs often does not make them more useful as a store of value than the less scarce raw material supports my argument not yours. Second hand necklace preferences are fickle, and financial instrument preferences even more so.
> You seem to be unaware of how many people hold Bitcoin just because they like doing so (think GME and WSB)
How's GME performed as a store of value since WSB pumped? It's just as scarce as it was 10 days ago, but apparently not guaranteed to go up after all...
And come to think of it, the "terms of it being an instrument against totalitarianism and governments in general" are not independent from BTCs potential for future exchange use. Certainly neither as independent from future use nor as widespread as people taking pleasure from things' intrinsic shininess.
> How's GME performed as a store of value since WSB pumped? It's just as scarce as it was 10 days ago, but apparently not guaranteed to go up after all...
I was simply responding to what you said earlier:
> The same does not apply to Bitcoins, because unlike Bitcoins, people hold necklaces for the intrinsic pleasure of having a shiny necklace.
But it doesn't have any value. Except that some people think it has. In times of truly global trouble, nobody will accept bitcoins as payment for bread.
You can use diamonds to cut things. As for store of value, nobody sees it as a store of value. If you think it has value, go and buy a large diamond from a jewellery store, and then try to sell it somewhere for the same price.
Right. It's all mass psychology. Gold, the stock market, bitcoin, whatever.
It only has value as long as people believe it has value.
The caveat of course is that all of the things I listed have SOME more inherent value, but that is NOT the major contributor to their actual trading prices. Gold is not THAT useful. Neither is owning a billionth of a company.
Obviously this is much less true for gold than for bitcoin, and the value of the stock market is very real. If you own a piece of Apple or the local hot dog stand, you own a piece of something that is continuously producing value for people.
Over a billion people use Apple products, it's an extremely solid business. You can't compare that to a speculative bubble. Tulips were also very expensive once.
True, but when you own a part of Apple you also have to have faith that your shares won't be diluted to nothing via new stock offerings (which numerous companies have done in the past). So while there is intrinsic value in the shares, some of that is still based on faith (if Apple doubled their outstanding shares overnight, the value of yours would go down).
> you also have to have faith that your shares won't be diluted to nothing via new stock offerings
if the existing majority shareholders chose to do this, then it will happen, but otherwise, this can't happen. And i don't see a situation where the existing shareholders would willingly choose to do this dilution for no reason.
No that is not how it works. In order to double the number of shares they’d need to issue and sell more shares, meaning that they would increase their cash balance, and hence overall value, by 2.5 trillion.
So issuing more shares would not change the value of existing shares, at least in the short term.
Never mind the fact that the shareholders would have to make this decision, and that Apple has long been doing the exact opposite.
That is not true. There are only 1.5 billion active Apple devices. I myself own 4 of those. Everyone else I know that has an Apple device also has multiple. I'm pretty sure the average Apple customer owns more than 1.5 devices. Thus there can't be over a billion of these people.
Gold has some industrial uses. Therefore it has some "intrinsic" value. However, I suspect that the VAST majority of today's price of gold comes from the fact that it's used in jewelry (not actually "valuable" unless you also allow my bragging about my bitcoin wallet to count as value) and from "gold bugs" (basically the same as bitcoin "hodlers").
That was my point. Any "real" value in most of these things is dwarfed by social delusion value.
Same with AAPL stock. Sure, I can pay ~$130 per share to technically own a fraction of Apple. And what good does that do for me? What's the dividends on AAPL? Will my vote EVER actually influence the company? I could spend $130 on canned beans and rice and likely get far more utility than I'd get from the ACTUAL share of AAPL. On the other hand, I'll probably be able to sell my AAPL share to the next sucker for more than $130. THAT'S the real reason 99.99% of us are invested in the stock market.
And, like it or not, bitcoin DOES have uses. It's still a little bit cheaper to send money via bitcoin than via Western Union, AFAIK. It's easy to pay for something online without giving your personal info to PayPal or the person who you are paying. Are those minor conveniences worth $40k? Hell no. But that's also my point. It's all crap.
You buy a share in a company because that gives you ownership over a corresponding share of their earnings, in perpetuity, whether they pay dividends or not.
In Apple’s case, you’d now have to pay 136 dollars in order to be entitled to 3.7 dollars of their annual earnings, corresponding to a current annual return rate of 2.7%. That’s better than any bank accounts, and it will most likely rise faster than inflation.
This is how the stock market works and how people value mature companies.
It seems more likely that people conflict zones would be happy to accept gold (with the assumption it will be valuable in the future/in more stable areas) than bitcoins that require electricity, stable internet and tons of disk space.
Conflict zones are generally aware that there are non-conflict zones. The existence of the first world, and detailed knowledge of it's demands, means people know to collect assets that will be valued there.
The problem with Bitcoin is it's not a physical thing at the end of the day: nobody mints jewellery out of bitcoin.
But fiat has taxes, and state-backed violence and jails.
If your state demands your taxes be paid in FIAT, no matter what you wan't, you'll be paying in FIAT (or fined, or in jail, or depending on the circunstances maybe dead).
Say someone wealthy wants to escape the taxman and spends all their fiat buying things that "have value as long as people believe it has value", like land, stocks, jewelry, art works, antique cars.
When the taxman comes knocking on their door, do you think this person will escape by saying "sorry, I don't have fiat available to pay for the taxes, come back next year!"? No, the taxman will respond by either seizing their assets or forcing the person to liquidate into fiat.
What makes Bitcoin (or crypto) different in that regard?
What's with the capitals? The "fiat" in "fiat money" is neither an acronym nor an Italian automobile manufacturer. (The Italian automobile manufacturer, OTOH, is an acronym, just like "OTOH". One stands for "on the other hand"; the other for "Fabricca Italiana de Automobili, Torino".)
that's a stretch of what fiat means. Fiat backing is not just the belief in the backer's ability to back it. Fiat specifically requires government/authority.
bitcoin acts more like a commodity than fiat. Bitcoin is backed by the laws of mathematics, rather than laws of nature (which is the case for gold).
Fiat does not require a government or authority. Fiat money simply means it's not commodity money. Commodity money means the money is backed by a commodity, i.e. the issuer promises to redeem the notes for a certain quantity of a commodity.
Your claim that bitcoin is not fiat because it's backed by the laws of mathematics makes as much sense as claiming that the dollar is not fiat because it's backed by the printing press. This is not what 'backed' means in the context of money.
> Bitcoin literally stops existing if you stop believing in it.
That is the case for countless things. Is a corporation a real thing or a belief? Where is the physical entity Facebook or the physical entity Apple? Is it the people working for them? Their logo? Their contracts? It's all that and a collective belief in an abstract entity. That's true for fiat or states too, even if that belief can be enforced through e.g. army, that doesn't change the fact that's is a collective belief in something that has no material reality.
Not even close. Gold is a tangible psychical asset, a finite resource on Earth that can not only make valuables you can wear or leave as heirloom but is also a really good heat-reflector and electricity conductor needed in anything from semiconductors and precision electronics to supercars and satellites. Without it, the global electronics industry would suffer terribly.
This is why there is no gold standard anymore. Like, this right here is the exact reason: because collectively it's apparent gold is not worth much to anyone in a pinch. So why bother trading with it as a proxy for your nation-state's goods and services output?
Interestingly, I went and looked up what the price of gold would actually be if it was solely used for industrial processes, and it's hard to actually figure out: it's speculated on a lot, but world gold demand in 2019 was 4355.7t. Of that, 48.5% was for the jewelery industry, and 7.48% for technology - the rest accounted for by investment. So industrially world demand for gold for productive or decorative uses is about 2439.2 tons (as of 2019), whereas mining production in that year was about 3,300 tons.
So about 45% of world gold demand is essentially from financial speculators. To figure out pricing you'd have to really get into the current mining economics for technological use...
Absolutely. It's just funny that many cryptocurrency advocates reject "fiat" currencies for being fake and arbitrary, but bitcoin is even more fake and arbitrary. At least USD has the non-illusionary property of keeping me out of jail when paid to the IRS. ;)
Fiat currencies (of democratic nations) are democratically controlled. That makes them fundamentally different from cryptocurrencies controlled by early adopters, a few engineers, and mining rigs.
serious question, how is the democratic process different between the two? One i.e. democratic nations are a group of people on the same piece of land that. The other is a group of people on the internet.
A few years ago the BTC/BCH split happened. This was a major philosophical decision that creates winners and losers and changes the trajectory of the winning coin forever. It was a fiscal policy decision.
It was made exclusively by software engineers and miners. Miners get to vote based on their wealth. I don't consider that to be "a democratic process". There is no guarantee of enfranchisement. Some people get far far far more votes than others. It is more like a council of aristocrats.
the only reason the dollar has any value at all is that it is issued within the context of a society full of people who have agreed to treat it as though it has value. Without that faith, every major currency on Earth would be as useful as small pieces of paper generally are
Indeed, it doesn't even need to be global trouble, e.g. if you were a bitcoin enthusiast living in Puerto Rico during 2017, you learned first-hand exactly how useless bitcoin becomes when a major disaster strikes. Cash and gold didn't suffer the same fate.
Presumably it wasn't used for everyday payments before, and obviously the global price was unaffected, so when you say it become useless, in what way do you mean?
I mean that the island was without power for months so anybody that was expecting to rely on bitcoin in any capacity during the disaster was totally screwed.
For many BTC enthusiasts the store of value narrative has been in place for a very long time.
“I see Bitcoin as ultimately becoming a reserve currency for banks, playing much the same role as gold did in the early days of banking. Banks could issue digital cash with greater anonymity and lighter weight, more efficient transactions.” - Hal Finney (2010)
What "cash level privacy"? Banks have to report all significant cash transactions and ensure that customers can't deal large quantities of cash anonymously; and in the exact same manner they would also have to report all significant e-cash transactions and ensure that every customer with whom they deal large quantities of e-cash can't be anonymous.
Now I'm confused. Bitcoin is not lighter weight than existing digital cash. It's not really lighter weight than anything. Well, possibly the large hadron collider consumes more, I don't know.
You can go through life without ever using physical cash. You get paid digitally, you buy groceries digitally. You even borrow money for a house digitally.
The thing you transact with is digital, liquid and fungible. In what sense is it not cash?
I don’t think any common definition of cash includes the idea that payments are “irreversible”. I don’t even see why this is so important. If someone pays me physical cash by mistake they have legal recourse to get it back. It’s not finder’s keepers.
I haven't received my official enthusiast talking points memo, but the obvious solution was proposed years ago: off chain transaction that use smart contracts for settlement on the public ledger. I vaguely remember "store of value" being used for what would more accurately be described as "trust anchor" or "root authority".
Off Chain transactions look so much like a credit card that as soon as you begin to build the off chain transaction system you see that Amex/Visa/MC could just allow customers to settle payment in BTC and get the same value.
You could make it a debit card and require people to deposit BTC. But in general the USD is a better settlement currency. That is why BTC isn't being used in transactions.
lol, so nothing even close to an off chain network - but somehow the "same value". Well, except for the real time cryptographically secure stuff - but nobody wanted those values anyway.
10+ years is a pretty long con, that satoshi is one patient fraudster.
satoshi obviously isn't part of the con. He would have sold a long time ago if that was the case.
It is the people who have latched on as "bitcoin evangelists" and are recruiting more people into the network to get the price to go up. Classic Ponzi scheme.
So not a "Classic Ponzi scheme", but the opposite - where Charles Ponzi is the victim of "people who have latched on". That is twice now that you've claimed something based on a bizarre redefinition. Even if there were some kind of campaign of revolving pyramid schemes over all these YEARS, bitcoin is net positive... while pyramid schemes operate at a deficit all the way up to the point where they go to zero.
I think you are right, this doesn't perfectly fit with existing definitions of other scams. This is more like the beanie baby situation combined with some libertarian political beliefs.
But the beanie baby craze only lasted 3 years. The CBOE didn't start trading beanie baby options. NIST didn't begin several beanie baby focused work groups and studies. The IRS didn't provide tax guidance on beanie babies... You guys really need to update that script, but I do congratulate you on dropping the tulip mania talking point - given the fact that there is no evidence it ever happened in the first place.
...that is why you were congratulated. Nice reading comprehension there. I've had this exact conversation at least a dozen times over the years, it is formulaic. There is always a claim of some kind of nonsensical fraud, after that unravels then it turns to speculation about mass delusion, and it usually ends with political appeal/slander and "we live in a society!" Every year there are positive developments and evidence of wider interest, but the opposition's script has remained unchanged. I got into it with a tech reporter a while ago who was obviously very emotionally invested in bitcoin being a fad/scam/bubble, after searching archives of his timeline I understood why: he had been predicting bitcoin's demise, very confidently and regularly, since back when it was trading at $130. Every year it gets funnier.
I never said there wasn't wider interest. I said the opposite, I said that the enthusiasts are activity looking to expand the number of people investing.
If you want to talk about previous conversations around this, the ones I have had always end in people believing that decentralization or cryptography are magical words that solve all kinds of problems without creating new ones. I have never invested in currency so the price doesn't matter to me. I assume it will go up proportional to the number of people that can be convinced to invest.
> > ..."bitcoin evangelists" and are recruiting more people into the network to get the price to go up. Classic Ponzi scheme.
> > ...this doesn't perfectly fit with existing definitions of other scams.
> I said that the enthusiasts are activity looking to expand the number of people investing.
I wonder. Are you aware of how far your characterization of the situation has shifted within the same thread?
evangelist -> enthusiast
recruiting -> expanding
Ponzi scheme/scam -> investment
Have you changed your position, or simply softened your language as a result of finding your position indefensible? If the former, congrats; if the latter, maybe think on that a little more.
> ...always end in people believing that decentralization or cryptography are magical words...
Well, you claimed earlier that off chain transactions were functionally equivalent, from the perspective of the money transfer service, to credit cards. When challenged, you adjusted that to debit cards - which is also not even close to being true. Even if you were talking about it from the perspective of the end user, or merchant, you'd still be very wrong. So you clearly don't know much about the stuff you've expressed strong opinions on, and that means your estimates of others' opinions on the same carry no weight.
> ...the price doesn't matter to me.
You might want that to be true, but it rarely works out that way. Opportunity cost can do funny things to people, like compel them to construct elaborate coping mechanisms in defense of their ego. Sometimes that looks like a confidently stated, but ill-informed, opinion that crumbles in the face of any pushback. Like I said, I've been here a long time and I've seen it all. There is one guy I worked with years ago who asked me about bitcoin but took no action. I only pay attention to the price toward the end of the year, when working on taxes. But without fail if I get a call from him then I know that bitcoin has just had a major selloff. The funny thing is that he is totally unaware of the behavior, it isn't as if he aggressively gloats - but he always brings up bitcoin, and then I don't hear from him again until the next selloff.
I don't follow the day to day, and it has been years since I contributed any code, but a quick peek at the lightning network stats makes me think that everything is fine. Good organic growth, with over 1000 BTC presently in flight. A lot of people seemed to be under the impression that the off chain networks would take center stage, and the blockchain would quietly power it from behind the scenes - but I'm pretty sure the direct opposite will occur. As far as why there hasn't been an explosion in network activity: I guess there isn't enough pressure. Every so often there is a spike that gets people up in arms, then it quiets down and they forget. Larger wallets will eventually start moving transactions off chain, but they've obviously got as much enthusiasm about it as they did in updating their backends to take advantage of space saving changes in the protocol. But once its done, its done.
I find this data fascinating - partly because I don't understand it. I regularly send bitcoin and, as far as I can tell, have never spent more than a tiny (unquantifiable in fiat, as in much less than a cent) amount on transaction fees. Can anyone more savvy chime in on the discontinuity here?
Are you sending it over the network, or to someone else within a website? (eg: binance, coinbase; doesn't need to be an exchange)
Do you track your transactions later? Do they get confirmed? How many confirmations does a website need to count it? How long does that take?
I would expect a low-fee transaction to eventually either expire or go through. I don't know what timeframe that might take: higher fee typically means higher priority as I've understood it. I can't imagine it'd keep your $ in limbo forever, but who knows. If you haven't used it in a long time, I understand that the network is much more congested these days.
I'm saying that if a country's currency stops being accepted as the main means of exchange within its borders then its government will use laws to restore that.
And if laws are not obeyed that's a police matter.
Concretely if stores stop taking fiat, and only cryptocurrency, to the point where it affects the economy, then you should expect laws preventing that. If that doesn't help then you should expect to see arrests happening.
Governments have the legal and physical ability to enforce monetary policy. Bitcoin nuts who say that "fiat currency is backed by nothing" are delusional. Several currencies are ultimately backed by nuclear weapons.
So in other words cryptocurrencies are only allowed to the extent that they don't overthrow the whole system. And overthrowing the whole system was the whole point, right? (well, that and buy heroin and make ransomware)
The government implicitly guarantees that the USD can be used to purchase goods and services. Take a dollar bill. It has "For all debts, public and private". This is a guarantee by the government. If the USD gets outcompeted in the US, then that would make the government a liar, and thus it would use its power to make that not happen.
The government guarantees the value of fiat USD. The government has congress, police, military and nuclear weapons to back that guarantee.
Not only is it a "promise" by the government. It's also in its best interest to maintain control of monetary policy.
Do you disagree about what would happen if the USD would be at risk of being outcompeted inside the US, or are you just arguing semantics with no connection to the real world?
(serious honest question)
The US government DOES guarantee that the USD has value. It's not something that they cannot fail at, but they do guarantee it. Cryptocurrency has no guarantee at all that it has value.
If your definition of "backing" is that you are guaranteed to be able to exchange it for something else, then cryptocurrency is truly backed by nothing, making the statement "backed by math" commonly used by bitcoin nerds complete nonsense.
True, but there's a bajillion checks and balances to stabilize the value of it, no such thing for bitcoin. I mean mtgox bought virtual btc to drive up the price. Tether is a money printer created to push real money into btc. And it's quite telling that nobody's talked about BTC on its own since 2012, it's always been in relation to the USD.
Money is a technology, that's all. A technology can be developed and maintained to serve a specific purpose. It happens that major government money systems have been managed to serve purposes such as: Temporary store of value, convenient medium of exchange, and instrument of economic policy.
Like any technology, it works or it doesn't, and people will use the one that works the best for them if they have a choice. For instance people in some countries use their local currency for daily purchases, but store their wealth in instruments that are valued in dollars, euro's, etc. Some people will break the laws of their own countries to lay their hands on those dollars or euro's.
Money is speculative inasmuch as its value is still relative to other things such as stocks, gold, and bitcoins. Holding dollars instead of gold on any given day is a speculation. In a relatively free economy, there's no such thing as opting out of speculation.
Bitcoins are unique inasmuch as they are designed to exist without any deliberate purpose being imposed on them. The only way a government can manipulate the value of bitcoins, that I can think of, is to subsidize the electricity for bitcoin mining.
IMO it isn't. However, I do see a huge for sending large transactions. In that sense, I don't find it too crazy that Tesla is accepting Bitcoin, because buying a Tesla is a large transaction.
I think accepting Bitcoin as payment was tried before - it never worked since people buying it are either not selling (and using to store cash that keeps on growing), or buying it for speculative purposes via secondary instruments (gbtc, ethe).
Not really sure what’s point is for Tesla but my guess its speculative for them, with an attempt to get some additional value on cash they are starting to swim in now...
