Nah. It motivates rational beings to spend that capital on anything at all, as fast as possible, because the alternative is a net loss of purchasing power.
Deflationary currencies on the contrary motivate actors to think before spending, because any spending has to be balanced with the future gains that won't come from holding it and seing it accumulate value over time.
Which is by design, to encourage investments elsewhere. The rise of Bitcoin and the stock market are probably an indication that the policy worked. People indeed are willing to burn their money in crypto rather than keeping them in savings/bonds
I keep reading about how we need to discourage consumerism, wastefulness, mindless consumption. Recycle and reuse.
Yet fiat enthusiasts keep parroting that the linear and intentional destruction of value through inflation, in order to encourage further mindless consumption, is a good thing? What is so bad about a currency that maintains its value throughout time? This would allow someone to actually save, rather than be forced to buy some stupid widget they don't need, or become a part-time fund manager trying to decide between a series of risky assets. As it stands, simple savings accounts pay zero and lose money to inflation, so if you don't become a one-man hedge fund or pay someone else to become one for you, you just lose your money.
Every currency’s goal is to be stable in terms of value. The mechanics of achieving so are complicated though since you will need to exactly calibrate the supply of new money to match your economic activity. We are at the point where we don’t even agree what economic activity is lol.
Is there a name for the situation where you assume X of someone else because that’s how you feel? Is that projection?
I discussed gambling on Bitcoin, considered it carefully, right near the beginning. Didn’t bother. Don’t regret it. I mean, why should I be enriched by Bitcoin? It’s not clear that Bitcoin is a good thing. I could have invested in cigarettes or oil companies but I wouldn’t do those things. I have no regrets about not buying Bitcoin, just as I have no regrets that I haven’t gone to work for Facebook and accumulated lots of cash.
I find it so odd that people would assume I’d regret it. Life isn’t about finding easy ways to collect money, why would you think it is?
It's just natural, that people are salty about proof-of-work that leads to computation devices scarcity. No one asked for this and it's really scary - society can economically decide, that distributed ledger protection is more important, than gaming and science. Just like we economically can decide that global warming is not important.
> That's right, all criticism of bitcoin or cryptocurrencies is necessarily down to jealousy, and therefore can be safely dismissed.
It all depends on the audience, but on HN in particular you are right. The site is rife with people who could not fathom the value at launch and who've been in denial since without ever putting the work to learn about the ecosystem.
Notice how "debates" around cryptocurrency on HN never delve into technical arguments, and compare that peculiarity with discussions on Reddit for example.
Because it’s enormous? A colleague just finished putting together a 125MW BTC mining operation. That’s sheer insanity. Nobody has ever been able to explain how Bitcoin saves the world from climate catastrophe by using 0.3% of all electricity.
> Nobody has ever been able to explain how Bitcoin saves the world from climate catastrophe by using 0.3% of all electricity.
Why would you think that Bitcoin needs to accomplish that particular task? As far as I know ending climate change has never been mentioned as a goal or desirable outcome of the project.
The maintainers of Bitcoin could make changes to the mining protocol that reduce its reliance on energy. By choosing to not do so, they are directly contributing - in a substantial way - to civilization-ending climate catastrophe. I do think that Bitcoin's maintainers have an obligation to do their part, considering that they are very materially a part of the problem.
Ethereum is at least working hard on other algorithms that are energy efficient. But in the Bitcoin space, the tremendous investment in energy-intensive mining equipment means that the entrenched players have an interest in persisting the way that things currently work, rather than seeking an energy conserving replacement.
It uses orders of magnitude more energy than the "legacy" financial institutions it competes with, to process a fraction of the transactions, and has tenuous practical benefits unless you're a ransomware gang or an early mover getting rich from the hype.
In an absolute sense it uses much less energy. If you divide that by the current rate limit of transactions, it looks bad comparatively in that sense, on a per-transaction basis. But the energy usage of Bitcoin isn't related to the transaction rate, and the rate could be increased without affecting the energy consumption at all. There just hasn't been enough demand for that increase.
The core operating principle of Bitcoin is to waste energy. That's what "mining" is: wasting electricity to find useless numbers, such that the hash of each block starts with a certain number of zeros (a useless task).
This silly task (called HashCash https://en.wikipedia.org/wiki/Hashcash ) was chosen not because those numbers are somehow important to the algorithm or network, but rather as a way to slow down the rate of block creation: forcing people to waste energy on finding these numbers, in order to have their blocks accepted by the network.
It is important for bitcoin's security that the block chain can only grow slowly, since conflicts (like double-spending) are resolved by choosing the longest chain; if someone makes their own block chain that's longer than the main bitcoin chain, the network will switch to that and any payments on the previous chain will be forgotten. Using HashCash to slow down block creation makes this harder to pull off.
The difficulty of the HashCash task (the required number of zeros for the next block's hash) changes depending on how long it took to find the last block, such that it always takes about 10 minutes to find a block, regardless of how much energy is spent on this task, or any technology improvements (e.g. CPU vs GPU vs ASIC). In other words, wasting more energy on mining bitcoin, or making more efficient bitcoin mining hardware, will not find blocks any faster; the mining task will become harder to compensate, so it still takes about 10 minutes per block.
Bitcoin allows transactions to contain a 'fee' with a blank recipient, and each block can also contain a small payment 'from nowhere' as a reward/incentive. Miners create blocks which send these fees and rewards to themselves, then try to solve the HashCash task to make the block valid. Whoever solves it first sends their block to the network, it gets accepted as the longest chain, and hence that miner has received the fees and reward.
Miners can't make more money by solving HashCash faster, since it always takes about 10 minutes for a block's HashCash to be solved, at which point everyone starts looking for a following block (since that will form the longest chain), which may be even harder to find. Instead, wasting more energy on mining makes it more likely that a miner will be the one who finds the next block; since, on average, someone performing X% of all mining will find X% of all new blocks (and hence receive X% of the fees and rewards).
This creates a competition between miners, to try and waste more energy on HashCash than each other. This race-to-the-bottom breaks even when the energy wasted finding a block costs the same as all of the fees and rewards in that block; i.e. when all of those wasted megawatts are being spent for literally nothing (net).
There are other ways to slow down the creation of blocks, or to resolve conflicts which don't incentivise long chains; other cryptocurrencies are experimenting with such things.
In the winter I ride my bike down streets lined with cars idling because their owners don't want to ride in the cold for a few minutes.
In a way I appreciate bitcoin for its absurd and unambiguous wastefulness. It's sort of the perfect expression of consumerism, destroying the precious and irreplaceable earth for something immediately disposed of.
Bitcoin is the most durable money we've had, it can never be disposed of. Lost, perhaps.
Energy consumption != energy production. Bitcoin is incentivizing reusable energy and moving energy to cheaper locations, further from cities. I suggest you look into how it's actually quite positive for the Earth.
You know we have a limited amount of green energy production right now, right? It's not exactly green if your bitcoin mining is using wind energy, while a bunch of other stuff is stuck with coal.
We also know that this theory is really, really stupid: The kind of self-justifying idiocy that people don't come up with unless they're already deeply committed to a point of view come what may, logic and fact need not apply.
Supply follows demand is basic economics. Buy up green energy and the suppliers will use your money to build more supply in order to expand their operations to fit the larger market.
I was going to add a disclaimer to my post along the lines of "not saying I believe or disbelieve this theory", but I was tired of adding disclaimers to all my posts.
> Are you really going to claim that there isn't a demand for green energy already?
Is a disingenuous argument. Of course there is already demand for green energy. Meanwhile, Bitcoin increases the demand so much that people are apparently outraged by the increase.
> Of course there is already demand for green energy. Meanwhile, Bitcoin increases the demand so much that people are apparently outraged by the increase
Assuming that you think you're serious: Increasing the demand for energy (and it's not "demand for green energy" it's demand for energy, period) is not, has not been and never will be a green strategy in itself.
This is easy to understand, unless you choose not to.
1. Wind/solar energy are being trumpeted around the world as the cheapest source of electricity available.
2. Bitcoin miners' profits are directly `sale price of BTC - buy price of electricity`. Other costs are marginal in comparison.
3. BTC mining is a extremely competitive, trivially mobile, trivially liquid, global market.
4. Given 1, 2 & 3 there is a lot of fretting that BTC is creating a coal-powered financial system.
With the recent spike, the currently reasonable cost for a fast, median-sized transaction is $10.46 [1] [2] According to the fretting articles I read, that is enough to power an average home for a 23 days and motivates sending over 300kg (700lb) of C02 into the air [3] That's 35 gallons of gasoline at 20lb CO2/gallon.
:/
For what it's worth, I get the concern. But, I also see equal shares of BTC hate|BTC fanboyism everywhere I go. Latching on to the environmental concerns of BTC is trendy right now. It's hard to argue against without sounding like an asshole and it's not entirely false. But, it's not entirely honest either. Everything I read and calculate shows that BTC makes total sense as a defacto green energy subsidy. But, that does not spark outrage. So, instead there is a lot of fretting about the second rise of a coal-powered economy.
IMHO, the way Ethereum is going is great: Bootstrap with POW then switch to POS after enough investment is built-up that staking actually means something. It's arguable that the best use of BTC at this point is to burn them all to bootstrap more POS tokens. We just need alternatives that inspire enough confidence to motivate people to convert their BTC over.
> Everything I read and calculate shows that BTC makes total sense as a defacto green energy subsidy.
Then you must be reading in a bubble, as this is nonsense. Self-justifying fantasising.
Throwing energy away (which from an outside POV, this is merely an example of) is not and never has been a green energy strategy. I mean that very literally: the green people are very keen on electricity demand reduction, always have been, and are not going to change this. Because they're not wrong.
Key terms to google: Energy conservation, Energy Efficiency, energy demand reduction, Negawatt
Crazy, I know. But, these are not contradictory strategies.
You can have everyone work hard to reduce their energy usage. You can have tax-funded subsidies to motivate green supply increase despite targeting reduced demand. And, that's all lovely and great.
At the same time, you can have a voracious, highly mobile demand for the cheapest energy around. You know, the kind that solar and wind is supplying, but sometimes in mildly inconvenient locations. This does not actually reduce the supply for everyone else. It's not a zero-sum game. Supply follows demand. This horrendous cadre of buyers directly pay for increased production of cheap green energy that otherwise would not have been set up at all. Thus, ramping up equipment production and economy of scale. And, motivating the creation of supply that otherwise would have been too risky to invest in.
There's nothing about Bitcoin that incentives mining with green energy sources more than dirty one. If coal electricity is cheaper, then bitcoin incentives burning coal. The only somewhat valid rebutals to the energy consumption arguments I know of are:
- a lot of it is spare power that would be wasted otherwise (only partially true).
- it uses less energy overall than governments spend protecting their fiat money's value (not that comparable since fiat can also be used as currency).
- the gold industry uses a lot of energy too (but I doubt Bitcoin will reduce the energy spent on gold, it will probably just add up).
EDIT: completed gold mining point following comment
> gold mining uses a lot of energy too (but I doubt Bitcoin will reduce the energy spent on gold mining, it will probably just add up).
I'm not sure it will add up. It seems to me that different stores of value compete directly with each other, because you can store value one way or the other way.
> gold mining uses a lot of energy too (but I doubt Bitcoin will reduce the energy spent on gold mining, it will probably just add up
Why do people keep making the comparison to gold mining? It's inappropriate.
Gold mining is bad for the value of gold, because it increases the amount of gold in the world. Eventually, the gold coffers on Earth will deplete and there will be no more gold mining.
Bitcoin mining is necessary for the value of bitcoin, otherwise there can be no certainty of the blockchain. After most of the bitcoins get minted, the mining will still have to continue out of transaction fees.
The cost of mining bitcoin needs to be compared to the cost of gold storage and handling of gold transactions, not gold mining.
I think people generally want to enjoy their lives. I have a friend that keeps his house at 60F in the winter. I think you can argue that I'm not going to die at those temperatures or experience hypothermia. It's quite unpleasant nonetheless. During the summer if it's hot indoors I feel miserable and tired.
A lot of us could live a more simple life (i.e. no cars, fewer children). But humans are attracted to comfort and the ability to pursue their dreams.
And then when an exploit finally gets worked out, OR the governments being 'replaced' wage war on bitcoin and its ilk sufficient to obliterate its value (largely based on its acceptance in whatever form and the promise that it WILL replace government currency, in time), all the destruction will have been literally for nothing.
It's fiat currency combined with total energy crisis. It only retains value as long as people are willing to tolerate exponential destruction of resources by the already wealthy who can afford to bankroll any possible conversion of energy directly into 'money', no matter what workaround is required.
If it becomes 'the miners run for one second every day' and there is no way to cheat, these are the people who simply take the same amount of energy they were draining before, and come up with a way to store it the whole day… that or the world blacks out every day, because miners.
Bottom line is unless they get everything they want and dream of, including the eradication of government currency, the escalation will inevitably lead to a collapse where all the work becomes meaningless, valueless. All that energy will have been burned for NOTHING.
We just don't know when that will happen. Bitcoin is time, all right: time running out. Don't be caught still holding it when it pops.
> It's sort of the perfect expression of consumerism
On the other hand, the finite supply/deflationary aspect of it is also the perfect antithesis of consumerism, in that it favors hoarding (spending less) instead of spending your paycheck as you get it.
I don't see it as waste, I see it as the cost of decentralized trust (no such thing as free lunch).
The way I see it, it's either "burn" the energy in proof of work (the machines leave behind only heat and bitcoin) or let a closed institution take this energy to provide this trust.
In the end, it's all tradeoffs and incentives decided by politics and made possible by technologies.
To be less glib, I think the article makes it clear just how inordinately difficult blockchains make their lives when they have to build, from scratch, a reliable definition of time.
If you could have a trusted time source, you could at a stroke get rid of one of the most egregious flaws in bitcoin, its vast wastage of energy, because of its 'proof of work' mining. Bitcoin miners are running at full pelt 24/7, picking random numbers and doing math on them in the hope of striking lucky and discovering the next block. The mining difficult is artificially picked so that blocks are discovered about every ten minutes.
However, imagine if bitcoin miners could all declare a cease-fire, for 9m59s of those ten minutes, i.e. they just do nothing for that long, consuming virtually no energy, and then they all furiously mine at full speed for the last second (with the difficulty adjusted so the global mining should take a second). This process would be just as fair as the current one; if you have more/faster hardware, you will still mine more, in the same proportion as before. The total energy usage would be reduced 600-fold!
But - the reason you can't do this is that there's no way of stopping cheating. Who can tell if the other miners are really idling for those 9:59? This is where the time source comes in. Imagine you have a trusted time source: it could, every ten minutes, broadcast a random number. Miners would have to listen for this number, then mine a block containing it, to prove that they didn't start work early. Problem solved!
Back to the real world: just about everyone can agree on time; we have NTP and can even use certificates to authenticate clock sources, we can even use multiple sources to make it harder for time to be faked. So why can't blockchains do the same thing? Why don't they use multiple time oracles to stop the colossal energy wastage?
And, when bitcoiners tell you that relying on a centralised source, or even a quorum of sources, is completely unacceptable, why then are the same people happy to use smart contracts where the use of centralised oracles is apparently both acceptable and commonplace?
> The total energy usage would be reduced 600-fold!
It wouldn't. If X$ worth of bitcoin is handed out every block, then miners competing for that prize are willing to collectively spend up to X$ per block on average.
If they could only mine for part of the time, then they'd simply acquire more hardware and mine at a higher hashrate during the shorter time.
Good point! We'd be living in a world where the lights flicker every ten minutes as gigawatts of power are momentarily switched on and off :) Or miners would have to install gigantic capacitors to fill with charge, just to power their machines for the brief instant of usage!
My example is also missing the obvious next step though - once you are using a trusted source of data (or even a wide selection of trusted sources), the whole blockchain idea becomes pointless, you don't need to do any mining at all, you can let the trusted sources run a distributed database...
I think you’re right on, but good luck with provable timestamps. You’re trying to coordinate and validate a measurement which in itself denies the reality of space time physics at least subtly. Time precision across space is hard enough, but adding bad actors and gravitational time dilation into the equation means... well I wouldn’t want that to keep track of my assets.
On the bright side, if approaching the speed of light would give you a viable attack on the bitcoin blockchain I'm sure our space propulsion technology would transform overnight!
The nice thing about relativity (special and general) is that all of the weird seeming-paradoxes 'sort themselves out' eventually. In particular, whilst we lose a total ordering for events, we never lose causality; i.e. two events can only appear in a different order to different observers if those two events are independent (no information has travelled between them, and hence neither one can influence the other).
> Proof of History is a sequence of computation that can provide a way to cryptographically verify passage of time between two events. It uses a cryp- tographically secure function written so that output cannot be predicted from the input, and must be completely executed to generate the output. The function is run in a sequence on a single core, its previous output as the
current input, periodically recording the current output, and how many times its been called. The output can then be re-computed and verified by external computers in parallel by checking each sequence segment on a separate core.
Data can be timestamped into this sequence by appending the data (or a hash of some data) into the state of the function. The recording of the state, index and data as it was appended into the sequences provides a timestamp that can guarantee that the data was created sometime before the next hash was generated in the sequence. This design also supports horizontal scaling as multiple generators can synchronize amongst each other by mixing their state into each others sequences. Horizontal scaling is discussed in depth in Section 4.4
> And, when bitcoiners tell you that relying on a centralised source, or even a quorum of sources, is completely unacceptable, why then are the same people happy to use smart contracts where the use of centralised oracles is apparently both acceptable and commonplace?
I think you're largely describing two separate camps within bitcoin hodlers. Some are 'gold-bug' types that value security and individual liberty above all else, and so are very conservative in their attitude towards Bitcoin development. Others are 'cyberpunk' types that value technological capability and functionality, and are much more liberal and exploratory in what they'd like to see Bitcoin become.
When you say "same people", I think they are rare, and this statement makes a bit of a false lack-of-dichotomy.
It takes 1/10th the time to initiate a funds transfer via crypto (eg. Bitcoin) as it does to effect the same wire transfer or ACH using most banks's treasury management systems. This, and the fees can be less depending on the token used; but are considerably less if the transfer is cross-currency. The transit time is about the same if BTC is used, less if one were to use XLM (Stellar) for example.
Bitcoin has a strong base of advocacy not based on any logic or utility but solely sprung from the mule stubbornness of those who profited from their speculation.
1. Bitcoin is environmentally damaging. It produces 37 megatons of CO2 per year and consumes 78 terawatt-hours of electricity annually. Much of that electric consumption is powered by coal. Not all energy consumption or CO2 output is bad, but value should be provided commensurately to society for the damage incurred. And yet:
2. It is a terrible currency. Promoters claimed we could pay for things with Bitcoin, that it'd replace fiat currency. But the design of Bitcoin in particular makes it an awful currency. To prevent deflation, a currency should be able to increase its supply to maintain reasonably constant velocity as demand increases for it as a medium of exchange. With its limited number of coins, Bitcoin cannot increase supply to maintain velocity: its only solution is to fractionalize, a form of deflation. And deflation is what we get. Massively: everything you own, and all your income, constantly becomes worth less expressed in Bitcoin, day after day.
3. It's a terrible currency, part two: currencies should have very low transaction costs. Bitcoin transaction costs exceed $20. The response to this is to recentralize it in the form of services that cheaply transact Bitcoin rights management through traditional databases. Eliminating the very value proposition of Bitcoin.
4. After having given up on defending it as a currency, the next claim is that it's a "store of value." But stores of value should have some degree of consistency of value: volatility is not a virtue. Bitcoin supporters are right that fiat currency, to the degree it is exposed to inflation, is at risk of not being the best store of value, which is why we don't normally keep huge amounts of resources piled up as cash. But Bitcoin is an awful store of value because it has no fundamental utility that moderates its price swings. Normal assets - real estate, bonds, gold - have some sort of fundamental utility or cash flow that helps to moderate price action over time. The asset must have some sort of use first, then it can become a good store of value. Because of the above flaws, Bitcoin has no good use, which thusly makes it a poor store of value.
None of this is a fundamental problem of crypto, just Bitcoin. Crypto could be very useful! But with many millionaires minted from a lucky speculation and their entire ego reliant on deceiving themselves that their speculation was clairvoyance, critiques of Bitcoin are invariably met with a flea market of intellectually mangy defenses that ultimately boil down to saying "well, look at its price!"
You have many severely fundamentally misunderstood ideas about Bitcoin.
Bitcoin is "money" and not a "currency." Bitcoin works very wonderfully as money.
Bitcoin is not very wasteful in energy, contrary to the pushed narrative by those that want everyone to believe this is truth. Bitcoin uses a tiny fraction, currently around 7-9% of the electricity that the global banking system currently uses. Bitcoin uses a very large portion of renewable energy sources, and will continue to balance it's energy use towards efficiency and optimizations.
Your part 2/3 etc, it's not a currency. Bitcoin is pure money. We also do not really ever use gold for currency. It is money. Bitcoin is a better money than gold. Once you stop drumming on the wrong path, you'll more easily understand the differences and stop banging your head about how it's a bad currency. It's not a great currency, while it is the very best form of money.
Your whole bit about meandering into defending it's value as currency or store of value, is just highlighting your total misunderstanding of the value of gold, or the new digital version of gold as money. Money IS a store of value.
Lastly, Bitcoin really has no fundamental problems. Nobody that knows about bitcoin gives a flying fuck about the price.
It's sad reading comments like this from bandwagoners who haven't read a single academic or technical whitepaper on the technology, let alone the hundreds of them that have emerged which prove / annotate / express / clarify, in exhausting detail, all of the "fundamental problems" that Bitcoin's PoW protocol have, as well as far superior approaches that are in the process of being implemented.
But it's cute. You like Bitcoin. You're a good cheerleader.
I've actually read every single paper on Bitcoin, on Proof of Work, and on Proof of Stake I've ever found. I've been involved in Bitcoin since mid 2010. What is sad is that you wrote what you just did as if that dismisses me, or as if you are in any way authoritative on the subject. Your snide passive-aggressive writing is not cute. I am not a Bitcoin cheerleader, and I'd just prefer not talk to anyone about Bitcoin. It's been years since I have done so, I no longer go to conferences or even talk to family members about Bitcoin, and it's much the same way I quit telling people about linux maybe a decade ago. HFSP.
Sometimes you come across communities that look, from the outside, like a Disney theme park. You enter the gates and you're in a different reality. Everyday words have different meanings, and there are stories built up about their definitions, completely divorced from whatever happens in the outside world. Paid actors learn to complete this comprehensive alternate reality. But as you exit the gates, reality returns, and words reclaim their conventional meaning.
It's like that with Bitcoin fanatics.
"Money" and "currency" do have definitions built up over time by economists and financiers over the past centuries. They are not the same as is used, apparently, in the Bitcoin-Disney fantasy park.
Conventionally - and by conventionally, I mean as it is used by all economists and financiers for centuries - currency is a subset of money. A currency is the dollar, the Euro, the yuan. It doesn't have to be fiat, but today usually is. Money is any type of highly liquid asset typically used for the payment of debts, which includes currencies but can include short term bank notes as well. Although there have been times in history where gold was used as money, it is generally not used as money now, although like most assets it can be converted into money. Bitcoin can be money too, but it's a crappy money, for the reasons I described above. Generally, economists don't spend a lot of time splitting hairs about money and currency, because they're very similar concepts.
"Money" is not a synonym for "store of value." You will not find that in any economic textbook, or even Wikipedia for that matter.
Even if you wanted to use the fantasy park definition of money as anything with a store of value, you chose not to even defend Bitcoin as a store of value. Possibly because it's a terrible store of value.
Again: this is just Bitcoin. Crypto can be designed better. The fact that Bitcoin fanatics obsess over Bitcoin in particular is just proof that they're talking their book.
Furthermore, there are not "blockchains," there is one blockchain, and then there are a thousand or more scams trying ride Bitcoin's shoulders. They are entirely pointless systems that are not made to solve anything, they don't solve anything, and they were not made by mathematicians or cryptographers.
Bitcoin can be thought of as a clock, but the unit that is being transfered can't be thought as time because for it to be mappable to time, you need a linear function and Bitcoin's emission is exponential because of the halvings.
It's a stepped linear emission that mimics an inverse exponential emission. You can even see it in that chart if you expand it. Between the halving periods the emission is constant.
The block subsidy is constant between halvings. And is thus a step function.
But "emission" refers to cumulative block subsidies. And thus is piecewise linear, with 34 pieces of exponentially decreasing slope, the last one ending up flat.
If you zoom in enough, you won't see these exponential steps. If you were able to zoom out completely, you'd see _only_ the exponential function. Bitcoin's emission is an exponential function (dropping exponentially), the fact that there is some time period between these exponential steps does not make it non-exponential. This would have been obvious if the halvings were every 30 minutes, but it's much less obvious when the "in-between step interval" is 4 years.
I'm glad you mentioned this. Indeed, there are two different things. First is the linearity of blocks and the second is the linearity of the emission of units with which we transact. Bitcoin has the former, but does not have the latter. You can't unambiguously say "I'm going to buy an hour of Bitcoin" because this hour depends on _when_ you plan on buying them - the emission over any time interval (including one hour) changes over time due to the halvings. This is why I think coins with a constant emission (especially Grin where 1 coin is emitted every second) can bring to life the saying "time is money" because money becomes time. There is no difference between calling your 100 Grins "100 Seconds" and buying an hour of Grin. So yes, you're correct that the article talks about the "block time", but I think this can be pushed further where you not only have a global clock for events, but your unit of money is time itself.
P.S. I prefer thinking of a blockchain as a "drunk" clock, because of the variance that comes with the finding of a valid PoW. It might sway a bit left and right, but it mostly goes in the straight line in the end.
Thanks for linking the Grin article! Now you've sent me on a rabbit hole reading about different emission strategies and ideas. (I follow Beam development, so I love to read about both projects).
Doesn't the consistent emission of Grin depend upon the number of users and transactions also rising at the same consistent rate? Can we really count on that like we can count on the ticking of time?
Glad to hear that. In Grin, each block creates 60 coins. The time to mine a block is set to be 1 minute on average, so it will average out as 60 coins each minute and hence 1 coin per second. This won't be _exact_ of course due to the variance in block times so you definitely can't count on that - just like you can't count on Bitcoin getting exactly 24*6 blocks each day. But these systems are defined such that if the blocks start coming in too fast, they make them come slower and if they are coming in too slow, they make sure to make the puzzle easier to solve so the blocks can come faster. I think this follows the models they have good enough.
That does seem like a cool feature. It just requires a bit of a mindset change.
Compared with gold, yes you can estimate when new gold is unearthed, but at the same time, there is a theoretical limit to the total amount of gold in the ground, right?
I don't think Grin does this but you can adjust the emission schedule based on the clock time (Sia does) so that the number of total coins produced on a given date is within a very tight bound of its expected amount, regardless of how much the hashrate has changed.
For what it's worth, I agree with you that Grin's emission scheme is the 'correct' one.
The effect of adding one coin to a pool of coins, on a steady schedule, results in inflation along a logarithmic curve. Inflation is about how much money is created relative to how much exists, so the second minute of Grin is 100% inflation, the third minute is 66%, and so on.