I can't see Tesla BTC as anything more than a marketing gimmick for their computer geek clientele and fan base. Even if it's a logistical disaster, they probably make it back in stock purchases from true believers.
Tesla tested the waters with Elon's tweets and it shook the Bitcoin and sent it to all time highs, then Tesla bought large amount of Bitcoin and now the market exploded even further. It is a marketing gimmick, true, but it is making Bitcoin more volatile and unstable, while Tesla hoards more money from Bitcoin!
In theory, "lightning networks", which are basically a network of open transactions across wealthy, participating nodes (e.g. banks and exchanges.) A lot of smaller transactions can piggyback on the larger transactions basically for free.
I don't think these are widely used in practice yet, but I might be wrong.
It's about $7 at the moment to be included in the next block. A new block is added approximately every 10 minutes. Since bitcoin does not guarantee finality some services require you to wait for a certain amount of extra blocks after yours to reduce the chance of a change reorginaztion happening that doesn't include your transaction.
Bitcoin will not function as a currency due to it's high volatility. For a more usable currency look at DAI, USDT, and USDC which are stable coins pegged to the dollar. DAI is collateralized with on chain assets where USDT and USDC are collateralized with real life assets which are mainly regular USD.
The public know that USDT is not fully collateralised with real life assets. This has been publicly stated on Tether page as well. So can we please stop parroting this USDT bullshit, nobody cares how tether is backed and with all the alternatives to USDT there is no reason to use it but from a perspective of ease-of-use and wider offering of trading pairs. You have DAI, USDC, TUSD, BUSD.... You can check which one is audited (USDC and TUSD) and will credit you fully if you need so. You can also work directly with USD at various reputable crypto exchanges (eg Bitstamp, Coinbase, Kraken).
This tether FUD always resurfaces as price goes up as people are butthurt that they did not buy the last dip. No worries, history will repeat itself. This year we'll see BTC hit 100k+ and end the massive bull run in 250k teritory by 2022. After that we'll see everybody dumping their cash in BTC and the bubble will burst on the wings of massive FUD & regulatory bullshit. Bitcoin willl drop to ~20k and cycle will repeat.
For those that weren't watching, this repeats itself every ~3 years for past 10 years. Keep watching the news... USDT stories will become more regular, next will be China bans, Russia bans... then we'll continue with EU regulation push, US regulation push, new tax laws....
The only smart thing you can do is start investing a small amount every week and forgetting about it. Cancel two lattes (or lottery cards, donuts) per week and buy BTC and ETH instead. Imagine starting doing this in 2016, when ETH was launched. You bought ETH for 1 USD. Today it's hitting ~1700 USD. You would retire easily.
Too bad you're so hard at work telling the world that crypto is a scam.
Please don't take HN threads into flamewar like this. We ban such accounts, because we're trying for something significantly different on this site. Fortunately your account doesn't seem to have a history of this; please go back to avoiding it here.
USDT claims to be collateralized with real life assets. But their story keeps changing, they refuse to allow an audit, and they're under serious investigation by the NY Attorney General. It can reasonably be thought of as a fraud that hasn't popped yet: https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/
Last time I tried to send significant funds from France to the UK, it took me a whole week of back and forth with the bank to complete all the AML/KYC paperwork.
You can buy or send bitcoin in seconds if you're not trying to do it on-chain, the same way you can do it with stocks and other assets. But definitive settlement of a bitcoin transaction is faster than pretty much any other asset.
I feel like Iran and Venezuela are bad examples as they are typically denied access to much of the global financial system. It’s normally pretty easy to move gold around and this process is handled by banks. Of course you might not get the same gold bars if you move gold between countries (for one thing they tend to come in different sizes in different places) and it likely won’t even be physically the same gold, but the banks tend to handle the arbitrage of taking physical gold to refineries across to move it from one market to another (though there were some worries this might break down between the US futures markets and London physical markets due to coronavirus restrictions)
> Last time I tried to send significant funds from France to the UK, it took me a whole week of back and forth with the bank to complete all the AML/KYC paperwork.
You would need to do the same paperwork with bitcoin.
I have UK and French bank accounts, transfers between them take seconds. Transfers from the French account to any other Eurozone account take seconds.
A bitcoin transaction never settles. If a longer chain is created without that transaction it will become the current state and that transaction will be effectively rolled back.
A simple case of this happening with bitcoin is if the network fragmented. For example if a country had a firewall which temporarily blocked bitcoin. The country would continue slowly adding blocks which would likely revert when they reconnected back with the rest of the network.
People would only mine on the shorter blockchain if they think it's valid and good luck adding a country firewall in an undetected fashion. It will be directly visible in one of the two forked blockchain that a lot of the hashpower has vanished.
If a country is behind a firewall, most likely, almost no new blocks will be mined because the hashrate difficulty will stay constant while the computational power behind the firewall will become too low. Blocks will be mined much more slowly for a period of time inversely proportional to the hashpower behind the firewall. Most likely, that chain will enter into a "mining death spiral".
What? No. It happens instantly at a protocol level. Practically, about thirty minutes. Most people don’t send and receive wires and so don’t choose bank accounts that prioritise them.
Practically speaking, Venmo and Apple Pay and Zelle are frictionless and instantaneous and more widely adopted than Bitcoin. For heavy users of international transfers, there are usually better solutions.
There are absolutely edge cases, and so a legitimate use case for a cryptocurrency there, but that’s not enough use to sustain Bitcoin’s value. To say nothing of the transactional motivation having been long since abandoned when inconvenient for the current store of value one.
Yes sure, it takes 30 mins to send wires in a best case scenario it is executed immediately when you send it but that's not what happens in practice for most people. I do that regularly and it takes me a couple of hours.
Venmo and co aren't "real" transfers of asset, it's an update to a "permissioned" database. You can make immediate transfers on coinbase too but they could be reversed, or your account could get locked just as with venmo. It is just as easy to have banks hold everyone's bitcoin and instantaneously update a database so that feature is not an advantage of fiat over bitcoin.
> it takes 30 mins to send wires in a best case scenario it is executed immediately when you send it but that's not what happens in practice for most people. I do that regularly and it takes me a couple of hours.
Your bank is not set up for wires. Try Fidelity or First Republic or Silicon Valley Bank. Between 10 and 30 minutes from my hitting transfer to appearing in the recipient’s account. Exceptions are large wires which may require a phone call for verification, though I can usually turn that off if I wanted to.
Ok, interesting... I think your general point is valid, which is that, transacting in USD with a bank is, under certain circumstances, simpler and faster than transacting in bitcoin on-chain.
But you always have to rely on a third party, transactions can be reversed, your funds can be locked etc... It's completely different from say, transferring actual bank notes, or actual gold bars or any kind of transaction where a third party is not needed, you can't be censored and it can't be reversed.
And again, everything you do with USD, you could do eventually do with bitcoin. If banks decide to hold bitcoin, they'll let you send bitcoin wires with all the issues associated with fiat wire. Bitcoin wires don't exist but they could. Permissionless, uncensorable, irreversible, under 1-hour USD transactions don't exist and they never will.
> Last time I tried to send significant funds from France to the UK, it took me a whole week of back and forth with the bank to complete all the AML/KYC paperwork.
How much time would it take to convert, transfer to a bank account AND withdraw that same amount of money from Bitcoin to plain FIAT?
The last years were the strongest indicator that bitcoin will not become any kind of usable currency. Seeing that it is as volatile as ever I'm honestly not sure what bitcoin can even still become except yet another abstract plaything to "invest" (bet) money on, the very thing it has been for a while now.
Also while it is decentralized, the reality of how it is used is very much not. The typical use case is buying and selling it via an exchange, not much else. Depending on where you live you have to reveal more information about yourself to "just buy bitcoin" than you have to when opening a bank account.
This may not be the most constructive way to make the point, but this is a feature of any speculative asset. If the market as a whole has a very high confidence it will continue to rise in value, few people will want to trade it for goods and services unless they have no choice or can make even more money from the goods and services than they can from holding the asset.
Otherwise, it’s like getting options in a startup and spending them on pizza.
No. I don't use BTC as a speculative asset. I use it for two things:
1. when it is expensive or difficult to send money to places like Vietnam, post-soviet countries, Iran.
2. some saving in case the shit hits the fan and I will have to survive for a couple of months without TransferWise, Revolut.
A transaction takes ~10 minutes, to ensure that the block which the transaction is included in isn't orphaned some services institute a 6 block waiting period to ensure the transaction is stable. Should the block be orphaned, the transaction will re-enter the mempool on all hosts who'd confirmed the block and should be included in a subsequent block.
The transaction cost depends on the size of the transaction and the congestion in the mempool, the cost can be set by any sender depending on the urgency of the transaction.
Maybe people close to Bitcoin know it won't be a usable currency, but unless you closely follow bitcoin, it sure seems like it is built to be a usable currency. Even the name implies this relationship, and the idea of a 'wallet' does too. Tesla just recently bought $1.5 billion worth for exchange, no?
It won't, but it's also not transferred as much because of cost, time, and transactions/second limit; I have no solid figures, but I wouldn't be surprised if 99% of actual bitcoin transactions are virtual, in databases on the exchanges. You can't do high frequency trading on the blockchain.
I have no position in Bitcoin, but isn’t it possible for “BTC scrip” to be the money used day to day. With actual blockchain transactions just being used to aggregate at the institutional level?
This is pretty much the way money worked in the 19th century, just with gold instead of BTC. Nobody physically carried or transferred gold to buy a beer. They just used bank notes that were backed by a trusted intermediary holding the physical asset. It might make sense for a bank, or even a very wealthy person, to pay the cost of physically transferring the hard asset. But most just used IOUs that were backed by the underlying hard asset.
It could, but why? The two things that BTC grants are trustlessness and the inability to enact fiscal policy. If BTC just becomes the backing for institutions, trustlessness is gone. So then it is a question of whether a backing unit that supports fiscal policy is better than one that doesn't. I think I know what institutions would prefer.
Some of us ask ourselves the same thing. NANO, for instance, has no fees and is basically instantaneous (<1s). But unlike Bitcoin, Elon Musk isn't hyping it, and you can't make money by using computer farms, so most people don't know about it.
It's already a usable currency. You overpay the fee to get your transaction confirmed in the next average 10 minutes. You use lightening (though support is still limited) to have cheap and fast confirmations and you settle later.
Also, it's still faster and cheaper than an international SWIFT.
"Bitcoin Cash" is a fork of Bitcoin with larger blocks to solve the transaction fee problem, which it has been largely successful at.
In fact the original design for Bitcoin assumed larger blocks in the future, so it is perhaps a more accurate description to say that Bitcoin Cash is the "original" Bitcoin, and Bitcoin Core is a fork with an altered (small blocks) design.
I'm tired of this BS about Bitcoin and pollution. So tired that yesterday I wrote this [0]. Of course you might be in complete disagreement with me, but please read it and let me know what you think. Be kind. I am trying to have a good conversation about it, not to impose my view.
I should have explained the "BS" part at the beginning of my comment in a different way.
I think that comparing Bitcoin energy consumption with a country (it used to be Chile, now Argentina), while technically correct, misses the big picture.
I also avoided a discussion on the true cost of having a global currency like the US$, which one might argue pollutes far more (military, etc).
> I think that comparing Bitcoin energy consumption with a country (it used to be Chile, now Argentina), while technically correct, misses the big picture.
I think a comparison like that actually is the big picture.
In the spirit of actually answering your question, first let’s just say that complaining about critics treating something named BitCOIN by its creators and something that has been promoted as an alternate currency from its creators to at least a decade of its supporters as a currency (Its the top cryptoCURRENCY) as currency is unfair to say the least.
The whole shift of calling it a store of value as opposed to currency that Bitcoin supporters have started over the past couple of years is very clearly a post hoc justification for its existence.
The problem, however, is that BTC isn’t even a very good store of value. Golds pricing has never collapsed 10x over the matter of months and nor has it risen 5-10x over the matter of months. As a result BTC isn’t even a very good store of value.
It’s currently, at best, a pure speculative asset. It’s like the GME trading from a week ago taken to its logical extreme. A speculative asset that has no relationship to its underlying fundamentals. Much like how GME’s price was completely divorced from any fundamentals of the company, BTC is like saying let’s do that thing, but why even bother with tethering GME the stock to an underlying company. Let it just exist on its own.
That’s what BTC is at the moment. GME if GameStop didn’t exist.
It's not BS. The world in general is trying to find ways to be more energy efficient and up pops bitcoin, now using more power than a country of 44 million people. It's ridiculous.
As is your reference on that article - "Most bitcoin mining is using energy at the source that was uneconomical to use for other purposes, because of the loss experienced in transporting the energy to economic centers", which just links to one of your own comments on HN!
The rest appears to be handwaving - "Gold is worse!" or "It'll move to proof of stake!"
(edit: the link to the comment is not the OPs own, but it is an HN comment which just contains an assertion about green energy use)
What I meant by "BS" is that most discussions about Bitcoin and its polluting effects are very superficial, and ignore some of the facts that I try to highlight in my post.
> just links to one of your own comments on HN!
No, the comment that I reference on HN is not mine, it's by someone else. BTW, I quite agree with it.
> The rest appears to be handwaving
I don't see why. We have used, and are still using, Gold as store of value. Each year gold pollutes tens of times more than Bitcoin. The ones criticizing Bitcoin should have been criticizing Gold all along; and they should criticize Gold way more than Bitcoin even now.
Mining gold is environmentally problematic, but no new gold needs to be mined when gold is transferred from one person to another. Bitcoin transactions require new blocks to be added to the block chain, and therefore more "mining" must take place.
There is a bigger problem, however. If a gold miner finds a more energy-efficient mining process, they will use it because it is more profitable. No technological improvements make Bitcoin mining more energy efficient (miners are incentivized to expand their operation rather than to mine at the same rate using less power), because the whole point of Bitcoin mining is to prove that electricity was utilized. That means that there is no real solution to Bitcoin's pollution problem, other than scrapping Bitcoin entirely and replacing it with something more energy-efficient (like a distributed ledger operated by a consortium of banks).
Bitcoin's energy consumption is a function of the number of miners, not the numbers of users. Just because more people transfer and use bitcoin doesn't mean more energy is used.
Every transaction requires at least one block (typically several) to be added to the block chain, and the block size limit means that, in fact, energy consumption in Bitcoin is proportional to the number of transactions. Beyond technical details, there is also the economic incentive: miners are paid to include transactions in new blocks, and if there are more transactions (thus higher demand) the fee will rise and miners will consume more power in order to collect the higher fees.
> No, the comment that I reference on HN is not mine, it's by someone else. BTW, I quite agree with it.
Ok, misread that. Either way it's just an HN comment, it's not proof of anything much.
Gold mining is terribly polluting, yep, but your attitude to it is pretty much the definition of whataboutery.
How do we determine how much/little energy usage is acceptable though? Is it okay for Google to use about as much energy as Tunisia? Maybe Bitcoin provides more economical value than Argentina? How much energy has and is being expended during the mining of all the gold that is just being used as store of value?
(Mostly playing devil's advocate here. I would personally be for strong carbon taxes on electricity.)
> How do we determine how much/little energy usage is acceptable though?
Well, a purely electronic financial instrument that pretty much by definition cannot produce anything, and provides little but an arena for speculation, would seem to me to be a bad thing to introduce to a world that's trying to reduce energy use.
If you want to get into "well people clearly value it", the evidence being the money they pump in, well then any energy expenditure is justified if it is profitable, and this conversation is pointless.
> How much energy has and is being expended during the mining of all the gold
This is just whataboutery. Gold can be a problem as well.
Impressed. I didn't know Bitcoin transactions accounted for such huge volume almost as large as MasterCard. I use MC almost every day for almost everything. Is there people like, entirely living with BTC?
I think it's more like I can create a currency, say that one myCoin is worth $5B, do 2 transactions of 1 myCoin and I can claim that I handle $10B/day.
Looking at the transaction amounts isn’t very informative, as one is primarily used as a speculative asset, the other two are actual payment methods. A better comparison would be looking at daily trading volume on the stock market.
To help put the difference more in scope, Visa and MasterCard each did over 100 billion payment transactions (nearly 300B combined) in 2019[0], yet Bitcoin still is over 3 orders of magnitude lower at around ~130 million (350k daily average x 365 days). The key distinction is the fact that the average Bitcoin transaction (currently ~$100k) is far higher than the average credit card transaction.
You'll have a hard time convincing people that Bitcoin is OK by comparing it gold since most people who think Bitcoin is wasteful would also think mining of gold is very wasteful. Moreover, I feel like you're making the mistake you highlight in your first paragraph: conflating 'mining' in gold with 'mining' in BTC. Bitcoin mining is necessary for transactions to occur, not so for gold. It's a very foggy comparison as far as I can tell.
Your comparison to VISA links to a source that says that better comparison is Fedwire and that it only settles 1% of the money that FedWire does. So Bitcoin significantly loses to VISA in transaction count and FedWire in value settled. So I'm not convinced by your argument. And how much energy does Fedwire use? Presumably much less than VISA.
It would be more apt to comparing the cost of transacting Bitcoin to that of recycling gold instead of mining it, which is not zero, but is substantially less than mining and that's where again, Bitcoin takes another lump. Recycled gold is useful; it's a precious metal obviously and one immune to most forms of oxidation, so once reclaimed, it can be used again in the next generation of smartphones and what have you.
Gold is however undoubtedly a good comparison pick for Bitcoin; it's something with a few natural pros on it's side that's been hideously overvalued for largely irrational reasons. Like... this metal is advertised as the "right" basis to back currency but I also have some of it in nearly every gadget I own? Then how rare can it possibly be if a small amount comes in a $15 audio decoder for goodness sakes!?
If this trend continue we may well seal our fate by crunching useless numbers at a global scale for the sake of greed and because we seem incapable of trusting each other.
If this was written in a novel we'd deem it a bit too much on the nose really.
We've already destroyed the planet through greed (let's be real, we're not going to fix climate change). If you were a writer you would be writing history, not speculative fiction.
You'll have to explain to me how replacing inflationary currencies with a deflationary one makes any sense in that context. Inflationary currencies punish those hoarding money, deflationary currencies reward them.
The idea that bitcoin is good for the less fortunate and bad for rich people is pure propaganda and not based on reality. It's going to make a bunch of early adopters very rich, and that's about it.
Bitcoin will benefit anyone who wants to save (create capital). It will not be kind on those who merely want to consume. It's low time preference vs high time preference.
Not all rich people have low time preferences. Particularly those who are involved in the fiat system and who benefit from the expansion of debt. They think in quarters.
And not all poor people have high time preferences, but under fiat, saving money is highly discouraged because it loses purchasing power. People are encouraged to spend or invest in stonks - where the markets are rigged to benefit the big players.
Everyone benefits in a society where capital is accumulated, rather than debt.
As for "rich versus poor," this is a distraction because their is nothing you can do about it besides resorting to theft, which makes the problem worse.
The problem has always been "thieves versus hard workers." The current system is one where central banks and those close to them are stealing the time that other people have put into labour by deliberately devaluing their money.
If something ever overtakes Bitcoin in the same way that Facebook overtook MySpace it’ll disprove the entire Bitcoin thesis. Currencies have to be stable. I expect a winner take all scenario here and Bitcoin to be that winner.