Also, people lose their cybercoins. It might average out that Grin hits a steady state, or even deflates a bit, depending on how frequently people or corporations lose their keys, die without heirs, send to a nonexistent address, and so on.
But even without this, the mining reward remains consistent even as overall inflation becomes negligible. Inflation never stops, but it does hit a point where it may as well have.
Bitcoin, by contrast, is guaranteed to be deflationary, and in fact the property that everyone holding BTC gets a permanent bump in asset value every time a bit of the ledger is lost strikes me as... moderately hazardous to the health of those who hold large allocations of the ledger.
I don't think this has much bearing on the article though, just wanted to tip the hat to another Grin respecter.
And yet you found time to litter internet with you telling other people that you won't spend even little time understanding the topic at hand or posting something produced by your own thinking... That's even worse than creatively criticising the topic, that's just meaningless jibberjabber.
PS let me rephrase my point: you write "I have ahem lost more than enough time on articles about Bitcoin, and its tiresome wide-eyed fanatics. The comments are bad enough." implying that you have decided for yourself that you are not wanting to spend any more time on adding meaningful things to this conversation.
Who do you think is interested in this information? Why on earth would you think it's a useful thing to share (on top of that with that negative attitude that makes it painful for a normal person to read)? If you don't want to participate, just don't.
I assume comments like that are from people who are conflicted by the fact that if their head weren't so far up their ass they would have entertained the notion enough to at least acquire a few bitcoin, but because it's now too late it's better to celebrate just how far up their ass their head is.
And yet what I responded to was a restatement of the same "deeply dull line of thinking" as you put it that triggered the responses you say I'm restating. I'm not sure what your point is, other than to say people on the internet tend to restate things.
Yeah I wish the bitcoiners would just bitcoin off and bitcoin happily together, leaving the rest of us in peace. But pyramid schemes depend on continually hyping the product, so they can't.
An analogy for you: like working with an Evangelical Christian who always assumes that your annoyance at their pestering _can only be jealousy_ that Jebus won't let you into heaven.
I mean I get it but your annoyance in this case appears to be directed at evangelicals on the internet you are free to ignore, as opposed to coworkers the presence of whom you have little choice. Maybe you are less free to complain about coworkers and so instead complain here? Either way, your complaining is no less annoying than the thing you're complaining about.
Check out Cardano's papers. Its PoS protocol has been live on mainnet for a while. Native token support just rolled out to mainnet yesterday and smart contracts are coming in Q2 this year.
It was founded by ETH co-founder Charles, who formed an academia network of CS PhD researchers to deal with 3rd gen blockchain problems and solutions.
It is 3rd gen blockchain built to handle the problems of ethereum and other blockchains that came prior.
A very simple summary is that it's a fairly traditional consensus protocol, in which if anyone breaks the rules it's possible to prove who did it and penalize them by burning their stake. It achieves scale by using aggregated signatures.
Can you elaborate on how that's true? Gold has use in making other physical products, such as electronics, which can do things and thus create value. Bitcoin comparatively seems to be a net drain on resources and value.
Not really. Half of the value of gold, or thereabouts, relates to its utility as a metal. Bitcoin is purely valued because people believe others will buy it from them in future at a good price - hopefully a higher price.
It may also not be correct that Bitcoin is a Ponzi scheme. A Ponzi scheme is, strictly speaking, one wherein the latest investors are used to pay out interest and withdrawals to earlier investors.
One reason I think is because of the global phenonmenon and easy to exchange native currency to crypto. And the immutable and fixed capped supply. Huge prizes to be won for someone cracking the network.
Not everyone will hold forever. BTC's situation is really no different from gold's: it's seen as a store of value, but in the case of BTC, there's a lot of hype around it. The GME situation is related, but doesn't have the overtly greedy hedge funds at the forefront.
Ponzi schemes have a schemer with asymmetric information about the scheme. How is the analogous to bitcoin since there is no asymmetric information (anyone can see the code). You can argue that bitcoin is a pump and dump scheme perhaps but not a Ponzi scheme.
A Ponzi scheme is a specific type of financial scam and Bitcoin, even with the least charitable definition, does not fall under that definition.
Needing new buyers for price to increase is not the definition of a Ponzi scheme. Because that is true for any speculative asset due to the price setting mechanism. Your argument entails that the price of Bitcoin is highly inflated over its fundamental value, i.e. that it is a speculative bubble. Speculative bubbles are very different from Ponzi schemes. A Ponzi scheme has the following definition according to the SEC:
>“A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves."
Ponzi schemes require a central fraudster to pass on money directly from old to new investors with the underlying asset obfuscatedly held on promise by the fraudster.
With cryptocurrency the buyer has control of the commodity, you actually have control of the crypto, there is no promise of a consistent return with little risk, there is no central entity defrauding targets with promises that hold the asset in reserve passing on money directly from new to old investors.
What we do have is a speculative bubble which will no doubt be devastating for new investors when it collapses. But the definition of a Ponzi scheme is not met.
Did you read the article? Your comment is copy-and-pasted on every cryptocurrency article, please discuss this article.
It is also completely wrong. A Ponzi requires a central actor (like Charles Ponzi) to actively pay profits to earlier investors with funds from more recent investors.
If you understood that you would understand it is not a Ponzi. I think you think you're trying to say "Pyramid scheme," which it also is not. It's hardly even a "scheme."
I'm certainly laughing with how much purchase power Bitcoin provided me so far.
I'll be laughing at your comment in 5 years time once a single Bitcoin will be valued above $1M USD while your fiat currency savings will have lost at least 50% of its current purchase power.
You're predicting >12% yearly inflation? That seems like a pretty bold prediction. I'm curious if you have any sources that would back your prediction.
I'm not saying you're wrong, but if you're here to discuss, you might as well do it properly. I'd love to hear what exactly is nonsense (or if it's easier for you, what's not nonsense). Also pointing out the exact flaws regarding "leap of bias" would be helpful.
I agree. I believe strongly in Bitcoin, but I think this article was just a bunch of pompous poetry without any substance. "The difficulty adjustment makes sure that the ticks of Bitcoin’s internal metronome are somewhat constant. It is the conductor of the Bitcoin orchestra. It is what keeps the music alive." Blah blah blah blah! So much fluff to say so little...
I feel like your expectations are a bit off. What did you expect from a blogpost titled "Bitcoin Is Time"? A serious whitepaper on how Bitcoin actually is what we consider time? Of course it's gonna be fluffy poetry, it's right there in the title!
Nothing is less material than money. . . . Money is abstract, I repeated, money is future time. It can be an evening in the suburbs, it can be the music of Brahms, it can be maps, it can be chess, it can be coffee, it can be the words of Epictetus teaching us to despise gold. Money is a Proteus more versatile than the one on the island of Pharos.
Nearly any currency when used in commerce is primarily used as an IOU for time. Due how the POW is designed to ensure immutability of the blockchain it also is dependent on how cheap it is to generate energy for the people who mine.
Comparing it to a bank with fiat a bank usually ensures the consistency of transactions so miners perform this action (and also developers of bitcoin if there are security holes) and your wallet is an account and bitcoin have a transaction cost which is like using a debit card associated with an account.
I think this is a rosy-eyed view. Money is a formalised manifestation of debt, which previously was an informal system of reciprocity and altruism. But formalising this debt with financial and monetary systems destroyed the altruistic part of the arrangement.
Graeber explains how money was created by states to enforce its authority and basically coerce people into participation. The anonymity of monetary debt and the fact that the system is controlled by the "powers that be" make it kind of the opposite of altruism.
Along these lines, there is an excellent book by John Kenneth Galbraith - Money: Whence It Came, Where It Went (1975) that covers the whole history of money, with much details & wit
I've always thought about it this way: We trade our time (work) for money and later trade that money for time (other's work). We see this manifestation in lots of places: bus is cheap but also costs time vs limousine is expensive but uses minimum time. Growing food is dirt cheap but also costs time vs buying produce is expensive but uses minimum time. This exchange has also allowed the producers to invest in efficiencies and economies of scale. All told, this is why I generally have a rule to not spend money on anything that doesn't buy me time, it is my most limited resource.
That sounds almost poetic. I wish people who mindlessly rail against capitalism on twitter actually took the time to understand how these systems work. I think many of them would like to believe that we can all live in a system without currency. They don't realize that much of the freedom we enjoy today comes from capitalism. The ability to start your own business, and more fundamentally, to decide how your money (and time) is spent. Communism and centralized control over resource utilization necessarily results in less freedom.
Why are we still talking about bitcoin and first gen blockchain tech. Yes it's old, yes it's slow, yes it wastes resources. It is legacy software after all.
PoS solves the problem of mining and wasted energy.
Cardano's Ouroboros is a provable and secure Proof-of-Stake blockchain protocol.
I wonder the same thing about people that still talk about cars. Electric cars solve all the problems with cars. Why do we even bother to talk about cars?
I'm not saying this is you, but many people on HN will cry out "Use Boring Tech!" while also not understanding why Bitcoin is king.
Bitcoin is old, secure, proven, and most importantly _simple_.
Of course what you sacrifice with Proof of Stake is sovereignty. A random person cannot participate in the network unless they have X amount of existing resources. So that's the trade-off as I understand it. Depends on where your values align. No doubt that existing financial institutions would prefer to be core partners with a performant PoS chain.
Doesn't the same hold for PoW systems, except the X amount is in the form of mining resources? This is why people argue PoS blockchains are (besides being more eco-friendly) actually more decentralized.
>Doesn't the same hold for PoW systems, except the X amount is in the form of mining resources?
That's not as true as I would have thought. Surprisingly, a single person can have a profitable mining setup on Bitcoin today. It might only be $10 USD per day profit, but it's something. To me, that is an achievement.
Your point could be truth in theory, and/or in the future.
However, in practice, it seems that it almost works the other way around.
To mine on BTC, you cannot enter the game with 10$ to your name. You can't buy a mining rig, it is way too wasteful to mine on your existing CPU, etc.
However if we look for example at staking in Ethereum, there are decentralized (no trust required) pools that allow you to stake however little amount of ETH. The chain itself will require at least 32ETH to run a single meaningful staking contract, but through pooling this is directly practically accessible to anyone with even small amount of ETH.
There's a difference between merely making money and being your own sovereign node in the network that is not reliant on anyone else (other than your source of electricity :P).
Just making money, yes you can pool together. And that's a great feature of smart contract networks. But we are also seeing smart contracts being brought into Bitcoin that allows the same things. I just think sovereignty and making money shouldn't be conflated.
pretty weird seeing this recent trend of hn going from crypto-resistant, to cardano pumping. out of all the blockchains cardano? thats where you see the future? really?
well #1 would be Charles Hoskinson and his history...
but more meaningful opposition would be in why use a DPoS network now that we can have PoS networks without the delegation?
if you value decentralisation and think it has a future why would you go for a DPoS network that can so far just send tokens, there are better dpos networks like cosmos or polkadot, and ethereum is moving to pos. What is cardano actually (still attempting) to solve that hasnt already been solved by polkadot/cosmos?
Why use haskell as the contract language? do you think in the limited pool of blockchain developers there are many people are wanting to write haskell? and that they are going to port all the existing tokens/defi/contracts made over the past few years to a haskell+utxo model? who is expected to build on this. in 15 years of dev work ive met a handful of haskell devs, they are all in academia and dont make production software.
And alongside that, and why i refer to it being pumped, is that it is getting so much publicity but barely being used. i just looked at the block explorer and in the past ten blocks three are empty and the rest have a top of 10 transactions being processed.
Where are the supposed network effects driving it? shouldnt the blockspace be in demand? especially with the recent price surge, if the price is going up but it has empty blocks surely that is a bad sign?
> Why are we still talking about bitcoin and first gen blockchain tech.
Because it doesn't seem to be going away faster than the newer generations. There is a real chance that if cryptocurrency ends up being a thing forever that BTC is the winner. And that is an environmental disaster until we get to 100% clean energy worldwide.
The way the scaling operates, as it goes along, even if you had FREE energy piped from a hyperspatial link in the heart of the Sun… eventually the ASIC farms themselves will begin to cook the planet.
It doesn't stay alive and profitable unless it keeps burning energy MORE. The fact that the energy's going to come from the dirtiest and most dangerous (cheapest) possible fuels, is certainly a problem and will continue to be one for as long as such fuels exist, but in the literal absence of fuel and cost of fuel, the exponential-growth thing just switches to the computers turning (now free and infinite) energy into calculation.
There is always a bigger server farm, because such a thing costs money, and those with money are the ones who can and will make more of it. With cryptocurrency, that's just literal, and their profitability is always a perfect and direct match with how hard they can cheat or abuse any possible rule there to constrain them. The end result, perfectly untraceable and fungible, as long as the system is allowed to continue.
Disaster will always be more profitable, in cryptocurrency-land. I mean, I suppose you could play nice and barely make any money…
The energy usage of Bitcoin is proportional to the price, it doesn't grow without bound as you seem to be saying here. Miners compete for a fixed reward, it doesn't make sense for new miners to enter the system if the rewards already are distributed to the point that they just cover the costs.
Bitcoin is only popular because tech workers get paid a lot and have the ability to speculate, we live in a world of massive asset bubbles created by government fiscal policies and Bitcoin is excellent for buying drugs on-line.
Most people want security in their assets, which is why a majority of folks read articles about bitcoin but never touch one.
All of these articles are great examples of creative writing. I do kind of enjoy them.
I see this being thrown about as a talking point a lot, but I think it ignores what's fundamentally happening here.
Bitcoin is essentially a proxy for another currency. Mostly the USD. These people need a way to protect their assets from what their own governments are doing to the value of their native currencies.
They cannot buy securities or foreign currencies for various reasons.
Bitcoin gives them a way. A way to convert their native currencies into USD, a stronger currency.
So while it's a good use-case for Bitcoin, it's not exactly a situation that's applicable to the world at large.
> Bitcoin is essentially a proxy for another currency.
Yes, but this is only temporarily. It's like refactoring systems. You create a new system and a proxy and then have the old system communicate with the new one via the proxy (or vice versa). Eventually, the old system becomes obsolete, so you kill it and get rid of the proxy.
But if your proxy takes at least $10 of your currency every time you use it, you would expect people to look for a different proxy.
In your example, Bitcoin would obviously be the "old system" if everyone wanted to use it for moving money around, because there are plenty of more advanced alternatives that work far better.
So why is Bitcoin so popular? Because it's a speculative investment. A new asset class divorced from fundamentals, making it impossible to say when the value is too high. That's why people like it.
Ironically, the number of people who use Bitcoin directly (that is, on the blockchain with their own address) is significantly smaller.
Most people use Bitcoin via exchanges, where they keep the coins. The average crypto user from Nigeria has zero interest in paying $10+ transaction fees every time they need to do anything with their money.
At this point, it doesn't matter if they own BTC or ETH or DOGE or whatever. They just want whatever allows them to move money around. The exchanges could simply keep balances in a database and reconcile them amongst each other via contracts, and it wouldn't make any difference as far as the end users are concerned (There are examples of this happening between exchanges).
I fail to see how something with wildly fluctuating value like bitcoin can ever serve as a stable currency or medium of exchange.
Maybe it's a "less terrible" solution in poor countries with inflation challenges, but I don't see that as a strong proposition for the utility of bitcoin. Cigarettes are used as a medium of exchange in prison. That doesn't serve as a strong argument for using cigarettes as currency.
Volatility is only problematic to the downside, not the upside. Bitcoin's volatility is skewed to the upside. Yes if you were not advised properly, and buy the top, you may be down, but only temporarily.
There are long phases in BTC's history where 100% of holders are in very handsome profits. And that's the problem?
No, it's also problematic to the upside if you're trying to use it as currency or medium of exchange rather than a speculative investment. How do sellers of assets price things? If I'm trying to sell a home in bitcoin and btc surges in value one day, do I lower my price accordingly? Or do I wait to see if btc goes back down a bit and settles? Volatility - both up and down - is destructive to price discovery.
If you're just making long speculative investments in btc and volatility is skewed to the upside, well sure that's fine but you're not using bitcoin as a medium of exchange, you're investing in it as a security.
Banks can't get rid of reserves at the central bank in aggregate. They can only get rid of them to other banks. So there is no need for the central bank to pay them.
Since there are always more reserves than required, and no alternative source of interest, the inter bank rate would be driven to zero by supply and demand. That's then the 'market rate'.
You can't hold reserves so the bank can charge you extra for borrowing money. Only banks can get zero.
How do you think central bank rates bind? It gives banks an alternative source of interest other than lending them to each other.
ok. it seems our differences here are more in definitions and semantics
I interpret the phrase 'left to their own devices' to mean that there is no central bank and therefore reserves are as a concept are null and void, which then also nullify the concept of a federal funds rate, which would upend the concept of the federal funds rate being 'the market rate' in the first place.
I'll take your word for it about the mechanics of what happens to inter-bank rates under different reserve mechanisms, perhaps they would be driven to zero for the reasons you outlined.
However I'm unclear on what the macroeconomic ramifications would be of letting a small group of banks dictate the federal funds rate; I believe the purpose of this system is to achieve a congressional directive regarding price stability and labor utilization.
Being driven down to zero I think means people would lend at 0% interest - I would think thousands of years of anecdotal evidence would speak to the contrary - how would it ever get to zero? Who would lend like that? What would their motivation be?
"Being driven down to zero I think means people would lend at 0% interest "
Banks can't get rid of reserves at the central bank in aggregate. They can only get rid of them to other banks. So there is no need for the central bank to pay them.
You can't hold reserves so the bank can charge you for borrowing money.
Since there are more reserves than required, and no alternative source of interest, the inter bank rate would be driven to zero.
How do you think central bank rates bind? It gives banks an alternative source of interest other than lending them to each other.
I keep these bookmarked as they're about the simplest and clearest introductions to how economies work that I've found - and the Bank of England should know what they're talking about :)
Bank reserves aren't an important factor in the financial systems, they're there to ensure customers have access to money if they want to withdraw it and to allow banks to move money between each other. More importantly banks don't lend money out of their reserves (so-called "fractional reserve banking"), they simply add the loan amount to the customer's account and also to their own liabilities i.e. they "create" money.
Out of all cryptocurrencies that exist today, Bitcoin is probably the worst one for buying drugs online. It's pseudo-anonymous at best (compared to Zcash that is actually anonymous), slower than many others and if government agencies have tracking tools in the cryptocurrency space, Bitcoin is probably the most popular target for those tools.
Zcash is not anonymous; cloaked transactions are optional and hardly anyone uses them (so they stick out like a sore thumb). It also requires trust that the founders aren't printing hidden coins (due to its flawed "trusted initialization" procedure used at the coins inception).
Monero/XMR is the only 100% private, fungible cryptocurrency. All transactions enforced private by default, with no option to send an un-private transaction.
I'm pretty sure it's primarily poor people buying into crypto, not tech workers. Go to r/cryptocurrency and read the posts, does it look like HN (primarily tech people)? are there any technical discussions, or is it just full of get-rich-quick hopers?
hint: posts mostly consist of "<famous guy> tweeted about <my favourite shitcoin>, this is good for the price of <my favourite shitcoin>".
Correct. If anything, tech workers like we find on HN tend to be more openly against Bitcoin (specifically) and cryptocurrency in general. The people I see buying it on /r/cryptocurrency are the ones posting "finally managed to get 0.01 BTC!"
This is the article that made things finally click with me. Thinking about the pre-WWI gold standard and the issues that existed there and the improvements that Bitcoin brings around time, consensus, etc.
The baseless negative comments with no interaction with the article content confirms for me that Bitcoin is on to something. Sour grapes syndrome is a result of pride, I think.
There is nothing baseless in saying that using 0.1% of the entire world's energy in order to do 3 transactions per second is beyond ludicrous, and an environmental disaster of massive proportions.
There are millions of people who use it, trade it, store their value in it, program more software for it etc. They see the answer, they get the point.
Can you please just answer this - do you suppose they all halt what they are doing and wait for an undeterminate amount of time for you to also get it, before they can go on with their businesses and lives?
I think the more pertinent question is, if they all halted what they are doing for an indeterminate amount of time for other people to get it, would the world [in future] be a worse place? And how?
I would upvote this a hundred times if I could. I don't understand where this kind of demand for further understanding even comes from we are well past the point where it could have been written off as a fad and it is obvious there is value to it. There is no reason why everyone should feel the need to "get it" or get value out of it to understand that other people do get it and do get value out of it.
It is such a weird sentiment to me because it would never occur to me to devalue the value others get out of things I don't understand. I hate bonds, I don't "get" why anyone would want to buy bonds, people have tried to explain it to me. I decided that I will never buy a bond in my life because they are just the dumbest form of investment. I can hold that sentiment whilst saying "I don't get why they buy them but clearly there is a lot of value from the vehicle and it is clearly a valid form". I don't see why I should need to understand an monetary vehicle or like an investment vehicle to understand that some people do, and those people have a valid opinion.
Can we at least acknowledge how far the goal posts have moved? I can remember what people were saying about Bitcoin in 2013 - that it was a revolutionary technology on par with the creation of the Internet; that it was going to completely transform our global financial system; that it was going to replace fiat currency; that it represented a dazzling new future that you’d have to be an insane Luddite to not go all-in on.
Well, where are we now? What significant advancements have occurred since 2013 as a result of Bitcoin (other than the catastrophic climate impact)? What new technologies are powered by crypto other than niche, nerdy shit which no-one outside of a handful of enthusiasts cares about? Bitcoin is now 12 years old - if Bitcoin is the next World Wide Web, then who is the Google of crypto? Who is the Amazon? Hell, does Bitcoin even have a Lycos or a Yahoo?
And yes, I acknowledge that millions of people own Bitcoin and are trading it. But what reason is there to believe in Bitcoin, other than the fact that other people believe it? Yes, I know that you could say the same of fiat currency: dollars only have value because we believe they do. But the difference is that I use fiat currency every day to accomplish real things that have an enormous material impact on my life. The only thing I’ve ever used Bitcoin for is to buy drugs - what else am I ever going to do with it, except hope that the value increases so I can sell it to another speculator?
Maybe the crypto enthusiasts are laughing at me for asking these rhetorical questions as if there isn’t an obvious answer - in which case, let me know! I don’t want to miss out on the crypto wave if it really is as big as people keep telling me. But I’ve read books about Bitcoin, delved into crypto-related code, and spent many hours of my life studying blockchain technology and trying to understand what all the fuss is about. That was a couple of years ago, and I got bored and gave up. I’ve been telling myself to take another look given the recent price surge, but I just can’t motivate myself. What am I missing? Why do people act as if this is all so obvious?
If bitcoin disappeared tomorrow - just completely disappeared - then beyond some people losing their unwise investments, nobody would be significantly inconvenienced in any way whatsoever.
For any task (beyond speculation and illegal activities) that bitcoin is used for, there exists other, usually much better services that can be used instead.
What benefits? Bitcoin isn’t fundamentally better than a database running on a fraction of the power (i.e. every modern bank).
The claimed benefits of BTC are (1) to remove government control of money, and (2) to eliminate the need for trust, but (1) ignores why we have chosen to give governments control of money in the first place when gold still exists (and can be traded electronically), while (2) requires you to ignore the other half of the transaction where you buy something with the money rather than just putting it in someone else’s account — reports of being ripped off by a vendor goes back to Akkadian cuneiform, and things like chargebacks and courts are there to deal with this, putting rules on what was once anonymous shiny rock that anyone could mine in a literal rather than metaphorical sense.
> being ripped off by a vendor [...] things like chargebacks and courts are there to deal with this
Third party escrow services, the better business bureau, the police... all of these can (and should in many cases) exist with bitcoin. It doesn't have to be either/or.
Unfortunately, the powers that be have ensured that we will never again be allowed to live in high trust societies because “diversity is our strength”.
Now do the gold mining industry, and then how USD is backed by armies. And then you can research Lightning Network on top of Bitcoin and how it can process an unlimited number of transactions.
Pretty close to unlimited, if you imagine a channel as slider or a bead on an abacus, as long as both nodes using the channel agree where it is, the position can be updated an infinite number of times without touching the blockchain. Timelocks let a transaction pivot through many of these.
This is just whataboutism. Gold isn't used as a currency. Seems a stretch to claim the armies exist solely for the USD. And until the Lightning Network is actually implemented it will remain theoretical.
Not sure where you get your news but LN is implemented and functional. There are wallets, services, software, etc, downloadable, functional, used every day. If what you mean to say "get all the marchants that support BTC to accept LN", then yes, there is still some progress needs to be done.
The LN is not functional. It does not have an implementation of routing that scales. Nobody knows how to make an implementation of routing that scales.
If LN ever sees anything more than toy usage, it will fall over instantly, and become unusable.
Quite an amazing feat fitting all the ridiculous things Bitcoiners say about energy usage into such a short post.
1. The gold mining industry has nothing to do with bitcoin.
2. The gold mining industry has nothing to do with money.
3. The gold mining industry does not use anywhere near 0.1% of the entire energy production of the planet.
4. Just throwing the army in there for some reason, huh.
5. The lightning network does not "process an unlimited number of transactions".
6. The Lightning network does not scale.
7. Nobody knows how to make the Lightning network scale.
8. If the Lightning network worked, which it doesn't, it doesn't need to run on top of Bitcoin, so Bitcoin still does not need to burn 0.1% of the world's energy.
Here me out. What if it was the only way to defund the US military? Would you be interested then? Why do we waste so much energy building killing machines? Why is there not a daily hackernews thread complaining about the energy consumption of the US military?
Because it’s a necessary to ensure you can buy and sell things when you want to.
If that was the argument, I would ask in response: if it could do that, why would the combined vested interests of the US military-industrial lot allow Bitcoin to succeed? It’s not beyond the reach of governments to ban unwanted trade, and even though bans are not magic, even a half-arsed enforcement of such a ban is enough to prevent a currency becoming endemic.
> It’s not beyond the reach of governments to ban unwanted trade
Yeah, right, it worked so well for alcohol... It DOES (/s) work so well for drugs in the US right now...
And hey imagine whether it's easier or harder to ban something that doesn't take any physical space in your suitcase and can be transacted with only internet connection.
Basically we are talking about the world's reserve currency becoming a denationalized currency. To be "mainstream" the denationalized currency will need to be defended by the militaries of the Euro-zone, US, India, China, and Russia (likely one after the other in this order).
Only the US is incentivized to have USD be the world's reserve currency. Meanwhile, 7 BB people around the world prefer a denationalized reserve currency, countries will prefer to interact with each other with a less trackable currency (e.g. Iran and the current sanctions), and based on the usage of tax loopholes by every multi-national company (e.g. FB, Apple, Google) every business will prefer transacting in less trackable currency (especially with crypto-coin tumblers). This demand for a denationalized reserve currency will be supplied by some crypto-coin (maybe BTC, maybe something else). FWIW, I don't think having a "less trackable currency" is a "good thing", I'm just saying there are large organizations that benefit from it financially and therefore it will exist.