"if" successful? Ethereum has had smart contracts now on-chain for 5-6 years and they are producing new abstractions and value add to the crypto ecosystem like decentralized exchanges, derivatives, crypto collectibles, savings and loans, conditional execution logic of smart contract based on external data from oracles (for things like prediction markets, insurance, price feeds, etc), etc etc. Turing complete smart contracts on-chain are a game changing innovation and Bitcoin won't go near it. They have ossified the protocol around the digital gold paradigm while Ethereum is creating a whole new platform with distinct network effects and value add. There's no reason why Ethereum's market cap can't exceed Bitcoin's. You know, there's asset classes that exceed gold's market cap, after all.
Ethereum is the most interesting altcoin I agree but it was always designed to be something sufficiently different to bitcoin, unlike most altcoins.
However ethereums adoption is considerably below that of bitcoin, possibly because the use cases are so varied there is not one strong reason for involvement. There may be many minor reasons that small specific groups have an interest in it but that isn't sufficient for widespread adoption.
The most important thing Ethereum is working on is PoS over PoW, and that technology, I expect, will transfer to bitcoin I'd Ethereum implements it successfully first
Bitcoin is never quitting PoW. The Bitcoin core maintainers and consensus are adamant about PoW.
The ETH2 work is important but the app layer on Ethereum is where the action is at today. Decentralized Finance is growing at 30x rate per year: https://defipulse.com/ . I fully expect this development to eventually eat most of the financial markets. They are going after derivatives, lending, options, etc. It's an extremely fast moving and innovative field and Bitcoin is frankly getting left in the dust. They will not implement Turing completeness. A lot of Bitcoin will end up wrapped and deployed on Ethereum. There's already $7.7B worth on there today: https://defipulse.com/btc
The problem is (and I have been involved - most often unsuccessfully) that building anything in this ecosystem requires a lot of understanding of digital signatures, distributed system, economics, game theory, security & quality, trustless ecosystems, incentives, possibilities of players with big budgets (PoS - 51% bought by some government)/great developers (bots frontrunning hacking of ERC20 contracts)/criminals (you have strong encryption, but still can be blackmailed/beaten).
Bitcoin is one of a few currencies that deliver what it promises. It doesn't promise a lot, but what it promises, it does. Others promise a lot but underdeliver and later abandon it. At this moment, I think Bitcoin delivers 100% of what I expect from it. Monero is potentially better, but underdelivers. Ethereum is potentially better, but underdelivers. Others are either just copycats or completely fail.
Bitcoin only delivers 100% of its promises because the promises have changed.
At first it was supposed to be peer-to-peer digital electronic cash. It was meant to both be money and a payment system to replace PayPal and the like.
Now it's been reduced to just a store-of-value, and not even that, it's a speculation that the volatility will stabilize and that it will be a store-of-value in the future.
> Your house is not necessarily heated with electricity.
But it will be anyway, that's a matter of a few decades now. If you're currently replacing your heating system, I should hope you're switching to electricity.
Though I'd say let's get a heat pump and save like 2/3rds of the energy compared to making the heat from scratch. Depending on the climate you might need some additional heating a few weeks per year, and then yeah sure let's do mining, but that's not a stable basis for a cryptocurrency's security.
Although I am not a fan of cryptocurrency popularity (mainly because of the potential to destabilize the macro economy), and I don't know much about this company: https://qarnot.com/en/home/, but I find they have a great name suggestive of thermodynamically optimal computing, Carnot being the father of thermodynamic efficiency. Carnot came up with thermodynamics to optimize steam engines, maybe making him the most steampunk of scientists. Thermodynamically optimizing bits is an echo of that for the cyberpunk age.
This is a rehash of a previous post of mine regarding electricity consumption:
Back in the days where all our electricity came from fossil fuels, I completely agree that marginal electricity usage was bad for the environment. However I think that thought has persisted with us even though it is no longer true 100% of the time. With renewables sometimes the marginal cost of electricity to our environment is near 0 or even negative (eg, during periods of higher winds and lower demand.)
I predict that in the future as bitcoin mining becomes more and more of an efficiency game that you will see bitcoin mining be kind of a load balancer the grid, effectively turning off during peak demand (or low supply) times and contributing to the base load during regular times.
For example, it may even help the economics of building new wind plants. Eg, currently it may not be profitable to build a new wind plant because base load is too low that the excess power generated would need to be sold off at 0 or even negative prices. However if bitcoin mining could be turned on during these times and off during periods of high demand, there will need to be fewer peaker plants in operation and it would positively affect the economics of opening a new wind plant.
Bitcoin mining only cares about the cost of electricity at a given time, it is not like most other electricity demands that are very time based. With the large variance of electricity generation by renewables, I think bitcoin can in the future help smooth demand according to the real supply/demand curve.
It's kind of like a different implementation of the Tesla utility grid batteries. Instead of deploying power, you force the grid to build more renewable capacity (that the miners are paying for) that you use except in peak periods, where you turn off and effectively provide the grid with more power.
Edit: here is an article of a bitcoin mining company doing just that:
Using fossil fuels for electricity is very nice. Imagine all the forests that stayed intact in remote places of the world that just started burning oil.
I don't think this will work out for several reasons:
1) Peak power usage is when people are awake - this is when you want transactions to happen.
2) This wouldn't reduce the need of peak plants, since you aren't generating power when mining for bitcoin. How would increasing overall energy consumption require less energy generation? If renewables could ramp up/down quickly and not be dependent on external factors - that would remove the need for current peak plants - which is usually nat gas.
>1) Peak power usage is when people are awake - this is when you want transactions to happen.
Mining is global, so this isn't an issue. It might be peak period in europe right now (2PM UTC) but not in asia or western US.
>This wouldn't reduce the need of peak plants, since you aren't generating power when mining for bitcoin. How would increasing overall energy consumption require less energy generation?
This is a big unknown, because the economics depends entirely on the cost of electricity vs the cost of equipment. If electricity cost dominates, then it'd make sense to shut down mining operations during periods of peak usage (because electricity prices are higher), but if equipment costs dominate then it'd make sense to mine 24/7.
As long as we need coal or gas plants, bitcoin mining is a net negative for the environment. It also doesn't add anything of value and facilitates crime. If you want to push bitcoin to low demand hours via pricing, you're increasing the price for the rest of us. It's a lose-lose-lose situation for people.
Given that the difficulty adjusts only every 2 weeks, that means that the time to find a block will vary enormously during the day as the demand/supply imbalance varies. That'll make BTC even more annoying than it is already (it's currently peak electricity demand where most of the miners are sitting, so I'll have to wait 3 hours for my 6 confirms?).
At any rate, you're basically saying that with renewable energy it's ok to waste energy, and I think we are not quite there yet.
>Given that the difficulty adjusts only every 2 weeks, that means that the time to find a block will vary enormously during the day as the demand/supply imbalance varies.
Isn't this a non-issue because mining is global? Peak time in europe doesn't mean it's peak time in north america or east asia.
Interesting question. If miners are approximately evenly distributed across timezones, it could be indeed the case, say, that those where demand is currently at its peak (following the sunlight) switch off their mining as electricity is expensive, and then switch back on as the sun leaves and electricity demand (and prices) fall.
I had assumed that mining is concentrated more. Empirical question.
I think that this is a great big stretch to try and justify BitCoin mining. I don't know if you personally own BitCoin, but I would say that this is a prime example of motivated reasoning.
> or even negative
I can see no way that consuming more energy can result in an improvement to the environment (unless that energy usage was directly related to improving the environment). There is absolutely no time where you can say "the more lights I leave on, the better the climate will be," no matter what your energy source is.
In general the rest of your argument can be summed up as "if there is more demand for electricity, more utilities will build renewable plants." The problem with this argument is that there is already far more electricity being used than renewables can supply, so there is already all the incentive needed to build more plants.
As for the present-day, a BitCoin mining rig consumes whatever proportion of fossils are inputs to that grid. If a grid is 50% renewable and 50% fossil, you can't pretend that you're consuming only the renewable portion. Indeed, the opposite may be true: renewables generally just produce their max output, the fossils can ramp up and down to meet higher demand. So it's best to think of the fossils as the ones that are rising to supply any "unnecessary" usage.
> where you turn off and effectively provide the grid with more power
This is again pretty striking motivated reasoning. Yes, if we turn off all non-essential lights during peak hours we are kind of "supplying the grid" with more energy, but if we build a huge energy-suck, and then occasionally turn it off, we don't get to pretend we are actually energy suppliers. If I set fire to $1000 of my company's money every day, I don't get to pretend I earned them $1000 on the days when I don't.
I think that this critique severely mischaracterizes the argument: we're not just talking about the merits of blindly consuming electricity ("leaving the lights on forever"), we're talking about what happens when you attach a financial incentive to consuming electricity structured in such a way that your net profit increases if you spend less on that energy.
For Bitcoin miners, the input is energy, and the output is money. This means that there is now possibly an incentive to make available cheaper sources of energy, and right now that happens to be wind and solar (at least per kWh).
It's worth litigating whether such an incentive actually exists, or if it does exist whether it will actually stimulate green energy development, or whether cheap energy is always going to be clean energy. These are interesting debates. But it's impossible to talk about Bitcoin as long as we mischaracterize the arguments.
You have the supply-demand curve backwards. If there is more consumption of electricity, that raises the price, it doesn't make it cheaper. Of course the bitcoin miners would like to buy it cheaper. The power companies would like to make it more expensive. Economics dictates that their meeting point will be higher with more demand.
You're describing it as if BitCoin miners have the ability to construct their own gigawatt power plant.
But even if they did, the argument is still "If I use more electricity, and I/they create more green power plants to match my demand, the environment is better off."
If I burn 100 TWh/yr of electricity, and they build a power plant for me that supplies 100 TWh/yr of green power, how, exactly, have I reduced the demand for fossil fuels? I'm burning all the new green energy that's being created!
> If there is more consumption of electricity, that raises the price, it doesn't make it cheaper. Of course the bitcoin miners would like to buy it cheaper. The power companies would like to make it more expensive. Economics dictates that their meeting point will be higher with more demand.
First of all, economics dictates that supply will catch up to meet the demand as long as the barrier to entry is low. You'd be right if there was a cartel in green energy — but there's not. As long as supply is elastic, high prices are always transient.
> You're describing it as if BitCoin miners have the ability to construct their own gigawatt power plant.
No, I'm describing it as if BitCoin miners have the ability to set up ASICs powered by solar panels in the middle of a desert in Nevada. Somewhat high upfront cost, but effectively zero marginal cost of power. What's being stimulated here is the demand for accessible solar panels that can be quickly/cheaply installed.
> If I burn 100 TWh/yr of electricity, and they build a power plant for me that supplies 100 TWh/yr of green power, how, exactly, have I reduced the demand for fossil fuels? I'm burning all the new green energy that's being created!
But again, that presupposes that there's some fixed supply. Supply also changes, and it responds to demand. This is the core thesis behind Keynesian stimulus, and why inflation doesn't necessarily follow from stimulating demand.
Now, baked into all of my points here is the assumption that the barrier to entry for new supply is low. It might not be! That's, I think, the more interesting question. The market conditions could also change making it easier and easier to spin up a solar farm, or spin up a wind-farm.
> But again, that presupposes that there's some fixed supply.
No, it doesn't! Exactly the opposite!
Again: if a BitCoin miner generates 1 TWh/yr of their own electricity, how does that reduce the burning of fossil fuels?
Likewise, if power companies create more green power to supply the needs of BitCoin miners, how does that reduce the burning of fossil fuels? You're simply consuming whatever new green energy you're creating.
So the whole "it will make power companies produce more green energy, and therefore it's good for the planet" argument falls flat.
> Again: if a BitCoin miner generates 1 TWh/yr of their own electricity, how does that reduce the burning of fossil fuels?
First of all, if a BitCoin miner can generate 1 TWh/year of their own electricity without burning fossil fuels, then the entire argument around Bitcoin electricity use is moot. Second of all, the only way a BitCoin miner can generate 1TWh/year of their own electricity is if they have access to the tools/infrastructure necessary to set up their own power generation — and the demand for that tooling/infrastructure stimulates the development and promulgation of it.
> Likewise, if power companies create more green power to supply the needs of BitCoin miners, how does that reduce the burning of fossil fuels? You're simply consuming whatever new green energy you're creating.
Again, because if you dust off your "economics" argument, when demand increases, cost increases. Then when cost increases, as long as supply is elastic, it increases to meet the demand. The demand for green energy, today, is increasing at a natural/slow pace, but if you have a financialized industry that demands high volumes of it, you supercharge the development of infrastructure on the supply side — enough that eventually the majority of electricity supply is green.
> So the whole "it will make power companies produce more green energy, and therefore it's good for the planet" argument falls flat.
You really haven't explained how. Your entire argument presupposes fixed supply. Maybe that's true, but you'll then have to make the case for why the supply of green energy (or tooling/infrastructure) is fixed.
As it stands, right now, there's a lot of money to be made selling solar panels. If industries mobilize to cheaply produce easy-to-deploy solar panels at scale, that is good for everyone.
> Again: if a BitCoin miner generates 1 TWh/yr of their own electricity, how does that reduce the burning of fossil fuels?
Simple, during times where peaker plants need to run (because electricity demand is higher than supply), these miners can shut off, giving the grid more green power. Now these peaker plants (which generally burn coal/natural gas) don't need to exist or run anymore.
> I can see no way that consuming more energy can result in an improvement to the environment (unless that energy usage was directly related to improving the environment).
Literally the entire point of the comment you are responding to was to outline how bitcoin mining can help support the economic viability of renewable energy projects like wind farms.
And since we already use far more electricity than renewables generate, I dismissed this concern in my comment.
I mean, if that were valid, wouldn't it be more environmental if we all just left the lights on 24 hours a day? Or turned on thousands of A/C units outdoors?
It's like saying my burning $1000/day of my company's money incentives the company to earn more money, so it's actually a good thing.
I don't think you're understanding the point being made. It's not simply that bitcoin consumes energy, but about the economics of renewable energy infrastructure. Building a renewable project large enough to power an entire city during peak hours often does not make economic sense because of the large fluctuations in consumption. But, if you have a bitcoin mine that you can flip on to consume the excess energy during off hours, suddenly the economic viability is completely different.
> Bitcoin mining only cares about the cost of electricity at a given time
I think this is the fallacy in your argument:
In the absence of a block reward, Bitcoin mining seems like a purely demand-driven activity. The demand is people wanting their transactions be confirmed on-chain, which seems entirely uncorrelated with electricity prices.
On the other side, you have miners wanting to operate at marginal profit.
Total mining expenses would therefore be driven to always exactly match the total monetary value of being able to transact. In other words, the demand for transaction confirmation drives the demand for mining, which in turn drives the demand for electricity.
In a world in which the only electricity sources available are renewable, I'd agree that Bitcoin mining has no net impact on the environment. In any other world, some of that demand for electricity will be satisfied using fossil fuels, directly or indirectly.
What's your point? Gold is useful. One of the most versatile metals. You can find gold almost en every electronics, or medical implants, or scientific equipment, or in space telescopes. BTC isn't even useful data. It's just a number. What an utterly disingenuous comparison.
Bitcoin is useful too. It's impossible to quickly and reliably transfer money between many places (e.g. Africa and Europe, USA and Africa, USA and EU) by any other way than Bitcoin.
African banks will steal your money if they have a chance to claim it was lost in transport. Transfers between EU and USA take so much paper and gasoline (to travel to banks) that Bitcoin must be more ecological.
And transfers between many country pairs are totally impossible without Bitcoin.
There's levels of usefulness. Not dissing your argument but gold is still way more useful. There's has to be better ways to solve the problem you mention. Like they say, Bitcoin is a solution looking for a problem.
Gold is not much useful to millions of Nigerians while Bitcoin is praised daily there. I think if there was another solution, we would be using it already.
Bitcoin every consumption halves every two years since the mining profit halfs. Thus mining bitcoins becomes less profitable and thus more energy efficient over time.
In the other, if the price increases faster than the mining yield drops, efficiency is decreased.
This is incorrect. The mining reward halves every 4 years, but if the price of bitcoin goes up then so does the value of the reward. Also it is a bit of an arms race so more power is required to power more machines,to mine the same number of bitcoin.
Forgive my ignorance but aren't there a finite number of bitcoins? A casual search says the world has mined 18.5 million out of a total of 21 million, after which, doesn't the mining process stop, along with the current environmental impact?
No it doesn't, since the primary purpose of mining is processing transactions, not creating new bitcoins. The created bitcoins are merely an incentive to mine.
Bitcoin has a halving mechanism, every 4 years the rate of new BTC mined drops by half, so that BTC will take over a century to actually reach 21 million (2140).
Mining is what powers transactions as well as generating new coins. Once all 22 million coins are mined it is assumed that transaction fees will replace the coins miners earn . So mining will always remain in some form or another, and also the size of the network is what makes it safe.
Indeed. The "Coinbase" mining reward (currently 6.25 BTC per block mined) halves every 4 years. The theory is that the proportion of fees (currently only 10%-20% of the total reward miners make) will increase and make up for the reduction in coinbase.
Currently, a successful block makes 6.25 BTC * 45000 BTCUSD = 280k USD in Coinbase, or around 100 USD per transaction, plus a 10-20 USD fee per transaction.
As Coinbase drops (or BTCUSD drops), users will have to pay around 100+ USD per transaction in fees, or the rewards to miners will drop and some will go offline, resulting in a reduction in difficulty and less energy wasted.
If I understand the system correctly, the vast majority of bitcoin energy consumption comes from the mining process, which is not strictly required (at least not anymore, with 18+ million BTC now mined and in circulation). I can spin up the bitcoin software on my home PC to participate in the network, sending and receiving bitcoin, and confirming some transactions, and the power consumed would be low. Much less than running a 4k graphics 3D game.
Because of that, banning bitcoin ownership and trading seems to be overkill or missing the point... Just regulate/limit mining, or even better put a capacity on electricity usage or have tiers where the more you use, the more expensive it is, making mining not worth it after a certain point.
All that said, government regulation will be extremely challenging here as it would require cooperation of nearly every country on Earth, and we've seen how difficult that is.
You don't understand the system correctly. Mining bitcoins is also confirming transactions, which is the sending and receiving of bitcoins. Yes you could use your home PC but you would never find a block and so never confirm a transaction.
Mining Bitcoin is a necessity if you want to transact, so you can't eliminate it. Basically, validating transactions is very costly, so people doing it get rewarded with "mined" bitcoin.
If miners stop mining, you cannot transact in it, at least with the current "proof of work" approach. There are some alternatives, like proof of stake, but they are not mainstream yet.
The mining process is _how_ transactions are verified and recorded. Bitcoin doesn't work without it. Mining is a misnomer. You aren't finding bitcoin. It's a reward for solving a problem that proves you participated in helping record transactions for the network.
> Just regulate/limit mining, or even better put a capacity on electricity usage or have tiers where the more you use, the more expensive it is, making mining not worth it after a certain point.
Isn't that the exact method used, electricity is metered, the more you use, the more expensive it is.
Yes it drives up the price for everyone else because there's demand, but by that argument we would need to look at other energy intensive activities, like heating and driving, which feels like a step backwards.
No, the expensive mining process is required to build the block chain and prevent double spending. It is also used to determine who gets block rewards (transaction fees). Bitcoin will continue to consume more and more power forever
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[ 556 ms ] story [ 859 ms ] threadIt would also had a relative bigger impact on the price, and so Tesla could have made a lot more money with such a move.