Frankly once the S&P companies purchase enough BTC (e.g. TSLA, Square, etc), a BTC 51% attack will need to be defended against by the US military to ensure national stability. If BTC (or any crypto-coin) can hit "too big to fail" in the US, the rest of the world's militaries will all build a defense strategy around BTC mining. As as consequence, cheaper energy will also be an investment into national security.
There are still more problems with BTC specifically, like "slow transactions" but as may here have said, we can either use a geographically sharded blockchain (e.g. BTC-California, BTC-USD, BTC-CAD, BTC-RUP), where each shard allows fast transactions, and slow reconciliation, or we will just leverage credit for fast transactions like we do today, with slow reconciliation between banks like we have today. I don't see "centralization" as a problem, because having bank accounts and credit are very useful as an individual (as individuals will likely only transact with credit cards like we do today).
Will BTC become "too big to fail" in the US? Unclear. Another crypto might get there first. However, there is no scenario where the world's reserve currency continues to be tied to a single nation.
> Only the US is incentivized to have USD be the world's reserve currency.
The US is merely the largest reserve currency and has been trying to reduce that role for well over a decade now - being a reserve currency merely means foreign crises lead to dollar flight which has knock-on effects on US trade. There's no real upside - demand for dollars is based on the stabiliy and size of the US economy, nothing more. EUR, JPY and GBP also operate as reserve currencies due to the strengths of their economies.
What need there is for an international reserve currency is filled by the IMF's SDR, an asset whose value is based on basket of USD, EUR, RMB, GBP and JPY:
I'd actually argue that it was more of a threat to the authority of the state than Bitcoin is today. The widespread disregard of Prohibition lead directly to its repeal. Defying the state in one aspect of your life leads to defiance in other aspects.
On the contrary, bitcoin mining operations can be sniffed out by their impossibly outlandish power requirements, like pot growers used to be.
Increasingly, mining operations have to make special arrangements with entire power grids to suck up their energy and basically just burn it in arbitrary calculation. The scale at which this operates, and the increase over time, are both what makes up a lot of the problem, and what makes it impossible to hide.
If you'd prefer a world where people value bitcoin BECAUSE due to its unpopularity and externalities, governments resort to drone striking such operations when discovered, all I can say is: well, that solves the energy wastage issue, as blown-up ASIC farms aren't good at burning energy anymore. Maybe it solves the constant devaluation against energy cost issue, too! But I think you're missing the point and looking at only the end product of the industry.
Mining doesn't have to happen in the same country where you use the coin though.
In order for this scenario to become a reality, many governments would have to collaborate to make mining infeasible. But they would be incentivized to not collaborate so they can instead tax their miners and get the profits for themselves.
Given what governments worldwide have done with currencies in the past, I think you’re underestimating their capacity and how much they care about the functioning of their currency.
If you’ll excuse my admittedly also-naïve wargaming of their responses:
“Dear ISPs, this is the government. That stuff you do to block piracy and illegal porn? Do that for bitcoin.”
“Dear Banks, this is the government. Purchase of bitcoin is now a federal offence. Tell us if anyone tries to exchange them for money.”
“Dear The Power Company, this is a government order. Turn off power to these properties who are engaged in illegal Bitcoin mining.”
“Dear everyone, this is the government. Your taxes can only be paid in dollars, not in bitcoin.”
(Not that I would say such things will never happen, only that I expect America to become irrelevant on the world stage before it happens; and even in the most extreme USSR-mimicking scenario that is not something I expect before 2041).
As I mentioned in my reply above, I think the way it can work is if it grows exponentially, and the US government doesn't respond in time at which point not using crypto will put the US at a disadvantage. Crypto has the unique ability to spread across borders with ease, no other currency has had this ability. So I think it's a pretty unique scenario in that case.
Another scenario is if it grows slowly amongst the countries that have unstable currencies. Slowly it takes over the USD as the world currency. At a certain point, the US would have to allow it to participate in that economy.
Nations with bad currencies and mismanaged economies sometimes switch to the USD.
Such nations collectively switching to a different currency like the Euro or the Yuan is way more plausible than switching to Bitcoin; and not only do none of the USA, the Eurozone, nor China have economic policies compatible with giving up direct control of inflation, the usefulness of a shared single currency isn’t enough to outweigh the political costs for the UK to use the Euro (famously), or South Korea to use the Yuan, or Canada to use USD.
Money in the scale of governments isn’t like money on the scale of individuals. For governments, money isn’t even like it is for the richest individuals, different as it is between the rich and normal people.
I don't follow. Why would a country's citizens choose to use a different country's currency rather than a denationalized currency? i.e. couple their monetary policy to the world market, rather than to a single country's market. Given they just experienced one countries economy create poor monetary policy, why trust a single entity rather than diversify by trusting the group decision of many decentralized entities?
And why wouldn't a government whose citizens do not trust the government's currency, not incentivize its citizens to use a denationalized currency instead of funding potential threats?
e.g. The Venezuelan government would way rather its citizens use BTC over USD or Colombian currency, in order to ensure inflation/deflation is globally decided by neutral parties, rather than decided by a single foreign entity with potentially malicious intent.
Aaa… this will take too long to do justice to the topic, but politically speaking, the Euro is supernational and the UK collectively hates it, that sort of attitude is part of the problem. “Loss of sovereignty” is how they felt about it, how many discussed it.
> The Venezuelan government would way rather its citizens use BTC over USD or Colombian currency, in order to ensure inflation/deflation is globally decided by neutral parties
Why would those parties have Venezuelan interests in mind rather than their own? One of the arguments against the Eurozone (I’m not qualified to judge it on quality, but it is given as an argument) is that Northern Europe “should” have different inflation to Southern Europe to help boost the local economies. Can’t do that with a single currency, they say, and that would apply more the wider that zone spreads. A single global economy — fiat, digital, or metallurgical — would never be able to resolve it.
> “Loss of sovereignty” is how they felt about it, how many discussed it.
Yup! I agree, there will be many holdout countries. However, even the UK uses the USD as the world's reserve currency.
> Why would those parties have Venezuelan interests in mind rather than their own?
Venezuela was fucked because a handful of people are performing bad monetary policy. While the interests of each mining operation would be their own interests, in aggregate, the interests of all BTC mining is a globally averaged monetary policy. Unaffected by corruption, or stupidity (whichever you think is a more apt description of Venezuela's current monetary problem).
I don't know what a globally averaged monetary policy will look like (or who it'll benefit the most), but I can say that for any population currently living with a monetary policy below the average (i.e. because of corruption or stupidity), it'll be an improvement and they will adopt a denationalized currency to get it.
> The Venezuelan government would way rather its citizens use BTC over USD or Colombian currency, in order to ensure inflation/deflation is globally decided by neutral parties, rather than decided by a single foreign entity with potentially malicious intent.
No, the Venezuelan government has tried to create its own cryptocurrency called the Petro in order to have control of it.
Of course they did! They want control. Meanwhile, the population doesn't trust its government and wants a non-Venezuelan controlled currency.
Legitimizing crypto currencies by creating one, without increasing trust in the government just results in more of the Venezuelan people buying a denationalized crypto.
> It’s possible that, as Jiménez suggested, Venezuela’s peer-to-peer bitcoin activity wouldn’t be where it is today without crypto-friendly initiatives from the government itself. It’s also possible that bitcoin adoption in Venezuela may be driven by the sheer rate of Venezuela’s hyperinflation, which outpaces other crisis economies. [0]
Too late to what? Forcefully distribute it as it sees fit or else put you in prison or harm your family? If you keep using it in secret it will never be mainstream.
Physical force is the strongest currency on Earth. Arguing it’s not is arguing millions of people die for entertainment rather than shifts of power.
If Bitcoin is the revolutionary future millions will die on that hill to make it so.
If they haven't done it by now, then they don't currently see it as a threat.
Now let's say in a few years, that inflection point happens where crypto sees an exponential rate of adoption. Every other country begins to use it, some ban it, many others adopt it. At that point, if not using crypto will put the US at a disadvantage, they have no other choice but to adopt it as well.
A semi-related example is the way many companies "disrupt" the markets e.g. Uber/Airbnb wasn't a threat to many cities, until it was. At which point, the demand for Uber/Airbnb outweighed the government's ability to do anything about it.
It's not the best example since some cities have done things about it and Uber/Airbnb, being a company, is easier to target.
With crypto, its decentralized nature makes it much more difficult to control and attempting to ban it will raise issues around free speech.
That's not to say countries won't try and succeed in getting it banned, though in the case of the US, I don't think it's as cut and dry.
But what if it's not a conscious forfeit of power. The power is taken out from underneath them and by the time they realize it, they have no recourse. Other than threatening all countries that use the currency, which I don't see happening.
You’re saying all militarized countries on Earth will come to a point where Bitcoin is prominent and they will forfeit their power over their citizens without any fight?
You’re proposing Bitcoin will bring world peace without conflict?
They have no recourse because the box has opened, and the new economy is up and running. Barring your citizens from participating would put your whole country at a disadvantage.
Also, I don't think I agree with the notion that adopting crypto would result in a country forfeiting their power over the citizens. There are plenty of ways to integrate crypto into existing governments while still maintaining control.
I'm not claiming this will happen, more of contemplating on how a global decentralized currency can take over.
As far as bringing world peace, I don't think a decentralized currency would do any such thing. It's probably one of the required steps towards it, but one of many.
For example, if the rest of the world adopts BTC as the world's reserve currency, the USA would HAVE TO purchase crazy amounts of BTC, and defend against a 51% attack by investing into mining.
Meanwhile, the USA could try to preempt this future, but only the USA is incentivized to have USD be the world's reserve currency. As such the USA would need to threaten every other country in the world to stop using BTC, but its not clear if that causes BTC adoption to drop, or the Streisand Effect to kick in.
And ofcourse, "mutually assured destruction" stops any large country from employing too large a threat against any other large country.
Would any nation allow itself to be in a position where a coalition of the willing could perform a 51% attack on their currency? Because if not, only one country could use BTC or anything with the same mining algorithm.
If we are talking about a coordinated aggressive action to cripple the economy of a non-superpower nation, like today it requires a superpower to protect it.
If we are talking about a coordinated aggressive action to cripple the economy of a superpower nation, you're basically triggering "mutually assured destruction". As such its most productive to assume that doesn't occur.
I mean all that US Govt needs to do to crash the price 90% is, accuse ... not even that, only hint, that Tesla’s BTC holdings might be tainted by drugs/terrorism financing/money laundering. Game over.
That is true only to the extent that proof of work has already been performed. You have to stake something of value or POS doesn’t work. Staking a POW coin to “mine” a new POS coin works. So does burning a POW coin to convert it to a new POS coin that can be staked for more. But, you can’t bootstrap a POS coin without leveraging proven investment from previously burned work.
At this point Bitcoin and Eth have about a trillion USD of built up burned work. Is that enough to prime the pump for a POS-based world economy? I dunno. Probably?
That's true. So, where are those currencies in the market capitalization charts and news articles?
Remember; the last time Bitcoin tried to change its mining algorithm, the democracy voted for a split. Ethereum has said they're moving from Proof of Work to Stake; I'm not surprised, given the Ethereum developers seem to abhor Work in all of its forms, including making progress on Ethereum itself, so we'll see if that actually happens in a few decades.
PoS is a theory right now, with some minor market traction, but nothing to the degree of BTC or ETH. Don't levy it as a promise which absolves the environmental sins of cryptocurrency, when its so obviously unlikely to do so. Bitcoin is the zeitgeist; its actively destroying the planet; its not moving to PoS.
Ethereum's PoS has been running in production for three months, and has about $5 billion staked. So far it's running perfectly.
They still have to migrate the rest of the network to it, but that's a relatively easy task. Once you have consensus, adding more data to reach consensus on is basically just adding a hash value to each block.
That's not the point. The point is, it hypocritical to complain about bitcoin energy consumption without also complaining about the energy, material and human deaths consumption caused by for example US military, which is in essense what is required for something like a USD as a reserve currency to function.
If Bitcoin becomes the reserve currency, the theory goes that the US would not need to involve itself in as many petrodollar wars as it does today, thus resulting in a smaller military.
I don't think anyone seriously thinks Bitcoin will replace militaries completely.
Wouldn't the US become more desperate to hold onto its influence in oil producing regions and do so with violence? don't see why "wow, everybody is starting to use BTC rather than USD for oil transactions" would lead to "guess we don't need this aircraft carrier" instead of "time for some coups to install governments who will do what we want and not switch to BTC".
The petrodollar is basically a conspiracy theory - you can use dollars to buy oil priced in Euros the same way you can use Bitcoin to buy drugs priced in dollars. Iraq pricing oil in Euros would just mean they sold most of it to countries using the Euro.
The importance of the role of the dollar as a reserve currency is also just an urban myth:
If bitcoin causes the value of fiat currency to fall enough, the government will not be able to print money to fund wars. A war will require overtly billing the people for it or raising taxes. So it will be less likely the people will consent to start a war.
Without commenting on the "funding wars" part. The US leverages inflation as a taxation strategy (and doesn't really admit it).
Most lay-persons don't understand it as a tax and therefore do not complain about it until they cannot afford things (housing, food, etc), and at which point the government distracts by bundling (hiding?) the inflation problem with the stagnant wage / income equality problem.
Eventually (every 2 decades) minimum wage in increased to catch up to inflation. Basically the inflationary tax strategy results in the US budget getting 2 decades of "extra taxes" (burdened by the lower middle class and the working classes[1]), then a reset, and then repeat.
[1] Note inflation as a tax strategy is actually a negative tax on low-interest debt holders like businesses, and home owners. It is also has a net-neutral effect on the investing class, because assets inflate proportionally. Meanwhile, credit card debt and other high-interest loans are not reduced as much (i.e. X% inflation of 19% credit card interest is a lot lower than, X% inflation of 2.5% mortgage interest).
Okay, the claim is that the US government raises funds by generating inflation, that is clear. The details are the problem. Say the US government issues a bond, some bank buys it, and eventually they sell it to the Federal Reserve. The US government has the same debt, and it seems to me that the only thing that has changed is that the bank now has cash where before it had a bond. How does this 1) create inflation and 2) is leveraged by the US government as a taxation strategy? That's what I'm asking.
MMT[0] is relatively new in our lives, I find it hard to understand myself, let alone try to explain it.
> Say the US government issues a bond, some bank buys it, and eventually they sell it to the Federal Reserve. The US government has the same debt, and it seems to me that the only thing that has changed is that the bank now has cash where before it had a bond.
This is mischaracterizing the situation. It actually is: 1. A bank buys a newly issued bond; 2. The government spends that bond money on the private sector. 3. The Fed buys the bond by changing the values in its database (i.e. "printing money").
The best I can do to explain MMT is this:
1. The government spends as much as it wants and collects as much debt as it wants.
2. The government plays a game of chicken with the private sector (including other countries).
2.1. As long as everyone plays along, its a ponzi scheme that spirals upwards until it hits a ceiling (hyper inflation).
3. Meanwhile, until it hits the ceiling, it creates "manageable inflation" and/or deflates the rest of the world's assets.
3.1. As long as the rest of the world plays along (which it does), the extra cash funds innovation (i.e. the private sector) and improves quality of life world wide (i.e. better pharmaceuticals, cheaper computing, etc).
3.2. Meanwhile, in the US the "manageable inflation" is paid for by the poorest.
My personal thought: the world's interconnected market is so complex, that no one understands cause and effect (including the people making the rules). Currently, there is an emergent property of that complexity that the US, Japan, etc can "print infinite money" and some large group of people somewhere are left holding the bag worse-off for the US' decision, but no one really knows who this group is nor how much those people got fucked. Even the impacted individuals don't realize they are impacted because individually its a small impact, and innovation keeps improving their lives enough to not complain.
Hopefully a denationalized crypto (i.e. no ability for a single nation to print money) will help us simplify all of this to be understandable again.
The fact that you don't understand monetary theory, doesn't mean economists can't figure it out. Maybe this is why developed nations haven't experienced hyperinflation in almost 100 years. And telling people that they should stop what they're doing for the sole reason that you don't understand the ramifications of their actions seems a little arrogant. I guess we also should get rid of money altogether, production and saving, in order to simplify the economy so you can finally understand it.
From what I can read, no one knows how it works, people just know that it works.
Without a simpler design how can I know I’m not being harmed? I think this is one question that will help drive people to adopt a denationalized currency.
Do I know how works what? The monetary system? The economy? The idea that a simpler design will help people like you avoid getting scammed is hilarious considering that you have already fallen for the biggest and most blatant scam of all which is bitcoin. Central banks are not there to rip you off, they have other concerns. And the wholesale adoption of bitcoin as unlikely as it is would definitely harm you in a way that you can't even imagine. Do some research on the gold standard, the problems it had and the reasons it was abandoned.
:( its become clear to me you're not having this conversation in good faith. I apologize that I wasted your time.
FWIW, I do not own any BTC or other crypto coins.
P.S. I highly recommend you research MMT. I think you'll find that no-one (including the most experienced economists) understands the details of how the emergent property works, they only understand that it works.
Re-reading you comments, I think you might be confused with regards to what MMT is. MMT is a novel monetary theory, it's definitely not the standard monetary theory, and it's not widely accepted by economists. The standard theory of money is the Quantity Theory of Money, which has been re-discovered many times since the ancient times. Why you think MMT is important in this discussion, I don't know.
> Why you think MMT is important in this discussion, I don't know.
Because over the last decade the US has been quietly transitioning to the MMT mental model. MMT is how we got out of the 2008 recession and also how we are funding both the pandemic stimulus packages (in 2020 and again in 2021).
The inflation we previously discussed in this thread is, in my understanding, a direct consequence of MMT.
What is the MMT mental model? It seems to me that you're under the impression that MMT is some kind of monetary policy, when it is not. Monetary policy along with fiscal policy are the two major counter-cyclical policies used by governments since the 1930s. MMT is an economic theory, and is much more recent than that.
MMT is actively being leveraged for fiscal/monetary policy in the US, and has been since 2008 (by both Democrat and Republican POTUS and Congress).
> "Congress has been showing us — in practice if not in its rhetoric – exactly how M.M.T. works: It committed trillions of dollars this spring that in the conventional economic sense it did not ‘have.’ It didn’t raise taxes or borrow from China to come up with dollars to support our ailing economy. Instead, lawmakers simply voted to pass spending bills, which effectively ordered up trillions of dollars from the government’s bank, the Federal Reserve. In reality, that’s how all government spending is paid for." [0]
> When President Trump signed the $2 trillion CARES Act into law, the federal government sold bonds to fund the new spending, expanding the government debt. However, the largest purchaser of those bonds was the Fed. ... As a currency issuer, the federal government can create more money to buy Treasuries and pay off its debts, making an involuntary default impossible. Under the Fed’s jurisdiction, it could purchase all U.S. Treasuries tomorrow and retire the entire U.S. federal debt, something Japan has already done with nearly half of its debt. ... Is the Fed’s financing of the debt created by the CARES Act fueling inflation? Not quite. The annual U.S. inflation rate currently stands at around one percent, half of the Fed’s two percent target. In fact, over the past decade, the Fed has struggled to increase the U.S. inflation rate. There actually is not enough spending (aggregate demand) in the U.S. economy to hit the Fed’s inflation goal. [2]
> Modern Monetary Theory (MMT) is alive and well in the United States. While MMT is derided by mainstream economists, the federal government is practicing MMT. From running massive federal government deficits, to the operations of the Federal Open Market Committee (FOMC) by the Federal Reserve Bank, the United States is practicing a policy of MMT that is currently underpinning the economy of the United States. ... The U.S. Federal Reserve (Fed) began its own form of quantitative easing (QE1) on November 25, 2008 by purchasing $600 billion in agency mortgage-backed securities (MBS) and agency debt. [3]
> While MMT may seem like a purely theoretical construct, it should be recognized that many governments, including the U.S. government, are effectively already putting MMT into practice. [4]
If you're still not convinced that the US is actively applying MMT in practice thats ok, lets wait and find out more. Meanwhile, thanks for catalyzing my motivation to research all of this! :)
Okay... I still don't know what it means to "apply MMT". I already told you that monetary policy has been used by governments since the 1930s long before MMT was invented. But, anyway, what is your point? Do you think that QE was a mistake? What do you suggest would have been an appropriate monetary policy during the 2008 financial crisis?
Given inflation didn't run rampant, I don't know if there was a better strategy.
However, the continued liberal application of QE 1. Could hit a hyper inflation ceiling (hurting the poorest). 2. Weakens USD compared to other currencies (as we have seen through 2020. Hurting every entity that holds cash i.e. typically the poorest). 3. Reduces the ability for the US to apply QE in the future. Hurting our ability to tackle the next crisis, which will predominantly hurt the poorest.
All of this to say, a portion of the lost trust in the USD is being put into crypto to hedge for the medium term, and (for better or worse) to create a long term denationalized currency where no handful of politicians can choose to use QE rather than making good fiscal policy decisions quickly.
So when the next economic crisis comes you would rather have central banks not interfere with the crisis at all. Just let the crisis solve itself. Is that what you're saying? Also, you seem to think that taking monetary policy away from central banks will lead somehow to governments making good fiscal policy decisions, whatever that is. Where do you get that from? The gold standard never stopped governments from going bankrupt. Monetary policy in the hands of incompetent authorities can be disastrous, but this is no reason to get rid of it. Otherwise we should also get rid of many things, including laws and government.
I'm not making a judgement about its merits, it might end up horrible.
All I'm saying is, there is a trend towards denationalized currency as a hedge against bad monetary policy. Based on this trend something like BTC will likely become the new gold standard used for slow transactions (i.e. reconciliation) between governments and large corporations.
Will it be BTC? I don't know. Will it be a good thing? I don't know.
I do know, the trend suggests a particular future, and trying to root out the motivations suggest the trend will continue.
People who believe removing power from central banks is a good way of avoiding bad monetary policy are a tiny minority of lunatics. This will never be the motivation behind a widespread adoption of a bitcoin by governments, corporations and the general public.
By your definition from earlier in the thread, any entity that buys BTC is a lunatic, so I'm not sure you'll have much to learn from this :P
But, if you are willing to acknowledge both Square and Tesla are run by very intelligent people, these are quotes about their motivations:
> However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere. [0]
> Square believes that cryptocurrency ... provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose. [1]
Based on my research into the motivations for BTC (or any crypto), these quotes are not unique. The majority of the root motivations seem to be 1. "to hedge against bad monetary policy" and 2. "to create a global monetary system" i.e. create a single global monetary policy.
Meanwhile, if enough S&P companies follow Square and Tesla the US government will find BTC is "too big to fail" and adopt it wholly. But I'm not convinced other S&P companies will follow. Lets see.
The anti-government, anti-bank ideology behind the creation of bitcoin and other crypto-currencies is indeed a bizarre political cult whose adherents are definitely lunatics. That doesn't mean everybody who owns bitcoin is necessarily a lunatic. What is true though is that, generally speaking, proponents of bitcoin don't seem to really grasp basic economic concepts. For example, what does it mean for a fiat currency to have "negative real interest" rate? Currencies don't "have" real interest rates. Real interest rates are not set by governments nor central banks, but by the market, and they are independent from currency (that's what "real", as opposed to nominal, means). At least Musk is decent enough to admit he doesn't know what he's talking about, which is good. Bitcoin is a non-income generating asset, which means the only way it can produce a positive return is if it increases in price, and it can only increase in price if the demand for it grows. Therefore I'd be a little sceptic about opinions put forth by people who are invested in bitcoin, as they have a strong financial interest in promoting bitcoin in order to make its price rise, as this is the only way they can safeguard their investment. If I were you, I'd look elsewhere for opinions on this matter.
In practice, we need to get our emissions down in the next few decades (if it's not already too late). I think retooling our energy economy is already an incredibly ambitious project, and I'm not sure we'll be able to achieve it in the designated timeframe. I certainly don't imagine us doing that and deprecating the US military in favor of Bitcoin, even if you accept the very, very bold idea that the former serves the same functions with the same efficacy as the latter. In other words, even if I was convinced that Bitcoin could replace the US military, I would still argue that we should stop Bitcoin mining until we solve the energy crisis and then take our time with a slow, thoughtful transition from military hegemony to crypto.
Why would we need to do that, Trump lost and the good guy won. Surely the good guy who is friends with the guy who won the peace prize wouldn't be out there starting wars. No way. Our fair and independent media would tell us if that was the case surely. If not them it's not like views against that administration are removed from social media, no way.
If you think the US military or any military will go away because Bitcoin you’re delusional.
> Why is there not a daily hackernews thread complaining about the energy consumption of the US military?
People are willing to pay a high energy cost for safety. Bitcoin doesn’t provide me any safety and it doesn’t have the strongest military in the world claiming it’s worth anything.
If you think Bitcoin will topple governments be prepared for a long future of conflict and casualties. Maybe it will be worth it but I doubt it.
So all in all it’s a massive energy waste thought experiment.
Great, let's just let current trends continue for a few decades and we can live in a world where the most powerful military belongs to China. I'm sure we'll be much safer then.
I know the US military won't go away as long as USD is used as the world's currency. Getting off USD is a prerequisite to ending American imperialism, it's not the only thing that needs to be done by a long shot though.
We can lessen those casualties by working hard to defund the military (which is a multi pronged endeavour).
For instance, I have no problem paying taxes for social services. I have a major ethical problem with my tax dollars being used to fund military action. Bitcoin is not the only piece of the crypto puzzle but if I could keep my assets out of the hands of the US government, I would do it for purely ethical reasons.
Ok, defund the US military now what? China or Russia has a stronger military and guess who is controlling our interests now.
What you’re proposing is that Bitcoin needs a massive shift in thought that overthrows all forms of militarized government. Possible? Maybe but highly unlikely without millions of people dying.
The new Bitcoin power would also need its own military to do this. So we’re back at square one or where we are today.
That is unless you think Bitcoin is also the answer to world peace which seems even more far fetched.
I do see the toppling of the US government having a domino effect on other powerful nations. If the systems are in place to end US imperialism, those same systems can be used by citizens of other oppressive regimes.
I said very clearly at the start that Bitcoin alone will not bring peace. It's one piece of the puzzle to get us off our current government. People are going to die either way, I'm just done using my money to pay for bombs to kill people that have nothing to do with me.
> I do see the toppling of the US government having a domino effect on other powerful nations.
I guess you are about 11? May be 15?
Before you were born a great power was toppled, called The Soviet Union. It happened over three years, 1989-1991. We can all see the domino effect, for sure.
Why do you think it is a prerequisite? Imperialism can certainly exist without having the reserve currency--consider the world situation on the outbreak of WWI, which was the height of imperialism and yet no country had a reserve currency (everyone being on the gold standard).
Taxes on USD are used to fund the military. I see long term value storage in Bitcoin with operational and privacy focused "cash" like crypto being pegged to BTC as a way to choke the input funds to the US military.
I'm saying it's much harder for the US government to collect taxes from crypto. It's much easier to work with a bank to directly pilfer your account than for them to force people to hand over their private keys. The latter doesn't scale nearly as well as the former.