10% is in Sichuan, which appears to be largely hydro-driven[3].
1: https://cbeci.org/mining_map
2: https://en.wikipedia.org/wiki/List_of_major_power_stations_i...
3: https://en.wikipedia.org/wiki/List_of_major_power_stations_i...
[0]: https://www.smart-energy.com/renewable-energy/renewables-pow...
[1]: https://simon.medium.com/bitcoin-and-pollution-the-definitiv...
End of the day, people choose to spend resources on things that provide utility to them.
A computer pumping ~300W into the air 24/7 is remarkably effective for a small apartment
If your using fossil fuels for heat its more efficient to burn them directly at point needed and capture the heat, rather than use the heat to convert to mechanical then electrical then back into heat.
Air source heat pumps are basically solar assisted, they move heat from outside air into heated space using electricity which also contributes resistive heat in compressor friction. The outside air is heated by the sun.
This is not true. Resistive heating is inefficient indeed but not all forms of conversion of electricity are inefficient. Geothermal pumps are very efficient for instance and use electricity only, they can be assisted directly by solar (PV) too.
Doesn't mean that the generator on the other end is efficient but that is a separate concern that can benefit from economies of scale (a big gas turbine would be more efficient than a swarm of small gas ovens producing the same energy).
Simple proof by example; if the exhaust air of your gas oven is warmer than ambient energy, it cannot be 100% efficient. (A few other laws of thermodynamics also play in here)
A gas turbine has the advantage that it can use higher temperature gradients within, as well as high speeds and other mechanisms to take advantage of larger burnoffs of gas.
A gas turbine is 60% efficient at base load and largely will be able to maintain 60% efficiency while being maintained at this load. A gas oven has a rough efficiency of around 70-90 % in AFUE. AFUE does not measure actual thermal efficiency, you can usually subtract between 10-35% depending on your boiler system, which ends you between... 40-60% just like a gas turbine in a worst case. The better cases of 60-80% are unlikely to be a steady state efficiency and more likely to be achieved if you have a boiler with great heat capacity that can hold onto the heat for longer. The efficiency here is ruined by ignition each time the furnace has to start running.
Turns out you can't cheat thermodynamics, but you can certainly market like you did.
The reason is that simply a heat pump does not convert electrical to thermal energy, so it has no comparable efficiency in that process.
That's the definition of efficiency for home heating.
Furthermore, that 100% efficiency of a resistive heater is only true under very specific high school level circumstances. Under no practical circumstances (e.g. source resistance, reactive load) resistive heater is 100% efficient (though it can get close).
In cases of heating, resistive is 100% efficient as you loose none of the energy put in to waste heat, only effective heat, while a gas oven or heater will loose heat to it's exhaust gases, thereby being less efficient.
I wouldn't say this is "high school level" circumstances. The waste heat in the wires of your house feeding into the heater will also heat up, no?
The only energy lost is outside the system we're trying to measure, hence, not relevant.
The mains is normally AC. You WILL lose energy either in AC-DC converter or in reactive load of the heater.
Yes, reactive current is still current and any series active load (wiring) will experience that current and heat up. The reactive load itself is "imaginary".
Besides, for any reasonable heater arrangement, this loss will be negligible compared to any other heating mechanism.
Not the fact that conversion of electricity doesn't have make energy disappear.
Electrically powered heat pumps also produce >100% efficiency.
And yeah that does seem to be "profitable". A 2070 Super card seems to net me a couple of bucks a day...enough to offset the cost. Probably not profitable in the true sense, but hey free heating is a win for personal finances.
[0] https://confluxnetwork.org/
I am telling myself the same thing when I play videogames. :-)
Change my mind.
Bitcoin rewards miners in Bitcoin, which is the ultimate deflationary “store of value”, and has the world mindshare as such. Even if a network arose that was better in every technological way, if it was a “sidechain” to Bitcoin, then BTC would just be locked up as people migrated to that network, so “unstaked” Bitcoins on the original network would become even more scarce, thus mining rewards would go up even more. Bitcoin would be a store of value / collectible just like gold, except its supply would always be shrinking and mining rewards rising.
PS: Consider I am right. How would governments even begin to stop it, if this use of electricity would net the provider more profit than powering a home?
Yes it was called a cash system in the original whitepaper - but somewhere around 2013 the narrative shifted from Peer to Peer Cash to Store of Value. And it has stuck. This is a copout but it works! Bitcoin has all the features to be a great store of value and nothing more...
Bitcoin is now a store of value and you dont need it to scale if once in a while someone wants to move $50K from their savings account to their checking account to actually use. They can also have Nexo, BitPay etc as debit cards backed by BTC reserves.
So why do you need Bitcoin to be a good currency too?
The toothpaste is out of the tube. Nothing can be done.
Well, personally, I'm still convinced Bitcoin is going to crash at some point. It doesn't work well as an actual currency because transfer times/fees are too high.
I don't know if that will happen in one year or 20 years though.
It is the ultimate store of value.
You think people will let governments destroy their store of value so that the world can use electricity for other uses? Let’s explore that shall we.
One third of the world farmland is desertified, today.
Insects are dwindling and other species are experiencing an extinction on unprecedented scales today.
Fossil fuels are being extracted at rates that are not stopping anytime soon. We never switched to electric cars yet.
We couldn’t even switch to biodegradeable plastic and instead polluted all the bodies of water on earth.
You really think humanity will be able to stop this runaway economic effect designed to get bigger and bigger until it consumes the world’s use of electricity? Why is this any different?
PS: with exponential growth, by the time you note the electric use is one quarter of the world, it’s too late.
Yep, a "store of value" created out of thin air, just like tulip petals! I don't expect it to last myself.
What backs gold? It is more durable than tulip petals
The more people buy Bitcoin as reserves the more it IS reserves. It is a network effect, man.
That’s how languages and cultures work too.
None of that means Bitcoin couldn't be the next gold, I just think the odds are overwhelmingly stacked against it.
Inflating the supply of bitcoins is a value in a config file + buy-in from miners, who are the ones with all the capital to benefit from inflating the supply. Unsure why you think the miners are just going to go home when it’s all mined and sell off their expensive equipment at firesale prices when they can collaborate to increase the amount of Bitcoin?
(Somewhere Joel Spolsky is yelling: “Commoditize your complements!”)
Please learn about how consensus rules work.
"The consensus rules are the specific set of rules that all Bitcoin full nodes will unfailingly enforce when considering the validity of a block and its transactions. For example, the Bitcoin consensus rules require that blocks only create a certain number of bitcoins. If a block creates more bitcoins than is allowed, all full nodes will reject this block, even if every other node and miner in the world accepts it." [0]
Because users must consent to run full-node software with a particular version of consensus rules, miners cannot simply change the rules. This was shown in 2017 with Segwit2x and UASF(User Activated Soft Fork).[1]
In other words,
"If securing Bitcoin requires consensus on what Bitcoin is, and Bitcoin is a database of values assigned to keys, and Bitcoin has a protocol for reassignment of keys, then securing Bitcoin can only be done by … your node!" [2]
> [Miners] are the ones with all the capital to benefit from inflating the supply.
You're not thinking clearly about supply and demand. Because bitcoin has a fixed supply (21M), its price movement is a pure result of demand. If someone were to start inflating the supply, the price would drop, devaluing the coins for everyone including those doing the inflation because created coins are instantly visible to everyone. (Incidentally, this also creates a disincentive for Satoshi to ever move his "lost" 1M BTC. Moving them would instantly make them appear available to the market/network and be a massively inflationary event. Prices would immediately drop in response to this perceived increase in supply.)
> Unsure why you think the miners are just going to go home when it’s all mined and sell off their expensive equipment at firesale prices when they can collaborate to increase the amount of Bitcoin?
Miners work for the block reward (which halves every four years) but also for transaction fees (an auction in which you bid for blockspace for your transactions). The question for the distant future is: will transaction fees be sufficient to ensure the security of the network?
[0]: https://en.bitcoin.it/wiki/Consensus
[1]: https://bitcoinmagazine.com/articles/bitcoin-independence-da...
[2]: https://medium.com/bitcoinerrorlog/who-secures-bitcoin-95b19...
"How would governments even begin to stop it" - I don't thing that governments will choose to try it, but if they did want to do so, a simple ban on all sale and barter in BTC would work. It wouldn't stop all trade, but making exits difficult would reduce investment interest sufficiently to get a huge decrease in price, especially since current price seems mostly defined by "store of value" i.e. investment arguments, not based on usefulness for transactions. If many investors can't exit, then it ceases to be a good store of value for them, reducing the demand.
For example, Tesla $1.5B purchase was a big pressure upwards; but if it's known that no such purchases are ever coming again, and that Tesla's holding is now worthless (unlike some small-scale drug trader, a US company like Tesla can't really use a black market or person-to-person transactions to exhange it for anything), that would kill the short-term price; this would mean that the mining costs much more than their electricity costs (there is an inherent lag in block difficulty adjustments that's potentially huge in case of a rapid slowdown in mining rate) which may cause many miners to cease mining.
Of course, then you can talk about externalities such as climate change but I am ignoring this for now and just talking about the criticism of wastefulness.
That's what, you know, governments are supposed to be fixing.
I am being brainwashed on a daily basis to turn off electronic devices, I pay extra for electronic devices to be marginally more energy efficient, I am crossing local law if my car idles for more than 60 seconds but it is fine to be burning energy on massive scale as a detail of computing algorithm.
Not to mention I can't buy decent graphics card because of how prices are inflated by miners.
Let's face it. If you are mining bitcoin you are effectively engaging in a destructive operation where you accept small extra payment for burning much larger amount of energy away. While the rest of the world tries to minimize our carbon footprint you are wasting part of the infrastructure that makes it possible for a cut.
- Consider the small plastic pellets, which will eventually work their way into delicate ecosystems and devastate the ecology for a millenium or more.
- Since beanie babies were considered a store of value, countless tons of plastic storage bins and millions of cubic feet of climate controlled storage space are consumed to store beanie babies.
- Back of the napkin calculations indicate that over a billion dollars has been spent heating and cooling beanie babies since 1996.
- Beanie babies take up alot of space, driving demand for self-storage facilities.
- When sold on the internet, consider the electricity, excess heat, etc generated by Ebay, as well as the carbon footprint of producing and disposing of cardboard, tape, labels, etc and the carbon consumed in shipping them.
- The human toll is real as well. At least a dozen UPS drivers have been seriously injured while delivering beanie babies.
On the surface it seems the value of Bitcoin is directly tied to its energy consumption and thus environmental harm.
I get that Bitcoin itself is decentralised and cannot be banned outright. But could it be neutered in such a way that renders it more and more worth / useless?
If I wanted to neutralize it, I would do something like Bait&Switch. Support banks running own cryptos until point where general public will see no difference between BTC and private cryptocurrencies and leave BTC users with their wallets and even when it will remain legal and everything, the "crypto revolution" would be taken by usual suspects (the establishment).
However, I wouldn't like to see it. I prefer world currency to be run by nerds over bankers and politicians.
There's no need for mental gymnastics of blaming energy. Just one powerful guy says "no" and poof, its illegal. Now laws or logic required.
There was an exception for collector coins and jewelry
I liked the idea of bitcoin when it came out, but as per usual things have just gotten out of hand from there.
[1] https://www.statista.com/statistics/299609/gold-demand-by-in...
fair (and I think gold as a "beautiful" metal is dumb), but the other half of the usage (on your claim) is for an array of productive things. I don't see wires, heat reflectors, etc being made out of bitcoin.
It's far less than that. Only 7.48% is definitely useful (under "technology").
I sincerely wish more people had your ability for introspection!
The answer: they might try, but good luck with that.
It's not as simple as calling out the top energy users and saying we should start there.
Ah yes, the old trope that people use the US dollar because they are forced to.
Meanwhile, back in reality, people around the world are desperate to get their hands on USD for commerce, because it's easily transacted, accepted and valued anywhere. You know, kinda like Bitcoin purports to be, but way more common.
A currency having value abroad is arguably a side effect, not the main goal.
Dollars are not meant to be an "investment". The fact that the supply can be increased on demand is a feature, not a bug.
The same pattern repeats itself in history: those with the biggest army popularize their culture, language and coin. The Roman Empire is a good example.
See https://en.wikipedia.org/wiki/Hegemony
If the government is allowed to dictate how my car must be built in order to make it more environmentally friendly, I don't see why it shouldn't be able to dictate how my blockchain must be built in order to make it environmentally sustainable.
This wouldn't mean banning blockchain altogether. It would entail banning only those forms of distributed consensus that are not energy efficient.
Proof of work (POW) is by definition inefficient from an energy perspective. You have to prove to have spent a lot of resources to be trusted. There's no excuse for this from an environment point of view, even if, admittedly, from a technological perspective is quite a marvel.
I wouldn't be surprised to know that those defending bitcoin on this front are biased because they hold some quantity of crypto based on POW.
So save your regulations for the power plants and let the market figure out how to spend the electricity. If you wouldn't be in favor of the government regulating how much money can be spent on beef, or how much money can be spent on TVs, you shouldn't be in favor of the government regulating how much can be spent on Bitcoin's electricity bills.
The bigger issue with GP's comment is that, even if every major country on earth requires PoW systems to use renewable electricity (which won't happen any time soon in the first place) and can't run on the regular mixed grid, then after switching to countries without such laws (until there are none left), the renewable energy will be bought up at the source and the coal and gas plants will continue to supply everyone else. Nothing changes.
We need to change everything else to renewable before this starts to be effective. It would make a much bigger impact if some countries, where users want to use cryptocurrency, make it illegal to use proof-of-work-based goods or currencies (whatever it's classified as). Suddenly a coin with PoS or something else becomes much more popular and we might, perhaps, shift over to a digital coin that is not a climate disaster.
Is there no way to slim down the resource requirements to cut electrical use? (without breaking everything Bitcoin of course)
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[1] He played a major role in developing leaded gasoline (Tetraethyllead) and some of the first chlorofluorocarbons (CFCs)
[2] Environmental historian J. R. McNeill opined that Midgley "had more impact on the atmosphere than any other single organism in Earth's history"
https://en.wikipedia.org/wiki/Thomas_Midgley_Jr.#Legacy
To put it bluntly (not meant to sound blunt, I just can't think of a better example without reiterating a technical explanation of how bitcoin works), that's like asking if people living in the Sahara can't simply drink less water to solve the unavailability of fresh water. And even that's a bad comparison because the human body actually can actually make due with less water. Perhaps it's like an electric heater (not heat pump, just a plain old heater), if you know how these things work: if you make it use fewer Watts, you get less heat, because there is no "waste heat" because heat is what you want in the first place. So fewer Watts is always less heat no matter how you spin it.
Similarly, putting more power into Bitcoin makes you earn more money (as a miner). If we make the hashing algorithm more efficient, then the hash rate will just raise proportionally to meet the new supply (supply being the block reward + transaction fees, both in bitcoin (or whatever proof-of-work currency you're mining) that you receive when finding a block as a miner).
No, the alternative is moving away from proof of work. I've been hearing stuff about proof of stake for years now, and afaik there are some currencies already using it. Not sure why Bitcoin doesn't switch to it, I'm not keeping up. Lost interest back when it became clear what a disaster it is and that it won't be able to fulfill its original purpose anyway. I'm very surprised the price is still soaring, shouldn't the best currency win? I guess people just don't give a fuck about their non-direct impact and see it as a way to get rich quick.
Cheers for the reply
The fact that Bitcoin now uses half the power of Youtube (from a terribly unreliable estimate) should not be such a distraction from the real problem IMHO.
Terribly unreliable estimate:
https://www.google.com/search?q=what+is+the+total+power+cons...
The whole point of Bitcoin is resistance to adversity. Bitcoin value is directly correlated to its resistance against governments/agencies/bankers/regulation or anything else that wants to shut it down. If you can wrap your head around that, you'll understand why making bitcoin more eco-friendly from a centralized government or organization will suddenly make it less valuable.
"A consensus mechanism unique to Nano which involves accounts delegating their balance as voting weight to Representatives. The Representatives vote themselves on the validity of transactions published to the network using the voting weight delegated to them. These votes are shared with their directly connected peers and they also rebroadcast votes seen from Principal Representatives. Votes are tallied and once quorum is reached on a published block, it is considered confirmed by the network."
Suggested read: https://docs.nano.org/protocol-design/orv-consensus/
But even in this crypto bull market, everybody seems to ignore it, except for the fanboys on Reddit.
https://ethereum.org/en/developers/docs/consensus-mechanisms...
One of the problems with it is that it's difficult to bootstrap a network on a proof-of-stake system with a fair distribution. You end up with the pre-sale participants (i.e. VCs or founders) having the majority of the tokens.
I think what Ethereum is doing is a decent approach. They started as Proof of Work, so they were able to bootstrap the network for 6 years and now ETH is widely distributed and no single holder owns more than 1% of ETH, for example. So now they can migrate to Proof of Stake and they won't suffer from the centralized allocation problem.
I searched and found a blog that claims a chain is chosen by trusting other nodes:
“In PoS systems, weak subjectivity arises because the longest chain rule is not sufficient to determine the main chain due to the (nearly) costless process of creating an up-to-date chain. Creating up-to-date competing chains would take little effort in PoS as opposed to in PoW. Therefore, new nodes or nodes that have been a long time offline have to trust the information they receive from other nodes about which chain is the valid one, causing weak subjectivity.
In the case of weak subjectivity, to ensure that the information about the valid chain is accurate, a node that is new or comes online after a significant period would have to get a recent block hash from a reputable source, such as a blockchain explorer, and insert that as a “checkpoint” into their blockchain client. This is the method of dealing with weak subjectivity, which relies on the trust with a reputable source. Although not completely in line with a trustless system, it shouldn’t really be an issue unless the reputable source is compromised.” - https://medium.com/better-programming/the-problems-that-ethe...
In distributed networks, a transaction has "finality" when it's part of a block that can't change.
"To do this in proof-of-stake, Casper, a finality protocol, gets validators to agree on the state of a block at certain checkpoints. So long as 2/3 of the validators agree, the block is finalised. Validators will lose their entire stake if they try and revert this later on via a 51% attack."
In ETH2 2/3 of 128 randomly selected validators have to agree. You also get slashed if your validator goes offline, so they factored for that case:
https://ethereumprice.org/guides/article/eth-2-staking-risks...
And at least for the beacon chain you have to sync the whole chain to your node before you can begin validating.
Imagine a net split, where the network becomes briefly partitioned. Nodes in each partition would keep adding blocks. When the network converges, there would be two conflicting chains. Using proof-of-work the chain with the most work (longest chain) is the valid chain.
Another scenario: Using proof-of-stake I can create my own alternative chain easily (if I don’t want stake money I could create new genesis block), and broadcast blocks to nodes that join the network. When those new nodes receive blocks from conflicting chains, which one is correct? From what I understand of Ethereum, new nodes have to choose trusted nodes when they join the network.
I wonder, if one is going to consider trust a non-problem, then why stake at all? A network like Nano works the same way, by trusting a quorum of voting nodes, but there’s no staking or inflation, which has the benefit of allowing anyone to participate without the rich getting richer.