Sure, and it's even harder to collect taxes from cash transactions. The thing is that with or without Bitcoin you still need financial institutions, so I'm not sure your tax evasion plan is as brilliant as you think it is.
I had originally figured that you believed that a government would forego its fiscal policies if a monetary crisis ensued, the general assumption for most aficionados of the gold standard (albeit one that is thoroughly disproven by history).
The way the government forces you to make good on your tax obligations is wage garnishment: they tell your employer not to pay you but pay the government instead because you're in arrears. In general, I think you overestimate the willingness of third parties to become criminals for your sake.
Why do we "waste" so much energy building killing machines? How long do you think the USA would last as a nation if all the armies suddenly went to zero and we became complete pacifists? How long before an invasion?
> Sour grapes syndrome is a result of pride, I think.
Or maybe it comes from people who have read an Econo101 textbook and who have spent a lot of time trying to explain a crowd of Bitcoin enthusiasts why their reasoning is wrong but no one has been listening to them so far so they are bored.
Back in the time I used to spend my days on a forum about Economics. Every other week there was a random guy who signed up just to explain us his grand new theory about money. It seems that tech has enabled a grand new theory about money to be implemented.
That does not make it less true that money does not have magical properties and bitcoin will not create a new world order.
> That does not make it less true that money does not have magical properties and bitcoin will not create a new world order.
Is anyone really claiming that? The OP's post doesn't seem to be in this spirit anyway. It's more like "Bitcoin has true usefulness, it will keep some meaningful value for a long time, enable other use cases that didn't even exist before.". Nobody is saying that it is going to replace all other forms of money.
> Nobody is saying that it is going to replace all other forms of money.
To be a money it somehow has to. What is the value of a dollar ? The set of goods you can buy with a dollar. As long as the value of a bitcoin is expressed in another currency that is weird to call it a money.
The value of every currency is expressed in other currencies. How else would you do it? Are you saying there is nothing in existence which can really be considered "money" except maybe the US dollar?
How is that different from Bitcoins? If suddenly every land on Earth but one is flooded, and some people there happen to use Bitcoins (in addition to their other assets, probably), Bitcoins will still have a value too. Same with gold and everything else besides the fiat currencies of the sank countries.
The value of a currency is expressed in purchasing power. Exchange rates are prices of currencies in terms of other currencies, they don't tell us anything about purchasing power.
Sure, the actual utility of the currency might be best measured with purchasing power and not exchange rates. Same with Bitcoin or anything else, though.
Um transaction costs alone make it not the best use of money. It isn't widely used for goods that you would want to use on a day to day basis / the transaction costs of using it / energy use for bitcoin are some of the low hanging counters to why it isn't the best form of widely used currency.
Are those things that can change over time? Certainly - but it hasn't happened yet.
These low hanging counters have been discussed over a lot.
Transaction cost is pretty low in multiple views:
- You can globally settle billions of dollars worth of bitcoin for less than 10$ [0]
- FIAT Settlements between banks is a complicated and non-auditable process, which is internationally speaking also very slow
- You can build layers on top of bitcoin, i.e. the Lightning Network or liquid, which reduces transaction costs and time by a lot (sub cent range in the lightning network)
Energy usage is not tied to transaction throughput. It is vital to be very high in the future, as it secures this global and auditable settlement network. Mining is a very competitive business. Renewable and unused energy IS the cheapest energy available (without govt. subsidies), thus the most competitive miners will use them. Mining also "subsidizes" research in cheap energy, as it gives you a competitive advantage.
Im answering his question why bitcoin is not the best use of money:
(1) Most people don't settle on large volumes (thats typically banks/states/institutionals) so small volumes have a high cost percentage making it not a good daily driver. The fact that there is any transaction cost makes it challenging to work with as a daily money vehicle for consumers.
(2) It requires energy to exist and keep a ledger, it also requires energy to mine. Your comment on renewable energy isn't accurate sadly and unused energy works only if you can get access to it which isn't universally available. In some jurisdictions renewable energy beats on price but this is largely on huge projects that are bid into utility grids (At least in North America). It will get there but still needs more time.
I don't see how mining subsidizes research in cheap energy.
Understand they have been debated ad nasueum and the reason is that they haven't really passed muster for the use case we are talking about.
Don't equate my arguments as saying bitcoin is bad - it doesn't have a good universal use case for money and it does have negative environmental benefits associated with it.
(1) I think people assume that just because bitcoin exists banks will vanish. Bitcoin is the protocol that banks can use, but individuals as well. Also, micropayments on Bitcoin exist today. I encourage you to download a lightning network wallet (e.g. Breez Wallet: non-custodial and open source) and send me a "lightning-invoice" I can pay you in the sub-cent range.
(2) It requires real world resources to be spend and uses the most globally available resource, energy. I see it as a feature not a bug.
Renewable energy is the cheapest though[0] and thus the one that competitive miners need to use. Non-competitive miners get driven out very fast thanks to the difficulty adjustment.
Any percentage of optimization you can get in your energy production you can use to outperform other miners, thus get more of the block subsidy and drive out inefficient miners.
Bitcoin mining de-risks investments in energy producing facilities. You always have a buyer for your energy, which is a problem especially in renewables. [1]
I think from a scientific view, allowing and observing the experiment bitcoin is extremely interesting. Nothing like it has challenged economic thinking in the last decades.
It is very productive for a large population of the world.[0]
Not everyone gets paid in a stable currency or has easy access to it.
How it is challenging economic thinking? There is a near-zero chance cryptocurrencies replace an actual currency as the global reserve, so it's going to continue to be a novelty until people move on to something shinier.
> Not everyone gets paid in a stable currency or has easy access to it.
Bitcoin doesn't appear to solve this issue at all. How is private manipulation of Bitcoin any different than an authoritarian manipulating the local currency? If I was in a country with unstable currency, I'd want Euro or US Dollars, not bitcoin.
> What you refer to as private manipulation is called supply and demand, maybe try reading Econo101 :)
Does Econ 101 cover asset bubbles or financial manipulation? It's been so long, that I can't remember, but I promise you that prices can reflect things other than supply and demand once you manage to get past that first class.
> Bitcoin doesn't need permission though
No authoritarian would EVER cut off or filter the internet in their country. Nope, has never happened, will never happen.
> No authoritarian would EVER cut off or filter the internet in their country. Nope, has never happened, will never happen.
You're right, Myanmar just did that! Scary to think of it. Fortunately Bitcoin works over more communication protocols, but no internet is certainly not in any way easily defendable today. But i still think that physical and banked usd, euros and gold are more easily seizable by a government. A no internet scenario is probably economic suicide by any government.
I really don't get what you mean by financial manipulation in regards to bitcoin.
The supply got less, while the demand didn't decrease. The intrinsic value increased because of the network and lindy effect, which is why institutional investors jumped in. Bitcoin entered a speculative bubble the moment the first block was created.
I would say we just don't know the price of bitcoin yet, hence the heavy volatility.
I wouldn't price it at all, because I don't see it as valuable, and I don't gamble, so I'm not going to short it. The supply got less because people bought bitcoin based on media hype. That's pretty classic manipulation.
I'm astonished that you have such a strong opinion, while not even trying to understand how pricing works. Good thing you're not gambling on that!
Media hype typically drives demand, not supply. Supply in bitcoin is a very fundamental concept and controversial topic, which is a function of proof of work, difficulty adjustment and block subsidy.
What exactly in supply and demand is manipulation? You can't just shout manipulation and argue with "media hype", which historically for bitcoin is very mixed[0] and affects any asset class?
Cutting off internet is virtually the first thing an authoritarian government does at the sign of unrest. I want to say there's been something like a dozen in the last decade. If you include incomplete internet shutdowns, that list would probably grow well over 100. Hell, it's not just limited to authoritarian governments: the UK requires ISPs to filter certain sites.
I would not bet that the government is incapable of cutting off access to bitcoin.
Bitcoin has transitioned to "store of value", like gold, not "frequently transacted currency", like the dollar. There's plenty of other crypto currencies that fill that need.
> I'm not an economist, but nothing has convinced me yet that bitcoin is not the best form of money.
Contrary to the Bitcoin crow I don't spend my days thinking about it so my argument may seem weak. You mention bitcoin being 'the best form of money'. Assuming there is a hierarchy of forms of money, from what I understand the main advantage of Bitcoin is that Government can not manipulate its quantity. I wonder if a world where there is no possibility for governments to use monetary policy in times of trouble to stabilize the economy is desirable.
I would say that it shouldn't be the role of a government to govern over money.
The economy is very complicated. There are no models that can predict the output of changing its parameters. It wasn't possible before to have the properties in money that we have with bitcoin (a gold standard was easily removable by a powerful government). The current central banking system is an experiment as much as anything before it and anything that will follow.
I see it like this. I want my economic output to be measured in something that is:
- salabale over time (1 btc is always 1/21 million of the monetary base)
- salabale over space (i want to work remote)
- understandable and auditable (the bitcoin concept can be understood by everyone, the code is auditable by mid-level developers)
> (1 btc is always 1/21 million of the monetary base)
Why is that good? Why should I, if I have 1 bitcoin, always have ownership of a fixed proportion of the entire societal monetary base?
This seems like a great deal for someone who has a bitcoin, and a terrible situation for new workers and the economy as a whole. If the economy expands, your fixed proportion of the monetary base sees you profit off the backs of others for nothing more than sitting on currency. Not investing, not even speculating, just sitting on it.
As an employee, in a growing economy denominated in bitcoin, you would see your pay drop frequently as the money supply gets stretched. There's no reason at all to think BTC-denominated salaries would be able to stay constant as the value of the money rises.
> I also would like to be able to save without having to put my economic output at risk.
That's not the same thing, a fixed proportion of the money supply does not guarantee that, nor is it a necessary precondition.
Further, this is not in the interest of wider society - work today should be valued more than work yesterday. If you want to grow your money, you make it work.
This is just a rehash of the problems with the gold standard now. But worse.
> As an employee, in a growing economy denominated in bitcoin, you would see your pay drop frequently as the money supply gets stretched. There's no reason at all to think BTC-denominated salaries would be able to stay constant as the value of the money rises.
Assuming the world productivity is denominated in 21 million bitcoin, if world productivity grows by 3% per year, my salary of 1 bitcoin gets more purchasing power. This is where you get a lever with your employer, he needs you to earn less, you don't have to negotiate to earn more (same applies to minimum wage, it needs to be adjusted upwards in a inflationary monetary system)
Every money is inherently more valuable yesterday than today, as you can divest it. I would argue that it is very much in the interest of the wider society to have their savings not inflated.
The best way to make your money work will always be to invest it in productivity, be it in educating yourself or investing it in companies. This investments need to be a lot more smarter and more sustainable than those of today, as the base money is not worth less every year.
I think wasteful spending is a property of an inflationary money, where smart spending would be a required property in a non-inflationary money.
There's no lever there. In a bitcoin economy there's no chance your contract gives you a fixed salary in the first place, it would be tied to some measure of inflation.
Like I said, most of the rest is just a rehash of gold standard stuff.
> Like I said, most of the rest is just a rehash of gold standard stuff.
Exactly, however bitcoin is infinitely better money than gold and makes the "gold standard" viable. Fortunately the gold standard has a lot of proponents globally, some of whom started embracing bitcoin.
I just hope that the experiment bitcoin keeps on going and I'm guessing we will see some form of resolution, maybe even in this decade. There is a lot to learn still.
Tbh. my very basic knowledge comes from strongly opinionated austrian economics literature, which tends to confirm my bias, and from [0], which at least gives me some data points to refer to.
Do you mind giving me some of your arguments why it's terrible?
I mean, for a start 'Austrian' economics is a joke.
There's plenty of literature out there about the end of gold standards in various countries. The upshot of it is that economies get warped by constrained currency supply and those who already have tend to get more, over those who produce or invest.
> I mean, for a start 'Austrian' economics is a bit of a joke.
More specifically, Austrian economics is overtly and proudly ideological rather than empirical; it is about advancing an agenda not describing reality.
It's worth taking seriously, but as a particular group’s body of theology and religious propaganda, not as science.
Calling a position a joke, and calling that a fact, is not very persuasive. I can't tell if you're a troll, or just a lousy debater, but you're trying to win the argument by default. You don't get to do that, at least not here. Either some evidence or some argument would strengthen your position; drive-by dismissive mockery just makes you look lazy and unwilling to actually engage in substantive conversation.
I am unwilling to engage in substantive conversation when it comes to Austrian economics. There's little point to it, those who are adherents are not going to change their minds, it's an idealogical, rather than empirical position to take.
I'm not trying to win a debate here, nor am I interested in debating the merits of a system that I don't think has any.
In a non-inflationary monetary system cost of goods decreases every year, thats how productivity growth works.
You seem to have it backwards, this is where the Econo101 book from the parent comment might help ;) /s
Inflation drives down the purchasing power, hence why milk gets more expensive every year, even though we get much more efficient at producing it. Remove inflation and 1 bitcoin buys you a liter today and 1.03 litres next year.
Salaries are negotiable and the renegotiation lever is skewed towards the employee. e.g. "i accept the pay cut of 3%, but will need 2 days of vaction more" vs "please employer pay me 3% more to combat inflation"
You won't get more rich by sitting on your salary, but you will also not get more poor like you do today.
If the milk seller doesn't lower his prices a competitor will do that, as he is able to do that with the bigger margin the better productivity brought.
Here in Italy I already have 28 days of paid vacation and can't be fired without motive and a judge can reinstate the worker if the motive was not valid
That's a political issue, it has nothing to do with how currencies work
If the milk seller is going to lower the prices to beat competitors, workers will compete on salaries as well
nothing different from what we have now, the only difference is that rich people could amass fortunes much more easily than today
they'll just need to keep their money in the bank (i.e. their gold reserve will keep appreciating by the virtue of existing)
Rich get richer today by being closer to the money source. In the "bitcoin standard" non-rich people can even keep their money in the bank and don't lose purchasing power by not risking it.