Curious about this statement. Is this something that can be looked up online? I know wallets/transactions are entirely public so I guess its just a question of whether someone has made a tool to do this with ETH or other cryptos. How do other coins fair in the same regard? What's BTC distribution? LTC? Or any of their forks?
Top Accounts by ETH Balance: https://etherscan.io/accounts
#1 has 5%, but it's the wETH ("wrapped ETH") smart contract, that allows people to deposit ETH as the native token and receive wETH in return. wETH is more easily used for things like decentralized exchanges (https://weth.io/). So that's really a utility contract used by many applications and users.
#2 is the ETH2 Deposit contract, with 2.6% of supply. These are stakers receiving mining rewards for participating in ETH2 beacon chain validation.
#3 is Binance, with 2.5% of supply. They are the largest centralized exchange, so that 2.5% represents Binance's customer accounts.
#4, #5, #6, are also exchanges.
#7 is Compound Ether (@1.08% of supply). Compound is a decentralized finance savings & loan protocol, so again, that 1.08% represents tens of thousands of Compound users.
Pretty much every coin has substantial gini coefficient issues.
You mean no single wallet?
More keys to keep up? I don't think you understand how wallets work...
You can trivially generate 100 ethereum addresses from just one private key...
There are plenty of people who understand it well, I'm not saying it's outside of reach of a normal human being. But understanding proof of stake is not a 30 minute journey. (nor is understanding proof of work for that matter)
I post a deposit that says I'll be honest. If I'm caught being dishonest, I risk losing my whole stake.
How do you know that someone has been dishonest? A consensus system can only enforce rules within that consensus system, if the consensus system has been compromised the dictator can censor any evidence of dishonesty, even if most people are aware that dishonesty has occurred.
You can draw the line anywhere you want for "conceptually simple". We could easily say that proof of work is equivalent to building a tower, and that the tallest tower is used to determine what consensus is. That's also very simple, but also leaves out a bunch of ideas.
Yes, well how is this different than Bitcoin's massive multibillion dollar mining farm operations? Hard to avoid the rich getting richer. At least with Ethereum, it has launched hundreds of derivative tokens that have been able to experience exponential growth and have made a lot of retail investors very wealthy.
> How do you know that someone has been dishonest? A consensus system can only enforce rules within that consensus system, if the consensus system has been compromised the dictator
You're getting into implementation details. Almost nothing is ever easy to implement even if it is easy to conceive. Ok, a dam or a bridge is easy to understand, but building one is a highly technical challenge that involves a myriad of engineering tradeoffs, so if you want to read more into the particular tradeoffs the Ethereum Developers have settled on, go read the documentation. Everything is a rabbit hole, go as deep as you want.
Given that we are not interested in what these functions do, my choice would be to optimize the fast function.
Electricity used by Argentina generates massive amounts of destruction and pollution. The electricity used by Bitcoin is probably not even close.
Where does one even start?
My opinion is that using more electricity than Argentina is not as dramatic as the comments make it out.
Bitcoin is never going to be as destructive to the environment as these countries.
Saying that PoW is immoral or that Bitcoin is horrible because of electricity use is fine. But the immorality or horribleness is magnitudes away from what the rest of the stuff using electricity does to the world.
If we want to optimize something, make reductions, Bitcoin is at the bottom of the list, rationally.
That's assuming that a transaction comparison even makes sense, which it doesn't really because:
Bitcoin is not a currency. People use it as a way of getting rich, which they could also do with any other currency by just having a limited number of numbered paper bills, some guarantee that no more will ever be printed (e.g. agree that nobody will use a bill number higher than 10 million), and publishing on a forum who owns a specific bill number. It doesn't need proof-of-work to function as an investment scheme.
https://en.wikipedia.org/wiki/Climate_change
Indeed!
It's understandable that emotions run high about this topic imo
When the Elon boom bursts, folks will be back to complaining about cow flatuence, birds getting killed by solar panels, or whatever the shiny environmental crisis of the day is.
With these issues in addition to the high power consumption, how will Bitcoin become a usable currency?
It won't for small transactions. Buying a car or a house with BTC could still be viable in the future.
Big issues, big risks, but maybe you have big balls too... I personally don't feel so self assured about myself.
Maybe by "international" you mean something else, but at least in the EU(and EEA and UK) transfers can be incredibly quick.
Even if it's less useful than, say, access to SEPA, it'd have to be 14x less valuable to break even (again, presuming internet access available to everyone, which isn't a thing yet).
People think that's a feature until they don't.
Not in the EU they don't. A SEPA transfer takes max 1 business day and is usually free. More info: https://www.gbm.hsbc.com/solutions/global-liquidity-and-cash...
There are title deeds and tax rolls. In many jurisdictions you have obligations like building codes that need to be inspected and an owner needs to be held to account. If you need privacy, you have to set up shell companies to act as the legal owner, not hide the payment from your bank or government.
Speaking of showing the source of the money, if you bought my house from me with bitcoin, I would have to speak to a lawyer about not running afoul of money-laundering regulations. And no, I won’t take the internet’s word for it that somehow, those laws only pertain to fiat currency.
Something tells me that the cost of fighting my government in court would far exceed the value of my home regardless of whether I was technically in the right not to fill out all those same forms.
Well, almost -- they do always feature cool progress bars as the money is transferred.
"I don't want them to know." is therefore a valid reason.
The idea that somehow they'll let you buy something with Bitcoin without requiring the same level of disclosure is a complete fantasy.
I'm sure it's possible, although almost certainly very much not really liked by your solicitor!
I must point out I know a couple people who did that in Hungary in the last ten years, just because it seemed absolutely insane to me (cheques don't exist here, either..).
I am reasonably sure this isn't that common though, and the government still tracks the transaction :)
Bitcoin might not be as good as the UK, but you have to understand that the consumer US financial system remains stuck in the 1980s.
You can do it from home for a negligible fee ($0-$3) if you're ok with ACH instead.
(Same-day ACH has a max of $100k, though it used to be $25k. Next-day ACH is something like $100M, though your bank likely has a lower limit.)
can you elaborate on this?
>a need for always-on nodes
AFAIK if you're not a payment hub (ie. you want to route other people's payments) you don't need to be always online.
Haviong trouble finding it now, but google "lightning network routing problems" and you'll get a lot of results. IIRC the fundamental issue boils down to a hard mathematical problem about node traversal that is not yet solved. I am having trouble recalling the name right now, apologies.
> AFAIK if you're not a payment hub (ie. you want to route other people's payments) you don't need to be always online.
There have been ways that a counterparty can close a channel in their favour if you aren't online. Perhaps this has been fixed by now.
AFAIK the fix is to have a service (or multiple) stay online for you, and I believe it could be done without requiring access to your private keys. If your counterparty broadcasts a stale transaction that's in their favor, your service will broadcast a newer transaction that reverts it.
While I agree with him that Bitcoin is a terrible currency, I think the "store of value" thing is nonsense as well. Stores of value need to have relatively stable value. Bitcoin is hugely volatile. That's great for speculation, but nobody with any sense would use it as the equivalent of a savings account.
On larger timescales, this isn't really that much of an issue.
Volatility is also trending downwards. The bigger it gets, the more stable it becomes.
To be clear, there is no mechanism, logic or reason (at least revealed to me) why this would be true. Vice versa, increased amount of trading typically increases volatility.
If that's the case, then bitcoin owners will only dump their holdings if a) they fear that the bitcoin network is about to collapse for some reason or b) they need to put the value stored in those bitcoins to use.
Define amount. If you mean number of trades, then the effect is decreased standard deviation if the average trade is smaller as a percentage of total market capitalisation. That seems completely logical.
See: pretty much every study in to HFT.
https://core.ac.uk/download/pdf/4837179.pdf
The mechanism is that you get flows hitting both sides simultaneously (56 buyers vs 44 sellers) that tend to cancel out, instead of a single player (3 buyers vs 1 seller or vice versa) dominating the flow.
BTC volatility will go down as adoption goes up.
I don't think it's at all clear that Bitcoin adoption will go up. It's never been useful as a currency for most people, and Tesla aside, merchant adoption has been in retreat for years. KYC/AML laws are reducing its utility for financial crime. Its only real advantage is in speculation and market manipulation. But both of those depend on volatility.
Large cap stocks weren't engineered for stability, but they're lower tail-risk than mid cap stocks, which are lower tail-risk than small cap stocks, and so on.
The same phenomenon has been broadly true across all markets over all of human history, and the underlying mechanism (heterogeneous flows) is well understood and rather intuitive.
Whether or not BTC adoption increases is not relevant to what I was saying. My only claim is that volatility will decrease if adoption increases, counter to the misplaced scepticism of the post I was replying to
If BTC adoption decreases instead, then volatility should increase, ceteris paribus.
For example, inflation of a given currency is measured using a basket of goods and services, not other currencies.
"1 Tulip bulb will always be 1 tulip bulb. It's just that people but them with a bunch of different currencies and all the other currencies have been really volatile relative to tulips (though not relative to one another)."
Consider the classic store of value asset: gold. It's up 17% compared to a year ago, and down 11% compared to its peak last august. Sure, it's less volatile as bitcoin, but it's hugely more volatile compared to t-bills or a FDIC insured bank account. Does that mean gold also isn't a good store of value?
Gold is generally considered a last resort for the case where the US completely falls apart. But if that happens, I'm not sure gold is going to be much use - the global economy will be screwed enough that everybody suffers, gold or no gold.
If all civilisations collapse, yes. But if your civilisation collapses, a neutral store of value is easier to own than e.g. a portfolio of foreign bonds in a handful of offshore accounts.
Even if gold isn't a means of currency, you can still trade for it because someone will be interested in buying it. After the collapse bonds and paper money will be worthless, but you can still trade gold for things.
Currency is whatever we use to avoid having to create 10-way exchanges. (Baker offers the cobbler 600 loafs off bread for a pair of shoes, but cobbler doesn't want that many because they will obviously go stale, so we need to bring in dozens of other people who need bread and can trade something else to the cobbler). Gold is a good choice for this, but is isn't the only possible choice.
I can think of two, but perhaps you can think of more.
First is the local society collapse because of war. Could happen to everyone, and while your armies might win in the long run, you might be forced to flee. At that point gold is useful because it is small enough to hide on your person, thus meaning you have a chance to get it out to a safer area. You might not be able to prove you own foreign bonds (or maybe you can, but it takes years of paperwork). Gold still has value to the rest of the world in this, so if you can get out with it that is a good thing.
A nuclear nation decides to end it all and shoot randomly targeted ICBMs everywhere. In this case the few percent of the world that survives by luck will need to start over. It is just your village, you can't travel far because of the wastelands surrounding you. Gold is useful because it can be formed into tools. Iron is better, but harder to form, and you may not have fuel to spare to heat it (proper heat treatment of steel is one of the things that makes iron useful). Gold also is pretty and so there will still be the jewelry aspects.
Neither of the above require the gold be currency, though it is a good choice for currency in general in the latter case when starting over. (not the only good choice) Scarcity is part of what has always made gold useful. You could get it in enough quantities that most travelers could carry their wealth around in that form (when not in the form of trade goods - traveler implies trader in those historical days)
Both of the above are long shots. I don't personally invest in gold because I find the risks of the above low enough that I don't bother to insurance against them.
Of course, signalling your importance and status is also necessary in primitive society, and wearing a little gold does the trick.
EDIT oh found another cool one, "Gold, with its malleability and incorruptibility, has also been used in dental work for over 3000 years. The Etruscans in the 7th century BCE used gold wire to fix in place substitute animal teeth."
https://www.ancient.eu/gold/
Gold has been used as a store of wealth since at least ancient times. So it’s not quite a fair comparison.
And the whole economy doesn’t need to collapse for an asset to be valuable. The reason Bitcoin is up is because people looking to maintain wealth are looking to broaden portfolios. S&P is overvalued for some, the US dollar is weak for some. Fed rates are still low, bond yields are low. If you take into account inflation those CDs and Money Markets you mention lose money. An extremely good CD will currently earn you 1% interest, meanwhile inflation will remove 2%.
So it doesn’t need to be nonvolatile for it to be seen as part of a portfolio of wealth management, and it definitely doesn’t need to only be a last resort against complete economic failure since almost nothing qualifies.
If you don’t already have a fully balanced and diversified portfolio, you may not need or be ready for Bitcoin yet... but that doesn’t mean there’s not trillions of dollars that are ready for it.
Usually constructive comments would get some actual criticism or disagreement rather than just downvotes.
I get it... BTC sour grapes just downvote. Same thing happened when I called out the GME fiasco when that was $300 a share.
But pro tip so you’re not sour grapes in the future. Put aside you’re egos, and instead of downvoting things here that scare you or you simply disagree with. Try using HN as a learning tool.
If you disagree with something.. comment first... then downvote. Discourse, discussion, debate. Those are the paths to learning and understanding.
What’s the benefit of downvoting rather than posting evidence to counter my posts.
Since you don’t it means you don’t have relevant facts and instead seem to quell posts you disagree with.
That is a fact. I don’t “believe” the sky is blue due to light scattering ... I know it. And it doesn’t require “a line to the mind of God”. It’s called science, knowledge... education.
It is a fact that cryptocurrencies have value as a store of wealth and are not ponzi schemes.
Just because you don’t understand it doesn’t make it a belief on my end. Just like if you don’t understand why the sky is blue from how light interacts with nitrogen molecules, doesn’t make it a belief on my end.
We could debate the current price of Bitcoin. We could debate whether it’s in a bubble (which happens all the time in legitimate asset classes like real estate or the stock market). We could debate if the fact that only certain sectors of the population have access is detrimental. We could even discuss if Tether is pumping up Bitcoin through manipulation. (My opinion, since I and everyone currently have very limited data on it, is that it is, but ultimately to a very small degree). And tether in the way you brought it up, is a red herring here because one lone bad player doesn’t negate everything.
But dismissing cryptocurrencies as Ponzi schemes, tulips or beanie babies is simply ignorant and without fact. If there were facts that could support that conclusion, that would be worthy to discuss, but “extraordinary claims require extraordinary evidence”
Here are facts: COVID is a pandemic. Bitcoin is a store of value.
Here are opinions based on fact: The COVID pandemic has caused enormous suffering. Bitcoin is a good store of value.
Here are beliefs: COVID is humanity’s punishment. Bitcoin is going to ruin the world.
Here are prejudices: COVID is a caused by 5G or Chinese conspiracy. Bitcoin is a Ponzi scheme.
More reading on fact, belief, opinions etc:
https://writing.colostate.edu/guides/teaching/co300man/pop12...
https://chem.tufts.edu/answersinscience/relativityofwrong.ht...
Or it could be like tulip bulbs, beanie babies, or International Postal Reply Coupons (what Charles Ponzi sold everybody on investing in). Or it might not be a new asset class at all. It's not like there's a finite supply of integers.
It doesn’t matter if there are a finite supply of integers. I’m guessing you are alluding to being able to “print more Bitcoin” by moving decimal places or changing code or some such. That’s probably not going to happen, since you’d have to convince 51% of Bitcoin holders to dilute their own stake, since that’s how the consensus algorithm works. And if you don’t, we’ll then you have a fork, and as we’ve seen with Bitcoin cash etc, those typically don’t hold value, because fundamentally the value of a store of wealth is that everyone agrees that it’s a store of wealth.
No one ever agreed or assumed beanie babies or tulips were stores of wealth. Those were speculative bubbles based on the assumption that tomorrow you could sell it for more.
Bitcoin doesn’t need to be worth more tomorrow to make it valuable. It simply needs to hold wealth in a convenient, transferable, counterfeit proof manner that’s also not easily manipulated. And it does all of those things very very well. Ethereum likewise stores value, and also permits useful decentralized finance systems that also provide for storage and transfer of wealth.
If you told dollar holders 100 years ago, that the money in their pocket would only be good based on the good faith of the US Federal Reserve they’d look at you cock eyed, because back then the dollar was gold backed. To the average joe, that gave them confidence in its value.
And don’t get me wrong I’m not a gold bug that thinks we should go back to the gold standard. Just the opposite. Instead what the US did was brilliant. They simply said “trust” “believe” that the dollar is valuable and will remain valuable.
And it’s been incredibly successful, again because it comes down to faith in the ability to hold wealth and have others respond in kind when transferring that asset.
So do you believe the US dollar will hold value over the next 20 years? If you base it on the word of the government then that’s not as different as the the word of millions of Bitcoin miners. (Democratic consensus) If you base it instead on the value of the underlying economy using the dollar as a wealth exchange medium, well then again, Bitcoin currently does 87 billion USD worth of transactions per day.
So it should be pretty clear that it’s incredibly different than tulips or beanie babies. If it’s not clear, I’d research a little more about the concepts of wealth historically, along with macro economics and monetary policies the world over.
https://en.m.wikipedia.org/wiki/Wealth
https://en.m.wikipedia.org/wiki/Store_of_value
If you think Bitcoin is an odd thing to believe in to store value and wealth, check out this island that uses giant stones...
https://www.npr.org/sections/money/2011/02/15/131934618/the-...
Bitcoin is also a speculative bubble. It has no use value. It is not in any way living up to its original goal as electronic cash. (Contrast transaction volume and adoption with MPesa, for example.) Its main practical uses are speculation and some financial crime.
Well, I left one out. It's also great for market manipulation. The recent runup has been driven by "the largest fraud since Madoff": https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/
Eventually, like all frauds, you run out of dumb new money and accounting chicanery. That day will come: https://davidgerard.co.uk/blockchain/2020/12/13/tether-is-to...
I only have a notion that ignorance is ignorant.
I can back up all my arguments with facts, information, research study and understanding.
Your articles on Tether is just red herring fallacy since your original argument has no merit.
As for Bitcoins uses, there are many. For instance I recently acquired large amounts of bullion at a steep discount via bitcoin. Why? Because it’s cheaper and less trouble transaction wise for the bullion seller. All above board. All taxes reported. Nothing criminal.
Defi loans allow collateralization of crypto assets. People in business are currently using them to secure extremely large multimillion dollar notes in minutes to do business transactions. I’ve been in the rooms when these occurred. Again all above board, all tax legal.
Simply using banks for certain situations are a pain.
Clearly you’ve never experienced such situations, hence why it seems a scam to you.
I guess you’re smarter than me and Elon Musk. I would absolutely believe it if you had facts and arguments that didn’t have logical fallacies.
There’s political arguments on both sides of the crypto currency debate. Your arguments seem politically motivated. I have no political agenda.
The discovery of fission changed the world. There was no keeping it under wraps or going backwards after the physics were discovered.
The ability to transfer and store wealth online via blockchain and consensus algorithms will exists from now on. There’s no going back. It’s simply a fact of information science and physics.
Remember this discussion. Think on it when in 30 year’s cryptocurrency is considered a norm, and when multiple governments finally transition to digital currencies.
Or you know... you can quote more non relevant, poorly educated sources to support a point you wish for. It’s like the old timers laughing that the internet was just a play thing in the 90s... Now if the internet went down it would be a national emergency.
Oh... and here’s an actual intelligent article from a fairly respected source rather than some random blogger. Here’s the important point
https://www.cnbc.com/2018/01/16/skeptics-say-bitcoin-has-no-...Edit: I also hope you understand that this debate is an intellectual exercise, not a personal issue. So I am somewhat annoyed that you would call my comments tedious :). No one should accept ignorance. And disagreement is wonderful, but it should be an educated discourse. Silent downvoting or flagging of things that are unpleasant isn’t the way forward. I tend to only downvote comments that are provably factually incorrect, make comments that are based on ignorance or misunderstanding, non constructive, or outright hostile.
If you truly are interested in open understanding, it’s not a bad thing to say “I am ignorant on this subject.” In the past when I have said that, I have learned a lot.
Cryptocurrency and Bitcoin causes emotions or brings up political divides for a lot of people... I can only begin to guess at the reasons why. But burying your head in the sand or listening to the “bubble” crowd chorus is doing yourself a disservice.
That you think a pseudo-debate is a good idea explains why you're flooding the zone with nonsense, condescension, and a refusal to even look at what you're saying and how you're saying it. Which is indeed tedious. Maybe you don't have any better ways to spend your time, but I sure do.
Damn... guess that Socrates was a dominance driven asshole then huh?
It’s only “dominance driven” if you take it personally. If instead you realize that strong conversations are a way to elucidate clear logical thought and arguments on both sides, then you see it as a tool for understanding.
> condescension, and a refusal to even look at what you're saying and how you're saying it
That’s not me. I’ve been adding to the discussion with fact, and discourse. You’re the one who has quickly taken to dismissive ad hominem attacks.
> Maybe you don't have any better ways to spend your time, but I sure do
Says the man who’s cultivated a karma of 38876. You clearly spend wayyyyyyy more time on here than I do. Again, you turned this personal quickly... why?
Look if your so badly triggered by a discussion on HN about bitcoins, to the point where your thinking this is condescending and dominance driven on my half then do yourself a favor and read this book or at least the article.
The Coddling of the American Mind: How Good Intention... https://www.amazon.com/dp/0735224897/ref=cm_sw_r_sms_awdb_im...
https://www.theatlantic.com/magazine/archive/2015/09/the-cod...
And maybe that’s condescending? Or maybe I’m trying to actually help (which I am).
You don’t know me... I don’t know you. But I recognize areas when I know less than someone else and I open myself up to it. Did your teachers in school “condescend to you”?
Reread all the discussions and you’ll simply see that I attempted to shine information and fact where there was ignorance.
Not every human being has equal knowledge and understanding of all fact. I know for a fact I have a greater understanding of this than you do.
And when you post ignorant things, or post conspiracy theories then I respond in kind. And yes, I do have better things to do. But honestly it pains me there is so much ignorance, and conspiracy stuff online rather, retweeted and reposted without thought, than actual facts.
If enough people sat down with those Trump supporters who marched on the capital and actually condescended to them for a bit to get them to face reality and fact, you could get through to some of them. Not all. But some. And that’s the start of change.
So which kind of person are you. Do you take criticism and seek more knowledge, or will you come away from this never questioning yourself and only seeing condescension in differing opinions?
Good luck, and if you believe it or not, I do wish you the best.
Do you mean that very few people use gold as their only/primary store of value? I am sure many people have small amounts of their net worth in gold. Similarly I think Bitcoin is a promising technology but that doesn't mean I think users should allocate a significant percentage of their portfolio to it.
After a few years things start to settle down. Trade with your neighbors becomes possible for some division of labor. However trade works better if there is a currency. Paper money is either degraded (the most common bills last a couple years), and the replacements are all obviously bad copies. What is needed is something that is easy to verify, that is hard to copy, has some intrinsic value, isn't so common that you need vast quantities, and something you are willing to trade. There are many choices for this, but gold is one of the better ones. Even if something other than gold is chosen, it is rare enough, and valuable enough (for good looks, and it is somewhat easy to for into useful shapes) so you can expect to find a market for your gold. Many of the things you can choose instead are either useless (computers without the entire power grid can't do anything), or so common that nobody will care (why would I want your iron when there are junk cars everywhere with plenty)
Note that in order for this to work you need to actually have the gold in hand. If you invest in gold without a safe to store it in, then it does you no good. Even if you can get to Fort Knox, whoever is there first won't recognize your claim to the gold inside.
You also need to consider inflation, thousands is a nest egg. millions is more than the local economy needs. People don't need to accept your gold, unless you are the local warlord, and then you don't need gold.
Maybe we should all just acknowledge that money is made up and any security it provides depends on tons of interconnected systems made up of people largely unaccountable to the layman.
Edit: I think the mistake people make is trying to create stability on unstable ground.
Land.
But yeah, fair point. It's pretty much the only 99% safe asset.
> Does that mean gold also isn't a good store of value?
You answered your own question. There's a good reason to prefer FDIC insurance. If your fashion choices require you to avoid fiat currency, that's on you.
Few financially savvy entities keep gold as a store of value.
In places like India, gold jewelry has a prominent cultural value (a part of most wedding rituals, for example). So its desired and even required no matter its price - though demand is, I imagine, pretty elastic. The volatility of gold prices competes with 8% inflation,
Even if gold is volatile, it competes favorably in an investment environment where 1) cash inflates at 8% a year 2) private banks can often be risky, with many going bankrupt over the years 3) the average person has no access to US T-bills 4) gold can be melted any time to make jewelry anew, so one can always be fashionable (keeping the use-value of the material fresh) 5) gold can be pawned in emergencies, in practically every town 6) where access to digital banking may be spotty, transporting jewelry is an easy way to transport wealth
A store of value has many attributes that make it a good store of value - ubiquity, tradability, use-value, transportability, its value relative to the other options in the investment environment.
Y is like X to a lesser degree, and no it's not as good as Z, but does that mean Y is bad? We're only talking about X and no it's not a good store of value given the other options.
Is it just that the system of storage will have Ongoing operational cost like a vault has ongoing costs to protect gold?
Has anyone modeled what these costs might look like?
How are these questions still being asked, and more amazingly, still being upvoted? First off, there will not be a time when "all the bitcoins are mined". Mining rewards are on a geometric curve that approaches 21 million but never touches it. Second, transaction fees also go to miners, so even when mining emissions are negligible, transaction fees will keep the miners incentivized to keep mining.
This is all pretty much in the intro of the whitepaper, and the first thing you should learn if you spend 5 minutes looking into this technology.
These questions are still being asked because people like you still spout the wrong answers. There will be a time when "all the bitcoins are mined" - its in the source[0].
[0]: https://github.com/bitcoin/bitcoin/blob/master/src/validatio...
I've come around to the idea. I don't hold any bitcoin anymore, and the best chance to get rich is gone, but I can see a future where something digital (hence fundamentally ethereal) acts as dense and largely unregulated store of value, for the people who need it. In the same way the drug trade currently uses artworks and commodities when it needs to move value across national boundaries, they can use hashes or something like that. Transaction costs to convert those from/to cash are actually higher and slower than bitcoin will likely ever be (i.e. a week or two, and several hundrend USDs, will still be acceptable).
We'll never pay taxes or coffees with bitcoin, or hold savings accounts, but it will still act as a commodity.
The second best time to plant a tree is today.
Such a strategy is dangerous when you're looking at a Ponzi scheme, or a pump and dump, or anything else that is designed to leave the late entrants as the bag holders.
I'm not saying that's what Bitcoin is, just that it's dangerous to be a late entrant to an investment and you should be more wary
So you're saying that Bitcoin isn't a store of value, but you speculate that it will be in the future.
https://en.wikipedia.org/wiki/Black_Friday_(1869)
https://en.wikipedia.org/wiki/Gold_reserve
(As a side note, this role for gold is clearly legacy: look at how little gold China stores, compared to their overall reserves.)
this not backing ?
> look at how little gold China stores
by metric tones china is on 6th place in world, what do you mean ?
> this not backing ?
It's the opposite. Originally you said "Gold Market is backed by Governments". This is governments being (partially) backed by gold.
>> look at how little gold China stores
> by metric tones china is on 6th place in world, what do you mean ?
Their economy is the largest in the world. How much smaller are their gold holdings, compared to those in first place?
Perhaps not the most fun thing to hedge against, but just like buying life insurance it's a good idea.
In extreme meltdown scenarios, you can broadcast Bitcoin over FM radio, the data rates are literally low enough. Spending bitcoin requires sending _hundreds_ of bytes, which again is small enough that you can drop down to very robust and simple technologies if you need to.
Bitcoin has no "wasteful energy requirement". It adjusts the amount of hashing you need to do based on the amount of competition that's doing hashing. If 80% of the hashrate suddenly disappears, Bitcoin runs slowly for a couple of weeks and then significantly drops the hashrate requirements for the network to progress.
For efficiency, many Bitcoin mining farms are established within a couple hundred meters of the power plants producing the electricity, which means that Bitcoin also generally has minimal dependence on the global electricity grid, even though it consumes an enormous amount of electricity.
Bitcoin's robustness to societal meltdowns is one of the things that makes it really interesting.
Bitcoin can't even build a significant user base now. Approximately nobody buys anything with it. Compared with debit cards or cash or mobile money systems like MPesa, it's a rounding error. If it's not better than any of the existing payment systems, it's not going to get better in some sort of prepper-fantasy collapse.
also, volatility only matters if you sell it. if you're holding as a store of value, then you've done extremely well over the long term.
Maybe it's just me, but it's clear to me that markets crashed, the shockwave just hasn't been felt by everyone yet.
[1]: https://fred.stlouisfed.org/series/M1
Once it does, we're likely to see a depression at some point [1].
Since Bitcoin is famously volatile I'd bet that once there's a scare, people who've pumped the price up to the current highs will abandon it in droves. After all, there's a huge difference in risk between buying in <$5k vs ~$30-50k
[1] https://economicprinciples.org/
We could discuss the fact that BTC might be overpriced or underpriced, nobody really knows. But that it's going to go up in value (in terms of purchasing power) in the long term is, black swan events aside, almost a certainty because of its engineered stock to flow.
Scarcity is real whether it's physical or digital (as we've seen with art, collectibles or more recently NFTs). Gold is a good store of value because of historically predictable scarcity but it's not predictable with certainty. Bitcoin is. We'll know exactly how many bitcoins are in circulation 10 minutes, 10 days, 10 or even 100 years from now. If anything many will be lost, which will contribute to its scarcity.
Will Bitcoin be replaced by something else in the future? Almost certainly. But let's not forget that unbacked cash has been around for just half a century. Even if Bitcoin is replaced by something 50, 100 years from now that's plenty of time for a couple of generations to use it as a store of value (and payment system).
How about 5 years?
I can't give you an actual estimate of how long it will take for Bitcoin to lose its market share but I can confidently say it will take decades. At very least until it replaces a good chunk of gold's market cap.
Moreover, since technology is accelerating ever faster, five years from now is a lot longer than five years starting from 1980.
Until then, it's potentially a great investment in today's climate (especially if you don't care about the climate).
Most things valuable nowadays are strings of characters. It's not the byte sequence that's valuable, it's what it represents. Bitcoin is, conceptually speaking, an asset that is orders of magnitude better than most existing financial instruments and commodities. The fact that it's implemented using bits instead of atoms is completely irrelevant.
I really don't understand this urge of breaking down anything digital into its fundamental units to try and diminish its value. It's the equivalent of evaluating anything in the physical world as "just a bunch of atoms".
Because in the good times, people think these things are great investments. But as soon as things go south they look at what they have from a different perspective. Something with some intrinsic value (e.g. a "bunch of atoms" that can be eaten or lived in) is likely to be much easier to rationalise holding on to in that scenario, rather than something that's only worth something due to consensus by a bunch of strangers.
And that's the risk - it doesn't matter if as an individual you see great potential. If everyone else disagrees, gets scared and sells, then BTC could be battered.
Also the "live in" is a big misconception. Real estate doesn't increase in value. What does is the land on top of which it sits. A house depreciates over time exactly like a car (prefabs on rented land are a great example of that).
The only question that matters is: is Bitcoin better than commodity X? Where X can be gold, silver, oil or whatever else. And if the answer is yes there's no reason to believe it wouldn't take over X in terms of market capitalization (and, therefore, value).
No. The only question that matters is will people collectively continue to agree that it's worth something, lacking any intrinsic value?
If interest rates go up and people need to call in their assets to repay their debts, what do you think will happen? Would people rather lose their houses or their bitcoins?
I think people will dump stocks and risky "assets" like BTC and take flight into cash with some percentage in traditional safe havens with a proven track record (like gold) until things settle down. This is exactly what happened a year ago. There's no reason in my mind to believe anything would change regarding BTC's status now - I think it'll be dumped like it was last year. It may recover faster (I'd certainly buy it for a heavy discount), but I just don't buy the "store of value", "digital gold" argument.
It's an early-stage speculative asset IMO - let's not pretend it's a stable, low-risk store of value.
> A house depreciates over time
Tell that to people unable to buy because house prices have shot up. Property can also generate a good rental income - yield obviously dependent on the price paid. BTC doesn't provide any such perpetuity.
1. There is no such thing as "intrinsic value" and I explained clearly why in a different reply to your comment.
2. What goes up is the value of land, not houses. If houses themselves were valuable movable homes would also increase in value. They don't. The reason why land goes up in value is that (residential) land is scarce.
3. Gold isn't a safe haven because of its track record (in fact gold is relatively volatile [0] and if you had bought gold in 1980 you'd have lost money today, adjusted to inflation), it's considered a safe haven because it's the only commodity that has a historically predictable stock to flow and can (and normally does) act as a hedge against inflation. Bitcoin does that and more.
> It's an early-stage speculative asset IMO
So was gold in its early stages as a store of value. So is any valuable company's stock in the first few months after IPO. Speculation is uncorrelated with the lack of fundamental valuable features.
At this point I'm not sure your intent is to try to understand more about Bitcoin (or economy, for that matter) but rather to force a narrative that isn't at all obvious, unlike what you're trying to imply. And I'm not saying you're wrong, rather that you're unable to corroborate your statements with data and facts.
"And for that reason, I'm out".
[0] https://www.macrotrends.net/1333/historical-gold-prices-100-...
If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and sticking to the rules when posting here, we'd be grateful.
> Be kind. Don't be snarky.
> Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something.
And I disagree with:
> You've crossed noticeably into that here [emphasis mine]
I've only done that in 2 comments towards the same user who also behaved similarly towards me. All my other comments have been polite, constructive and filled with references.
Price is the interaction of supply and demand, and there is no particular reason to believe that people will be more willing to pay over $45k to update ledgers to indicate possession of a particular alphanumeric string in a couple of decades' time than they are now.
> there is no particular reason to believe that people will be more willing to pay over $45k to update ledgers to indicate possession of a particular alphanumeric string in a couple of decades' time than they are now
Absolutely. Nobody can know with certainty what will happen but if you compare Bitcoin with something like gold you immediately realize that Bitcoin is better in any possible way. There is literally no reason to think that Bitcoin won't replace gold in terms of market capitalization (except for the 7.5% actually used in manufacturing) [1].
[0] https://trends.google.com/trends/explore?date=today%205-y&ge...
[1] https://www.statista.com/statistics/299609/gold-demand-by-in...
Again, this is cargo-cult nonsense. Gold does not take the electricity resources of a large country to render it secure and make transactions possible. People cannot vote for a greater gold supply or fork gold, or create an alternative gold which lacks the need to use the electricity resources of a small country to secure it but is in every other respect functionally identical. Gold is pretty to look at and can be made into jewellery, not intrinsically worthless. Gold's price might be pushed higher than that intrinsic value by interest in its use as a store of value, but it's driven by millenia of desire to possess gold as a status symbol and currency substitute across a vast array of cultures, not a 12 year bull run propped up by counterfeit dollars and increasingly unrealistic claims that it will replace currency. There is literally no reason to believe that Bitcoin will ever 'replace gold in terms of market capitalization'
Except it does [0].
> Gold is pretty to look at and can be made into jewellery, not intrinsically worthless.
The first argument is laughable, the second is simply incorrect. Oil is intrinsically worthless. It's worth something only if you can turn it into fuel, plastic or some other product for which there is demand. Same goes for gold.
And although it's true that you can turn a piece of gold into a piece of jewelry that piece of jewelry will decrease in value over time unless it gains intangible value because of its history. Try buying a gold necklace and selling it the next day at the same value.
Nothing has "intrinsic" value. All value is relative.
[0] https://medium.com/@hillpot/bitcoin-vs-gold-which-hurts-the-....
You clearly don't understand what "intrinsic value" means if you believe this. The very fact it can be fabricated into something of value gives it some intrinsic value.
That's a plain contradiction. Oil is valuable because there is demand for products manufactured with it. In a world where there's no demand for gasoline, plastic or any other derivative of oil the "intrinsic value" of oil is zero, which proves there is no such thing as intrinsic value that isn't relative to a market.
Just to be clear we're discussing commodities and not company stocks, for which there is a very specific definition of "intrinsic value", according to fundamental analysis at least.
I'm pretty sure you're the one who's confused, but ok.
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newsguidelines.html
That energy is used in production, not securing the existing stock of gold. With the very significant consequence for gold's "store of value" role that if environmental activists succeed in curtailing gold mining, gold owners would see their gold go up in value, not transactions becoming incredibly difficult and prone to fraud and a price crash. (But FWIW I'm not saying that gold mining to use as a "store of value" isn't also wasteful)
> It's worth something only if you can turn it into fuel, plastic or some other product for which there is demand. Same goes for gold.
I'm sorry to hear you find the aesthetic preferences of virtually every culture in history and the role they have played in promoting gold as a symbol of wealth laughable. You'd be surprised how much harder it is to enthuse them about the aesthetic properties of Bitcoins though.
And no, oil or gold is not "intrinsically worthless" because it is possible to use oil or gold for purposes other than exchange, and thus people value them for those use cases independently of beliefs about their future price.
> And although it's true that you can turn a piece of gold into a piece of jewelry that piece of jewelry will decrease in value over time unless it gains intangible value because of its history. Try buying a gold necklace and selling it the next day at the same value.
And yet gold necklaces of a given design are invariably more scarce in supply than Bitcoin! Almost like the demand side of the equation actually matters! Luckily, people do not buy gold necklaces solely because they believe gold necklaces will go up in price, and are not motivated to sell them as soon as they fear the price will fall in future. The same does not apply to Bitcoins, because unlike Bitcoins, people hold necklaces for the intrinsic pleasure of having a shiny necklace.
Safes and transportation equipment have to be built too. And we already have layer 2 infrastructure that minimizes the amount of energy spent to secure transactions on chain. It needs a lot of work, sure, but it's not unfeasible for Bitcoin to use a fraction of the energy used today, at some point.
Furthermore mining gold requires mining equipment to use whatever source of energy is nearby or ship expensive tanks of fuel and/or batteries. With Bitcoin you could set up a mining rig where there's a source of energy that would otherwise be left unused. Meaning we could be using a lot of renewable resources that would otherwise be wasted to create and exchange value.
> I'm sorry to hear you find the aesthetic preferences of virtually every culture in history and the role they have played in promoting gold as a symbol of wealth laughable.
I don't and you took what I said out of context. Of course aesthetic properties are important. But quartz is arguably "prettier" than gold in most cultures. Gold is scarcer. That's why only considering the aesthetics is laughable.
> And yet gold necklaces of a given design are invariably more scarce in supply than Bitcoin!
Gold necklaces of a certain brand. Not any custom designed necklace. It's an important distinction. A brand is a very real and important source of intangible value. And a brand can be related to a company's IP or to other less predictable events (think Banksy).
> because unlike Bitcoins, people hold necklaces for the intrinsic pleasure of having a shiny necklace.
You seem to be unaware of how many people hold Bitcoin just because they like doing so (think GME and WSB). A strong niche of Bitcoin holders has ties with libertarianism and, therefore, attributes a non-zero intangible value to it in terms of it being an instrument against totalitarianism and governments in general.
Because gold will be worthless and useless if it is not possible to continue using as much energy as Argentina on a daily basis to build and maintain safes and Securicor vans?
> Meaning we could be using a lot of renewable resources that would otherwise be wasted to create and exchange value.
Because the world is famously short of use cases and storage media for electrical power? As I already pointed out, none of the energy used to mine new gold is essential (or even remotely helpful) to securing and transacting with the existing gold supply, gold mining being energy use is something of a moot point when considering possible advantages of holding gold instead.
> I don't and you took what I said out of context Of course aesthetic properties are important. But quartz is arguably "prettier" than gold in most cultures. Gold is scarcer. That's why only considering the aesthetics is laughable.
At no point have I even hinted at considering only the aesthetics, and no good faith reading of my arguments would conclude I did. I did, after all, include the clause "price is the interaction of supply and demand" in my opening post.
I noted that aesthetics were a factor creating demand for gold independently from its perceived resale value. You summarily dismissed this as "laughable". There was nothing substantive for me to "take out of context", but I'm glad you now agree that the intrinsic aesthetic properties of gold are important.
> Gold necklaces of a certain brand. Not any custom designed necklace. It's an important distinction
Yes. I am aware that brands exist. Sometimes brands even produce limited editions so "we'll know exactly how many [necklaces] are in circulation 10 minutes, 10 days, 10 or even 100 years from now", but even this doesn't guarantee their gold necklaces retain their value. The fact that scarcity of particular designs often does not make them more useful as a store of value than the less scarce raw material supports my argument not yours. Second hand necklace preferences are fickle, and financial instrument preferences even more so.
> You seem to be unaware of how many people hold Bitcoin just because they like doing so (think GME and WSB)
How's GME performed as a store of value since WSB pumped? It's just as scarce as it was 10 days ago, but apparently not guaranteed to go up after all...
And come to think of it, the "terms of it being an instrument against totalitarianism and governments in general" are not independent from BTCs potential for future exchange use. Certainly neither as independent from future use nor as widespread as people taking pleasure from things' intrinsic shininess.
I was simply responding to what you said earlier:
> The same does not apply to Bitcoins, because unlike Bitcoins, people hold necklaces for the intrinsic pleasure of having a shiny necklace.
It does, instead, apply.
It only has value as long as people believe it has value.
The caveat of course is that all of the things I listed have SOME more inherent value, but that is NOT the major contributor to their actual trading prices. Gold is not THAT useful. Neither is owning a billionth of a company.
People will only pay for the next Apple product as long as they believe it provides value to them. It's all the same. Perception is king.
if the existing majority shareholders chose to do this, then it will happen, but otherwise, this can't happen. And i don't see a situation where the existing shareholders would willingly choose to do this dilution for no reason.
So issuing more shares would not change the value of existing shares, at least in the short term.
Never mind the fact that the shareholders would have to make this decision, and that Apple has long been doing the exact opposite.
That is not true. There are only 1.5 billion active Apple devices. I myself own 4 of those. Everyone else I know that has an Apple device also has multiple. I'm pretty sure the average Apple customer owns more than 1.5 devices. Thus there can't be over a billion of these people.
That was my point. Any "real" value in most of these things is dwarfed by social delusion value.
Same with AAPL stock. Sure, I can pay ~$130 per share to technically own a fraction of Apple. And what good does that do for me? What's the dividends on AAPL? Will my vote EVER actually influence the company? I could spend $130 on canned beans and rice and likely get far more utility than I'd get from the ACTUAL share of AAPL. On the other hand, I'll probably be able to sell my AAPL share to the next sucker for more than $130. THAT'S the real reason 99.99% of us are invested in the stock market.
And, like it or not, bitcoin DOES have uses. It's still a little bit cheaper to send money via bitcoin than via Western Union, AFAIK. It's easy to pay for something online without giving your personal info to PayPal or the person who you are paying. Are those minor conveniences worth $40k? Hell no. But that's also my point. It's all crap.
In Apple’s case, you’d now have to pay 136 dollars in order to be entitled to 3.7 dollars of their annual earnings, corresponding to a current annual return rate of 2.7%. That’s better than any bank accounts, and it will most likely rise faster than inflation.
This is how the stock market works and how people value mature companies.
That is true for gold as well. (Ofc not 'nobody', just 'almost nobody'.)
A golden chain with a gold-plated USB key containing a Bitcoin wallet might have a considerable bling factor though. :)
It seems more likely that people conflict zones would be happy to accept gold (with the assumption it will be valuable in the future/in more stable areas) than bitcoins that require electricity, stable internet and tons of disk space.
The problem with Bitcoin is it's not a physical thing at the end of the day: nobody mints jewellery out of bitcoin.
If your state demands your taxes be paid in FIAT, no matter what you wan't, you'll be paying in FIAT (or fined, or in jail, or depending on the circunstances maybe dead).
When the taxman comes knocking on their door, do you think this person will escape by saying "sorry, I don't have fiat available to pay for the taxes, come back next year!"? No, the taxman will respond by either seizing their assets or forcing the person to liquidate into fiat.
What makes Bitcoin (or crypto) different in that regard?
bitcoin acts more like a commodity than fiat. Bitcoin is backed by the laws of mathematics, rather than laws of nature (which is the case for gold).
Your claim that bitcoin is not fiat because it's backed by the laws of mathematics makes as much sense as claiming that the dollar is not fiat because it's backed by the printing press. This is not what 'backed' means in the context of money.
That is the case for countless things. Is a corporation a real thing or a belief? Where is the physical entity Facebook or the physical entity Apple? Is it the people working for them? Their logo? Their contracts? It's all that and a collective belief in an abstract entity. That's true for fiat or states too, even if that belief can be enforced through e.g. army, that doesn't change the fact that's is a collective belief in something that has no material reality.
Not even close. Gold is a tangible psychical asset, a finite resource on Earth that can not only make valuables you can wear or leave as heirloom but is also a really good heat-reflector and electricity conductor needed in anything from semiconductors and precision electronics to supercars and satellites. Without it, the global electronics industry would suffer terribly.
Interestingly, I went and looked up what the price of gold would actually be if it was solely used for industrial processes, and it's hard to actually figure out: it's speculated on a lot, but world gold demand in 2019 was 4355.7t. Of that, 48.5% was for the jewelery industry, and 7.48% for technology - the rest accounted for by investment. So industrially world demand for gold for productive or decorative uses is about 2439.2 tons (as of 2019), whereas mining production in that year was about 3,300 tons.
So about 45% of world gold demand is essentially from financial speculators. To figure out pricing you'd have to really get into the current mining economics for technological use...
https://www.statista.com/statistics/299609/gold-demand-by-in... https://www.statista.com/statistics/264628/world-mine-produc... https://www.gold.org/about-gold/gold-supply
Why is BTC worth more than BCH?
One of those illusions is more powerful and sustainable than the other
It was made exclusively by software engineers and miners. Miners get to vote based on their wealth. I don't consider that to be "a democratic process". There is no guarantee of enfranchisement. Some people get far far far more votes than others. It is more like a council of aristocrats.
Government spending in the US is 35% of the whole GDP.
Try to argue with your tax office, that it is an illusion/religion.
“I see Bitcoin as ultimately becoming a reserve currency for banks, playing much the same role as gold did in the early days of banking. Banks could issue digital cash with greater anonymity and lighter weight, more efficient transactions.” - Hal Finney (2010)
Why would (a) my bank want to do this, and (b) why would I want my bank to do this?
you've got nothing to hide, right?
(a) providing cash level privacy to customers, which (b) they should probably value more than they do.
The money in your bank account is a liability of the bank, it's not cash.
The thing you transact with is digital, liquid and fungible. In what sense is it not cash?
If you receive physical cash, it's in your control.
Now if only that cash could not be inflated as much as it can.
Admittedly, my experience with BTC is limited so please enlighten me if I have this wrong. That’s not a sarcastic request. I’m being genuine.
BTC is a pump and dump play.
10+ years is a pretty long con, that satoshi is one patient fraudster.
It is the people who have latched on as "bitcoin evangelists" and are recruiting more people into the network to get the price to go up. Classic Ponzi scheme.
If you want to talk about previous conversations around this, the ones I have had always end in people believing that decentralization or cryptography are magical words that solve all kinds of problems without creating new ones. I have never invested in currency so the price doesn't matter to me. I assume it will go up proportional to the number of people that can be convinced to invest.
> > ..."bitcoin evangelists" and are recruiting more people into the network to get the price to go up. Classic Ponzi scheme.
> > ...this doesn't perfectly fit with existing definitions of other scams.
> I said that the enthusiasts are activity looking to expand the number of people investing.
I wonder. Are you aware of how far your characterization of the situation has shifted within the same thread?
evangelist -> enthusiast
recruiting -> expanding
Ponzi scheme/scam -> investment
Have you changed your position, or simply softened your language as a result of finding your position indefensible? If the former, congrats; if the latter, maybe think on that a little more.
> ...always end in people believing that decentralization or cryptography are magical words...
Well, you claimed earlier that off chain transactions were functionally equivalent, from the perspective of the money transfer service, to credit cards. When challenged, you adjusted that to debit cards - which is also not even close to being true. Even if you were talking about it from the perspective of the end user, or merchant, you'd still be very wrong. So you clearly don't know much about the stuff you've expressed strong opinions on, and that means your estimates of others' opinions on the same carry no weight.
> ...the price doesn't matter to me.
You might want that to be true, but it rarely works out that way. Opportunity cost can do funny things to people, like compel them to construct elaborate coping mechanisms in defense of their ego. Sometimes that looks like a confidently stated, but ill-informed, opinion that crumbles in the face of any pushback. Like I said, I've been here a long time and I've seen it all. There is one guy I worked with years ago who asked me about bitcoin but took no action. I only pay attention to the price toward the end of the year, when working on taxes. But without fail if I get a call from him then I know that bitcoin has just had a major selloff. The funny thing is that he is totally unaware of the behavior, it isn't as if he aggressively gloats - but he always brings up bitcoin, and then I don't hear from him again until the next selloff.
https://bitcoinvisuals.com/ln-capacity
It won't, it's just a speculative asset.
Are you sending it over the network, or to someone else within a website? (eg: binance, coinbase; doesn't need to be an exchange)
Do you track your transactions later? Do they get confirmed? How many confirmations does a website need to count it? How long does that take?
I would expect a low-fee transaction to eventually either expire or go through. I don't know what timeframe that might take: higher fee typically means higher priority as I've understood it. I can't imagine it'd keep your $ in limbo forever, but who knows. If you haven't used it in a long time, I understand that the network is much more congested these days.
So… there's that.
And if laws are not obeyed that's a police matter.
Concretely if stores stop taking fiat, and only cryptocurrency, to the point where it affects the economy, then you should expect laws preventing that. If that doesn't help then you should expect to see arrests happening.
Governments have the legal and physical ability to enforce monetary policy. Bitcoin nuts who say that "fiat currency is backed by nothing" are delusional. Several currencies are ultimately backed by nuclear weapons.
So in other words cryptocurrencies are only allowed to the extent that they don't overthrow the whole system. And overthrowing the whole system was the whole point, right? (well, that and buy heroin and make ransomware)
The government issues USD, it doesn't back it.
The government implicitly guarantees that the USD can be used to purchase goods and services. Take a dollar bill. It has "For all debts, public and private". This is a guarantee by the government. If the USD gets outcompeted in the US, then that would make the government a liar, and thus it would use its power to make that not happen.
The government guarantees the value of fiat USD. The government has congress, police, military and nuclear weapons to back that guarantee.
Not only is it a "promise" by the government. It's also in its best interest to maintain control of monetary policy.
And also the people want it, so…
That's not backing, there's nothing that the government guarantees I am able to exchange for $1.
> Take a dollar bill. It has "For all debts, public and private".
That has a long list of exceptions. But regardless, that's not backing.
> The government guarantees the value of fiat USD.
No it doesn't, the value of USD fluctuates every minute, and goes down significantly over time.
Once upon a time you could take your dollars to the government and exchange it for a fixed amount of gold. That was backing.
(serious honest question)
The US government DOES guarantee that the USD has value. It's not something that they cannot fail at, but they do guarantee it. Cryptocurrency has no guarantee at all that it has value.
If your definition of "backing" is that you are guaranteed to be able to exchange it for something else, then cryptocurrency is truly backed by nothing, making the statement "backed by math" commonly used by bitcoin nerds complete nonsense.
Like any technology, it works or it doesn't, and people will use the one that works the best for them if they have a choice. For instance people in some countries use their local currency for daily purchases, but store their wealth in instruments that are valued in dollars, euro's, etc. Some people will break the laws of their own countries to lay their hands on those dollars or euro's.
Money is speculative inasmuch as its value is still relative to other things such as stocks, gold, and bitcoins. Holding dollars instead of gold on any given day is a speculation. In a relatively free economy, there's no such thing as opting out of speculation.
Bitcoins are unique inasmuch as they are designed to exist without any deliberate purpose being imposed on them. The only way a government can manipulate the value of bitcoins, that I can think of, is to subsidize the electricity for bitcoin mining.
Nakamoto instilled within the Block's raw data: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."
"Your money isn't safe in banks", and a healthy dose of making it easier to launder money.
Bitcoin just provides a hedge.
[2] - https://1ml.com/statistics
IMO a niche use though.
Not really sure what’s point is for Tesla but my guess its speculative for them, with an attempt to get some additional value on cash they are starting to swim in now...
Speculation and free marketing I expect
I don't think these are widely used in practice yet, but I might be wrong.
Bitcoin will not function as a currency due to it's high volatility. For a more usable currency look at DAI, USDT, and USDC which are stable coins pegged to the dollar. DAI is collateralized with on chain assets where USDT and USDC are collateralized with real life assets which are mainly regular USD.
This tether FUD always resurfaces as price goes up as people are butthurt that they did not buy the last dip. No worries, history will repeat itself. This year we'll see BTC hit 100k+ and end the massive bull run in 250k teritory by 2022. After that we'll see everybody dumping their cash in BTC and the bubble will burst on the wings of massive FUD & regulatory bullshit. Bitcoin willl drop to ~20k and cycle will repeat.
For those that weren't watching, this repeats itself every ~3 years for past 10 years. Keep watching the news... USDT stories will become more regular, next will be China bans, Russia bans... then we'll continue with EU regulation push, US regulation push, new tax laws....
The only smart thing you can do is start investing a small amount every week and forgetting about it. Cancel two lattes (or lottery cards, donuts) per week and buy BTC and ETH instead. Imagine starting doing this in 2016, when ETH was launched. You bought ETH for 1 USD. Today it's hitting ~1700 USD. You would retire easily.
Too bad you're so hard at work telling the world that crypto is a scam.
https://news.ycombinator.com/newsguidelines.html
Sending simple wires in the US takes hours.
Last time I tried to send significant funds from France to the UK, it took me a whole week of back and forth with the bank to complete all the AML/KYC paperwork.
Let's not even talk about how long it would take to move gold from one part of the world to another cf. https://www.bloomberg.com/news/articles/2020-04-30/iran-is-h...
You can buy or send bitcoin in seconds if you're not trying to do it on-chain, the same way you can do it with stocks and other assets. But definitive settlement of a bitcoin transaction is faster than pretty much any other asset.
Joke is on you, though. Even Brazil now has instant wires (zero fees).
You would need to do the same paperwork with bitcoin.
I have UK and French bank accounts, transfers between them take seconds. Transfers from the French account to any other Eurozone account take seconds.
Both are probabilistic and highly unlikely.
A simple case of this happening with bitcoin is if the network fragmented. For example if a country had a firewall which temporarily blocked bitcoin. The country would continue slowly adding blocks which would likely revert when they reconnected back with the rest of the network.
If a country is behind a firewall, most likely, almost no new blocks will be mined because the hashrate difficulty will stay constant while the computational power behind the firewall will become too low. Blocks will be mined much more slowly for a period of time inversely proportional to the hashpower behind the firewall. Most likely, that chain will enter into a "mining death spiral".
What? No. It happens instantly at a protocol level. Practically, about thirty minutes. Most people don’t send and receive wires and so don’t choose bank accounts that prioritise them.
Practically speaking, Venmo and Apple Pay and Zelle are frictionless and instantaneous and more widely adopted than Bitcoin. For heavy users of international transfers, there are usually better solutions.
There are absolutely edge cases, and so a legitimate use case for a cryptocurrency there, but that’s not enough use to sustain Bitcoin’s value. To say nothing of the transactional motivation having been long since abandoned when inconvenient for the current store of value one.
Venmo and co aren't "real" transfers of asset, it's an update to a "permissioned" database. You can make immediate transfers on coinbase too but they could be reversed, or your account could get locked just as with venmo. It is just as easy to have banks hold everyone's bitcoin and instantaneously update a database so that feature is not an advantage of fiat over bitcoin.
Your bank is not set up for wires. Try Fidelity or First Republic or Silicon Valley Bank. Between 10 and 30 minutes from my hitting transfer to appearing in the recipient’s account. Exceptions are large wires which may require a phone call for verification, though I can usually turn that off if I wanted to.
But you always have to rely on a third party, transactions can be reversed, your funds can be locked etc... It's completely different from say, transferring actual bank notes, or actual gold bars or any kind of transaction where a third party is not needed, you can't be censored and it can't be reversed.
And again, everything you do with USD, you could do eventually do with bitcoin. If banks decide to hold bitcoin, they'll let you send bitcoin wires with all the issues associated with fiat wire. Bitcoin wires don't exist but they could. Permissionless, uncensorable, irreversible, under 1-hour USD transactions don't exist and they never will.
How much time would it take to convert, transfer to a bank account AND withdraw that same amount of money from Bitcoin to plain FIAT?
Also while it is decentralized, the reality of how it is used is very much not. The typical use case is buying and selling it via an exchange, not much else. Depending on where you live you have to reveal more information about yourself to "just buy bitcoin" than you have to when opening a bank account.
This isn't so different from any network.
Small transactions can be done on sidechains and other chains.
Especially for large transactions internationally, where my bank asks me+the other party to fees like $30 and it takes 3 days if everything goes well.
In comparison with that, BTC for those years, gave me on average 40 minutes and $1 fee.
This is thirty times better than what my bank provides.
Otherwise, it’s like getting options in a startup and spending them on pizza.
1. when it is expensive or difficult to send money to places like Vietnam, post-soviet countries, Iran. 2. some saving in case the shit hits the fan and I will have to survive for a couple of months without TransferWise, Revolut.
The transaction cost depends on the size of the transaction and the congestion in the mempool, the cost can be set by any sender depending on the urgency of the transaction.
Wake up, this question was reasonable in 2010, maybe 2015. :) Today no serious person is still thinking it would be usable :)
This is pretty much the way money worked in the 19th century, just with gold instead of BTC. Nobody physically carried or transferred gold to buy a beer. They just used bank notes that were backed by a trusted intermediary holding the physical asset. It might make sense for a bank, or even a very wealthy person, to pay the cost of physically transferring the hard asset. But most just used IOUs that were backed by the underlying hard asset.
Also, it's still faster and cheaper than an international SWIFT.
In fact the original design for Bitcoin assumed larger blocks in the future, so it is perhaps a more accurate description to say that Bitcoin Cash is the "original" Bitcoin, and Bitcoin Core is a fork with an altered (small blocks) design.
[0]: https://simon.medium.com/bitcoin-and-pollution-the-definitiv...
I would suggest that is not an effective way of starting a conversation.
I think that comparing Bitcoin energy consumption with a country (it used to be Chile, now Argentina), while technically correct, misses the big picture.
I also avoided a discussion on the true cost of having a global currency like the US$, which one might argue pollutes far more (military, etc).
I think a comparison like that actually is the big picture.
Maybe your arguments point though to more nuance.
The whole shift of calling it a store of value as opposed to currency that Bitcoin supporters have started over the past couple of years is very clearly a post hoc justification for its existence.
The problem, however, is that BTC isn’t even a very good store of value. Golds pricing has never collapsed 10x over the matter of months and nor has it risen 5-10x over the matter of months. As a result BTC isn’t even a very good store of value.
It’s currently, at best, a pure speculative asset. It’s like the GME trading from a week ago taken to its logical extreme. A speculative asset that has no relationship to its underlying fundamentals. Much like how GME’s price was completely divorced from any fundamentals of the company, BTC is like saying let’s do that thing, but why even bother with tethering GME the stock to an underlying company. Let it just exist on its own.
That’s what BTC is at the moment. GME if GameStop didn’t exist.
As is your reference on that article - "Most bitcoin mining is using energy at the source that was uneconomical to use for other purposes, because of the loss experienced in transporting the energy to economic centers", which just links to one of your own comments on HN!
The rest appears to be handwaving - "Gold is worse!" or "It'll move to proof of stake!"
(edit: the link to the comment is not the OPs own, but it is an HN comment which just contains an assertion about green energy use)
> just links to one of your own comments on HN!
No, the comment that I reference on HN is not mine, it's by someone else. BTW, I quite agree with it.
> The rest appears to be handwaving
I don't see why. We have used, and are still using, Gold as store of value. Each year gold pollutes tens of times more than Bitcoin. The ones criticizing Bitcoin should have been criticizing Gold all along; and they should criticize Gold way more than Bitcoin even now.
There is a bigger problem, however. If a gold miner finds a more energy-efficient mining process, they will use it because it is more profitable. No technological improvements make Bitcoin mining more energy efficient (miners are incentivized to expand their operation rather than to mine at the same rate using less power), because the whole point of Bitcoin mining is to prove that electricity was utilized. That means that there is no real solution to Bitcoin's pollution problem, other than scrapping Bitcoin entirely and replacing it with something more energy-efficient (like a distributed ledger operated by a consortium of banks).
I've seen this claim made a few times now: that most Bitcoin is mined using renewables, at source. Where's the actual evidence for it?
a) not the same as the original claim
b) not evidence
Ok, misread that. Either way it's just an HN comment, it's not proof of anything much. Gold mining is terribly polluting, yep, but your attitude to it is pretty much the definition of whataboutery.
I found this bit hilarious. I guess he's banking on people not actually clicking the source links? Medium journalism at its finest.
(Mostly playing devil's advocate here. I would personally be for strong carbon taxes on electricity.)
Well, a purely electronic financial instrument that pretty much by definition cannot produce anything, and provides little but an arena for speculation, would seem to me to be a bad thing to introduce to a world that's trying to reduce energy use.
If you want to get into "well people clearly value it", the evidence being the money they pump in, well then any energy expenditure is justified if it is profitable, and this conversation is pointless.
> How much energy has and is being expended during the mining of all the gold
This is just whataboutery. Gold can be a problem as well.
Is Bitcoin mining comparable to gold mining? It should rather be compared to the logistics and trading of gold maybe?
Impressed. I didn't know Bitcoin transactions accounted for such huge volume almost as large as MasterCard. I use MC almost every day for almost everything. Is there people like, entirely living with BTC?
To help put the difference more in scope, Visa and MasterCard each did over 100 billion payment transactions (nearly 300B combined) in 2019[0], yet Bitcoin still is over 3 orders of magnitude lower at around ~130 million (350k daily average x 365 days). The key distinction is the fact that the average Bitcoin transaction (currently ~$100k) is far higher than the average credit card transaction.
[0] https://www.statista.com/statistics/261327/number-of-per-car...
Your comparison to VISA links to a source that says that better comparison is Fedwire and that it only settles 1% of the money that FedWire does. So Bitcoin significantly loses to VISA in transaction count and FedWire in value settled. So I'm not convinced by your argument. And how much energy does Fedwire use? Presumably much less than VISA.
Gold is however undoubtedly a good comparison pick for Bitcoin; it's something with a few natural pros on it's side that's been hideously overvalued for largely irrational reasons. Like... this metal is advertised as the "right" basis to back currency but I also have some of it in nearly every gadget I own? Then how rare can it possibly be if a small amount comes in a $15 audio decoder for goodness sakes!?
If this was written in a novel we'd deem it a bit too much on the nose really.
If they weren't debasing other people's hard earned value, there would be no need for bitcoin.
But since they are, and are doing it at an increasing pace, the demand for bitcoin is inevitable.
The idea that bitcoin is good for the less fortunate and bad for rich people is pure propaganda and not based on reality. It's going to make a bunch of early adopters very rich, and that's about it.
Not all rich people have low time preferences. Particularly those who are involved in the fiat system and who benefit from the expansion of debt. They think in quarters.
And not all poor people have high time preferences, but under fiat, saving money is highly discouraged because it loses purchasing power. People are encouraged to spend or invest in stonks - where the markets are rigged to benefit the big players.
Everyone benefits in a society where capital is accumulated, rather than debt.
As for "rich versus poor," this is a distraction because their is nothing you can do about it besides resorting to theft, which makes the problem worse.
The problem has always been "thieves versus hard workers." The current system is one where central banks and those close to them are stealing the time that other people have put into labour by deliberately devaluing their money.
There are better ways to do this. But people remain infatuated with Bitcoin.
However ethereums adoption is considerably below that of bitcoin, possibly because the use cases are so varied there is not one strong reason for involvement. There may be many minor reasons that small specific groups have an interest in it but that isn't sufficient for widespread adoption.
The most important thing Ethereum is working on is PoS over PoW, and that technology, I expect, will transfer to bitcoin I'd Ethereum implements it successfully first
The ETH2 work is important but the app layer on Ethereum is where the action is at today. Decentralized Finance is growing at 30x rate per year: https://defipulse.com/ . I fully expect this development to eventually eat most of the financial markets. They are going after derivatives, lending, options, etc. It's an extremely fast moving and innovative field and Bitcoin is frankly getting left in the dust. They will not implement Turing completeness. A lot of Bitcoin will end up wrapped and deployed on Ethereum. There's already $7.7B worth on there today: https://defipulse.com/btc
https://defipulse.com/
The problem is (and I have been involved - most often unsuccessfully) that building anything in this ecosystem requires a lot of understanding of digital signatures, distributed system, economics, game theory, security & quality, trustless ecosystems, incentives, possibilities of players with big budgets (PoS - 51% bought by some government)/great developers (bots frontrunning hacking of ERC20 contracts)/criminals (you have strong encryption, but still can be blackmailed/beaten).
Bitcoin is one of a few currencies that deliver what it promises. It doesn't promise a lot, but what it promises, it does. Others promise a lot but underdeliver and later abandon it. At this moment, I think Bitcoin delivers 100% of what I expect from it. Monero is potentially better, but underdelivers. Ethereum is potentially better, but underdelivers. Others are either just copycats or completely fail.
At first it was supposed to be peer-to-peer digital electronic cash. It was meant to both be money and a payment system to replace PayPal and the like.
Now it's been reduced to just a store-of-value, and not even that, it's a speculation that the volatility will stabilize and that it will be a store-of-value in the future.
How much green house gases would be generated to keep our economic engines going and also who would be genrating this money?
What would the economic outlook of the world look like during covid if it happened in a world where all currency was bitcoin?
(Idea stolen from guy on reddit who actually did this)
Running an ASIC 24/7 would use up like $285 worth of electricity per month if you pay 12 cents for each kilowatt-hour.
But it will be anyway, that's a matter of a few decades now. If you're currently replacing your heating system, I should hope you're switching to electricity.
Though I'd say let's get a heat pump and save like 2/3rds of the energy compared to making the heat from scratch. Depending on the climate you might need some additional heating a few weeks per year, and then yeah sure let's do mining, but that's not a stable basis for a cryptocurrency's security.
Back in the days where all our electricity came from fossil fuels, I completely agree that marginal electricity usage was bad for the environment. However I think that thought has persisted with us even though it is no longer true 100% of the time. With renewables sometimes the marginal cost of electricity to our environment is near 0 or even negative (eg, during periods of higher winds and lower demand.)
I predict that in the future as bitcoin mining becomes more and more of an efficiency game that you will see bitcoin mining be kind of a load balancer the grid, effectively turning off during peak demand (or low supply) times and contributing to the base load during regular times.
For example, it may even help the economics of building new wind plants. Eg, currently it may not be profitable to build a new wind plant because base load is too low that the excess power generated would need to be sold off at 0 or even negative prices. However if bitcoin mining could be turned on during these times and off during periods of high demand, there will need to be fewer peaker plants in operation and it would positively affect the economics of opening a new wind plant.
Bitcoin mining only cares about the cost of electricity at a given time, it is not like most other electricity demands that are very time based. With the large variance of electricity generation by renewables, I think bitcoin can in the future help smooth demand according to the real supply/demand curve.
It's kind of like a different implementation of the Tesla utility grid batteries. Instead of deploying power, you force the grid to build more renewable capacity (that the miners are paying for) that you use except in peak periods, where you turn off and effectively provide the grid with more power.
Edit: here is an article of a bitcoin mining company doing just that:
https://www.bloomberg.com/news/articles/2020-09-01/bitcoin-m... https://www.forbes.com/sites/christopherhelman/2020/05/21/ho...
1) Peak power usage is when people are awake - this is when you want transactions to happen.
2) This wouldn't reduce the need of peak plants, since you aren't generating power when mining for bitcoin. How would increasing overall energy consumption require less energy generation? If renewables could ramp up/down quickly and not be dependent on external factors - that would remove the need for current peak plants - which is usually nat gas.
Mining is global, so this isn't an issue. It might be peak period in europe right now (2PM UTC) but not in asia or western US.
>This wouldn't reduce the need of peak plants, since you aren't generating power when mining for bitcoin. How would increasing overall energy consumption require less energy generation?
This is a big unknown, because the economics depends entirely on the cost of electricity vs the cost of equipment. If electricity cost dominates, then it'd make sense to shut down mining operations during periods of peak usage (because electricity prices are higher), but if equipment costs dominate then it'd make sense to mine 24/7.
Given that the difficulty adjusts only every 2 weeks, that means that the time to find a block will vary enormously during the day as the demand/supply imbalance varies. That'll make BTC even more annoying than it is already (it's currently peak electricity demand where most of the miners are sitting, so I'll have to wait 3 hours for my 6 confirms?).
At any rate, you're basically saying that with renewable energy it's ok to waste energy, and I think we are not quite there yet.
Isn't this a non-issue because mining is global? Peak time in europe doesn't mean it's peak time in north america or east asia.
I had assumed that mining is concentrated more. Empirical question.
> or even negative
I can see no way that consuming more energy can result in an improvement to the environment (unless that energy usage was directly related to improving the environment). There is absolutely no time where you can say "the more lights I leave on, the better the climate will be," no matter what your energy source is.
In general the rest of your argument can be summed up as "if there is more demand for electricity, more utilities will build renewable plants." The problem with this argument is that there is already far more electricity being used than renewables can supply, so there is already all the incentive needed to build more plants.
As for the present-day, a BitCoin mining rig consumes whatever proportion of fossils are inputs to that grid. If a grid is 50% renewable and 50% fossil, you can't pretend that you're consuming only the renewable portion. Indeed, the opposite may be true: renewables generally just produce their max output, the fossils can ramp up and down to meet higher demand. So it's best to think of the fossils as the ones that are rising to supply any "unnecessary" usage.
> where you turn off and effectively provide the grid with more power
This is again pretty striking motivated reasoning. Yes, if we turn off all non-essential lights during peak hours we are kind of "supplying the grid" with more energy, but if we build a huge energy-suck, and then occasionally turn it off, we don't get to pretend we are actually energy suppliers. If I set fire to $1000 of my company's money every day, I don't get to pretend I earned them $1000 on the days when I don't.
For Bitcoin miners, the input is energy, and the output is money. This means that there is now possibly an incentive to make available cheaper sources of energy, and right now that happens to be wind and solar (at least per kWh).
It's worth litigating whether such an incentive actually exists, or if it does exist whether it will actually stimulate green energy development, or whether cheap energy is always going to be clean energy. These are interesting debates. But it's impossible to talk about Bitcoin as long as we mischaracterize the arguments.
You're describing it as if BitCoin miners have the ability to construct their own gigawatt power plant.
But even if they did, the argument is still "If I use more electricity, and I/they create more green power plants to match my demand, the environment is better off."
If I burn 100 TWh/yr of electricity, and they build a power plant for me that supplies 100 TWh/yr of green power, how, exactly, have I reduced the demand for fossil fuels? I'm burning all the new green energy that's being created!
First of all, economics dictates that supply will catch up to meet the demand as long as the barrier to entry is low. You'd be right if there was a cartel in green energy — but there's not. As long as supply is elastic, high prices are always transient.
> You're describing it as if BitCoin miners have the ability to construct their own gigawatt power plant.
No, I'm describing it as if BitCoin miners have the ability to set up ASICs powered by solar panels in the middle of a desert in Nevada. Somewhat high upfront cost, but effectively zero marginal cost of power. What's being stimulated here is the demand for accessible solar panels that can be quickly/cheaply installed.
> If I burn 100 TWh/yr of electricity, and they build a power plant for me that supplies 100 TWh/yr of green power, how, exactly, have I reduced the demand for fossil fuels? I'm burning all the new green energy that's being created!
But again, that presupposes that there's some fixed supply. Supply also changes, and it responds to demand. This is the core thesis behind Keynesian stimulus, and why inflation doesn't necessarily follow from stimulating demand.
Now, baked into all of my points here is the assumption that the barrier to entry for new supply is low. It might not be! That's, I think, the more interesting question. The market conditions could also change making it easier and easier to spin up a solar farm, or spin up a wind-farm.
No, it doesn't! Exactly the opposite!
Again: if a BitCoin miner generates 1 TWh/yr of their own electricity, how does that reduce the burning of fossil fuels?
Likewise, if power companies create more green power to supply the needs of BitCoin miners, how does that reduce the burning of fossil fuels? You're simply consuming whatever new green energy you're creating.
So the whole "it will make power companies produce more green energy, and therefore it's good for the planet" argument falls flat.
How?
> Again: if a BitCoin miner generates 1 TWh/yr of their own electricity, how does that reduce the burning of fossil fuels?
First of all, if a BitCoin miner can generate 1 TWh/year of their own electricity without burning fossil fuels, then the entire argument around Bitcoin electricity use is moot. Second of all, the only way a BitCoin miner can generate 1TWh/year of their own electricity is if they have access to the tools/infrastructure necessary to set up their own power generation — and the demand for that tooling/infrastructure stimulates the development and promulgation of it.
> Likewise, if power companies create more green power to supply the needs of BitCoin miners, how does that reduce the burning of fossil fuels? You're simply consuming whatever new green energy you're creating.
Again, because if you dust off your "economics" argument, when demand increases, cost increases. Then when cost increases, as long as supply is elastic, it increases to meet the demand. The demand for green energy, today, is increasing at a natural/slow pace, but if you have a financialized industry that demands high volumes of it, you supercharge the development of infrastructure on the supply side — enough that eventually the majority of electricity supply is green.
> So the whole "it will make power companies produce more green energy, and therefore it's good for the planet" argument falls flat.
You really haven't explained how. Your entire argument presupposes fixed supply. Maybe that's true, but you'll then have to make the case for why the supply of green energy (or tooling/infrastructure) is fixed.
As it stands, right now, there's a lot of money to be made selling solar panels. If industries mobilize to cheaply produce easy-to-deploy solar panels at scale, that is good for everyone.
Simple, during times where peaker plants need to run (because electricity demand is higher than supply), these miners can shut off, giving the grid more green power. Now these peaker plants (which generally burn coal/natural gas) don't need to exist or run anymore.
Literally the entire point of the comment you are responding to was to outline how bitcoin mining can help support the economic viability of renewable energy projects like wind farms.
I mean, if that were valid, wouldn't it be more environmental if we all just left the lights on 24 hours a day? Or turned on thousands of A/C units outdoors?
It's like saying my burning $1000/day of my company's money incentives the company to earn more money, so it's actually a good thing.
I think this is the fallacy in your argument:
In the absence of a block reward, Bitcoin mining seems like a purely demand-driven activity. The demand is people wanting their transactions be confirmed on-chain, which seems entirely uncorrelated with electricity prices.
On the other side, you have miners wanting to operate at marginal profit.
Total mining expenses would therefore be driven to always exactly match the total monetary value of being able to transact. In other words, the demand for transaction confirmation drives the demand for mining, which in turn drives the demand for electricity.
In a world in which the only electricity sources available are renewable, I'd agree that Bitcoin mining has no net impact on the environment. In any other world, some of that demand for electricity will be satisfied using fossil fuels, directly or indirectly.
How much resources does the mining of gold use?
Afaik, 3000 tons of gold are mined per year. Which is worth about $150B. I would expect the mining uses resources of about $150B as well?
By my calculation, the value of bitcoins mined per year is $15B:
900 Bitoins per day = 328500 Bitcoins per Year
328500 * $45000 = $15B
So I would expect that Gold mining uses about 10x as much resources as Bitcoin mining.
African banks will steal your money if they have a chance to claim it was lost in transport. Transfers between EU and USA take so much paper and gasoline (to travel to banks) that Bitcoin must be more ecological.
And transfers between many country pairs are totally impossible without Bitcoin.
In the other, if the price increases faster than the mining yield drops, efficiency is decreased.
Currently, a successful block makes 6.25 BTC * 45000 BTCUSD = 280k USD in Coinbase, or around 100 USD per transaction, plus a 10-20 USD fee per transaction.
As Coinbase drops (or BTCUSD drops), users will have to pay around 100+ USD per transaction in fees, or the rewards to miners will drop and some will go offline, resulting in a reduction in difficulty and less energy wasted.
Because of that, banning bitcoin ownership and trading seems to be overkill or missing the point... Just regulate/limit mining, or even better put a capacity on electricity usage or have tiers where the more you use, the more expensive it is, making mining not worth it after a certain point.
All that said, government regulation will be extremely challenging here as it would require cooperation of nearly every country on Earth, and we've seen how difficult that is.
If miners stop mining, you cannot transact in it, at least with the current "proof of work" approach. There are some alternatives, like proof of stake, but they are not mainstream yet.
Isn't that the exact method used, electricity is metered, the more you use, the more expensive it is.
Yes it drives up the price for everyone else because there's demand, but by that argument we would need to look at other energy intensive activities, like heating and driving, which feels like a step backwards.
It's designed to be unregulatable.
It already uses the model where you can decide not to mine if it will cost you too much electricity.