Rich and non-rich will always want to take risk to increase their net worth, however the assets must perform much better to outperform the money. Unlike today where almost all investments appreciate when measured in fiat.
edit:
> That's a political issue, it has nothing to do with how currencies work
Would you agree that it would be a good thing if the base monetary layer would enable that? I only see that happening with a monetary policy that respects savings and is not alterable by a few elected and unelected officials
Unfortunately my salary is fixed today as well and not only does it shrink as a portion of global productivity, but also as a portion of the monetary supply.
For Bitcoin specifically. You can use a different token backed up by Bitcoin, but the actual implementation has these issues.
Transaction rates - Artificially kept low to profit miners.
Privacy - Every Bitcoin transactions is on a public blockchain.
Transaction fees - Using Bitcoin for even one transaction a day gets expensive.
Online only - Unlike cash only works with network access.
Conformation Time - Failing to wait for conformation in effect allows double spend attacks. Think 10 people buying computer equipment from different stores at the same time.
Assuming the implementation was changed to support wider adoption, a fixed currency has significant economic issues. For example, making or taking a loan in a currency that’s gaining value quickly becomes untenable.
PS: Of course all of this could be changed, but acknowledging issues is the first step in selecting a new set of tradeoffs.
First off, thank you for making fair criticisms. Unfortunately some of your information is old.
You don’t need a bitcoin backed token, lightning does it.
Transaction rates are not artificially kept low. In fact most the vast majority of the time bitcoin has excess capacity.
Privacy- this is a legitimate concern but it is improving, slowly. Taoroot and Lightning are both privacy improvements.
So your daily transactions aren't meant for bitcoin. A distributed ledger that replicates all data globally for eternity is not an appropriate method for recording coffee purchases. Though I have done it. Bitcoin makes sense for settlement, and lightning is appropriate for coffee.
That said, I regularly clear bitcoin transactions for $1 or less in fees, and it is cheaper then every other form of payment in the world. You may think a SWIFT transaction is “free”, but its merely the cost is hidden. And don’t forget the inflation tax, that is a global wealth tax on any money held in an inflating currency. So compared to that, $1 to send $100 is cheap.
Online Only- I don’t think there is a solution to this criticism, but not sure what the issue is.
Lightning allows speed without double spend problems. Personally when moving large (for me) amounts of money I font mind waiting an hour for the confirmations. I certainly won’t trust a payment without them.
But bitcoin is voluntary, it doesn't have to be perfect in every regard.
> Transaction rates are not artificially kept low.
You can look it up, larger blocks where allowed in the past, 1MB is a completely arbitrary size that was overkill at the time but hasn’t increased. Even 1$ transactions are quite expensive though they are often much higher.
The lighting network has it’s own separate set of issues. It’s Bitcoin backed but loses some of Bitcoins advantages: https://arxiv.org/pdf/2006.08513.pdf
> Online Only- I don’t think there is a solution to this criticism, but not sure what the issue is.
It’s simply a dependency. Shops may have issues accepting CC payments after a hurricane for example, but they can always take cash.
"Online Only- I don’t think there is a solution to this criticism, but not sure what the issue is."
The fact that I need to connect to some peer-to-peer network or third party service for every transaction is a limiting factor. It reduces the efficiency of the system and increases latency, and it adds additional points of failure.
In fact it can be solved for electronic transactions and there is a mountain of published research on the topic that dates back to the late 80s. Here is a recent research paper:
The idea is to ensure that users who attempt to double spend can be identified and penalized later (e.g. by being added to a blacklist; some systems actually ensure that all transactions in which the cheating user participated can be identified, so merchants who try to evade the blacklist can also be penalized). The money has to be issued by a bank under the security definition. If anonymity is not a requirement -- and presumably a Bitcoin enthusiast does not care about anonymity since Bitcoin is not anonymous -- this can be easily achieved by using ordinary digital signatures.
I think you are not understanding how bitcoin works, and this exact problem of double spending was better solved by bitcoin. You dont need to trust a third oarty or “online service”, you can dimply run a bitcoin node. If it is that important a raspberry pi and SSD is cheaper than your average credit card terminal.
The credit card network, by the way, is much worse in this regard.
...so you need to be online, connected to the rest of the Bitcoin peer-to-peer network, to engage in a transaction. I am talking about offline transactions, where I only need to communicate with the other party in the transaction. Again, you can just read the paper I gave a link to, which describes this scenario, or any of the other hundreds of papers published on the topic.
Unlike many great ideas, those in the paper you cite just haven't yet gathered enough acceptance.
The value of the US dollar as a reserve currency is a faith-based article, and yet it works well. The confidence in the Fed to not unduly dilute the value has reinforced the resolve of the participants to continue to accept it as currency.
Bitcoin's paid many years of dues in this regard as well, and its garnered the confidence of its market participants despite its deficiencies.
Transaction clearance - Artificially kept centralised to keep states control supply.
Privacy - Every bank transaction requires real names.
Artificial scarcity - If everyone tried to withdraw the money from their banking accounts at or around the same time, all the banknotes in circulation would be unable to cover all the demand.
Transaction clearance between customers at the same bank don’t involve any central authority. In fact banks are reporting their net transactions between each other aka if A has 100,000 transactions for 100$ each with B that sum to zero net transfer they don’t need to report anything.
This is needed as otherwise banks could claim to have unlimited funds.
Bank notes provide privacy and are created on demand. Having 1:1 bank notes to M1 money supply would simply be wasteful.
This[1] is an insightful article from an economist who has experienced the real world economics from very close quarters.
I don't have any opinion about Bitcoin one way or another, though through these fascinating arguments I gain new insight about the money and its relationship with geopolitics, human civilisation and other aspects.
That article is from 2013 and so we must grade it on a curve. He makes several wrong assumptions about how bitcoin works because he’s thinking it is based on trust, and he is an inflationist.
I have yet to have an economist explain to me why deflation us bad- computers getting cheaper is good, fixed income people being able to afford things us good. Inflation mainly allows government to hand out money yo wall street in exchange for bribes at the expense of everyone else. That’s not good.
If you don't like the Fed throwing money at rich people, you should probably be rooting for inflation. The historically low inflation of the past decade has them handing out money like candy.
We have not had low monetary inflation since at least the Ford presidency.
You are confusing the consumer price index for “inflation”. It’s understandable, this lie is one of the earlier examples of fake news.
When the fed prints money it goes to wall street and politically connected people. (This is quite literally the definition of fascism- a private economy run by government)
Wall Street profits from the inflation, but the rest of the people get poorer.
No. Everyone profits (the world economy grows).
Sure, some people will be left behind like blue collar americans but that’s mostly because of globalization.
Also people that put their money in the stock market for the long term will do much better than others. Even if they are poor, it doesn’t matter. Just buy SP500 with all the money you can spare.
At worst inflation is a tax on ignorance. If you keep buying crap you don’t need with your dollars instead of investing... it will suck for you.
What about those that are so poor that have zero money to spare in the first place? Well, that’s a situation that shouldn’t even exist. That’s why I live in European Social democracy where governments actually distribute wealth.
Besides the US can print as much dollars as they want because they have the largest economy and the largest military to keep the rest of us buying those dollars and inflating our own currencies in lockstep.
The US is not Zimbabwe. It’s not even comparable.
You can literally shove those dollars down the throat of the rest of the world for as long as the status quo is maintained.
The basic argument is that in small amounts, both inflation and deflation can be fine, but either one can become a problem. The issues with too much inflation are fairly obvious; the issues with too much deflation is that downward price pressure falls on everything. If deflation is so reliable that prices are going to be meaningfully lower if I can put off a big purchase for as long as possible, I'm going to do that. If enough people follow my lead, that hurts sellers. Wages go down -- more than likely through layoffs rather than pay cuts. And anyone who's already in debt -- and this doesn't just include your Uncle Bob who routinely puts too much on his credit card, it includes companies using lines of credit -- can end up in real trouble.
> computers getting cheaper is good
Sure, but -- even though I've seen this example trotted out before as a pro-deflation argument -- the prices of manufactured goods steadily fall due to continual improvements in manufacturing processes, economies of scale, and general technological progress. This has been particularly noticeable in computers over the last three decades, but Moore's Law isn't a supporting argument for the benefits of monetary deflation.
“This has been particularly noticeable in computers over the last three decades, but Moore's Law isn't a supporting argument for the benefits of monetary deflation.”
Asserting that an argument is not an argument is not a rebuttal.
The claim that people having more purchasing power will stop the economy is self serving for inflationists and never supported by evidence.
In fact the opposite has been the case time and time again.
As I proved in the example you simply ignored.
So, like I said, I have never seen an argument. Just these kinds of self serving assertions.
"I have yet to have an economist explain to me why deflation us bad"
There are a few different issues. First, volatility is universally bad for a currency, because it makes all transactions in the currency more risky. Money should always be a medium of exchange first and foremost; there should be little to no room for speculating on the value of money and people should not have to factor in unexpected changes in the value of money when determining prices. In general people will switch from more volatile to less volatile currencies because less volatile currencies make trade more efficient.
Unexpected deflation is particularly bad, because in addition to the general problems with volatility, it also triggers defaults on loans (because money becomes more difficult to obtain). Too many defaults in too short a period of time will create a "contagion" effect by reducing the collateral held by lenders (who use loans as collateral for their own debts), which triggers even more defaults. Worse, as lenders see their collateral vanish, they will try to make up the difference with money, taking money out of circulation and causing even more deflation and thus more defaults. This is the "deflationary spiral" scenario.
Inflation is not some trick to hand money over to "Wall St." Rather, a low, predictable rate of inflation is targeted so that there will be some "breathing room" during an economic crisis. It does not hurt people on a fixed income because it can be planned for and the fixed income can be adjusted for inflation (e.g. someone could hold a portfolio of TIPS). It also has nothing to do with the price of computers, which have become cheaper because of economic growth (and in fact have become cheaper over decades of inflation). Inflation also encourages investment activity by discouraging the hoarding of money, which is a good thing for the economy.
It’s a shame you spent so much time patiently trying to explain all that to me, not realizing it’s probably the ten thousandth time I’ve heard this. I appreciate the efforts, bit that view is rationalization and I tried to save you the effort by pointing out that the technology industry has not stopped like you would expect if your view were reality.
And I assure you, as someone who holds bitcoin that has greatly appreciated, I can’t wait to spend it on things that depreciate.
In fact my spending has increased now that my spending power has increased dramatically.
OK, well, congratulations on your gains, you made a good bet, it paid off, and I hope you can put it to good use. It does not make anything I said false. You asked why deflation is bad, and I gave you a summary of the various reasons why.
As for what we should expect...why should the current situation be so surprising? The vast majority of merchants who "accept Bitcoin" use a third party payment processor that immediately converts Bitcoin into a fiat currency. The number of people who use Bitcoin as money, rather than as a system to communicate payments made in some other currency, is vanishingly small. The "technology industry" has mostly focused on non-monetary applications of blockchains and a lot of attention has been paid to "permissioned" blockchains because they are overwhelmingly more efficient.
In the context of deflation goods getting 'cheaper' simply means that their nominal price falls, while real prices remain constant. If you thought that deflation makes people richer (or that inflation makes people poorer) then you were wrong.
Inly if you redefine “rich”. Increased purchasing power makes you richer, giving you a chance to build wealth. Inflation robs this from society and is oppression. I really don't care to be gaslit about economics.
Inflation only impacts actual cash. Land, stocks, gold, durable goods, even loans, and other forms of wealth are not directly impacted by steady state inflation.
Remember, if you have money in an interest generating account then you don’t have actual cash you have an IOU for cash with whatever institution you deposited that money with. Now, changes to the inflation rate or hyper inflation are another story, but consistent ~1.5% inflation is the goal.
No, inflation doesn’t hurt the poor the most! Have you even given this a minimal amount of thought?
Compare someone with a billion dollars and someone with 0 dollars today. Then huge inflation comes... who lost more purchasing power? Not the person with zero dollars, that’s for sure!
You really need to take a step back and start thinking because there are multiple people here spending their time and energy trying to explain something basic to you from first principles.
Have some self doubt about your worldview. You are dismissing sound logic based on what? Most of the things you reply don’t even make sense.
> "I have yet to have an economist explain to me why deflation us bad"
1 bitcoin will always buy more and more and more and more. So you have zero incentive to spend your money today and you have all the incentive to wait as far as you possibly can before spending anything. The economy would grind to halt.
Isn't this obvious?
Besides, rich people can sit on their money instead of re-investing. They will never have to work and neither will their descendants. You basically established some kind of stupid cyberpunk feudalism.
You are arguing that the kings if the past with lots if gold starved, simply because their gold could buy more food over time. People don’t forgo food for decades to put more money into index funds despite the broad market increasing in value consistently over time.
Computers get cheaper every year such that even inflated dollars can be held to get a better computer next year.
And yet the technology industry has not ground to a halt.
Food is low tech, cell phones are high tech.
It is obvious- this argument in favor of government being able to debase the currency to fund wars and somehow that’s good for poor people is never going to hold water.
But here is another thought- no matter how much you call it stupid, or fuedalistic, leftists gave been making this argument fir over a decade now and Bitcoin has only gotten stronger.
You may even be able to make it “illegal” if you ignore the constitution and laws, but you cannot stop it.
Bitcoin will be the tool that liberates the people out from under your technocratic thumb.
Wow, I can't even make sense of what I read. It's like all the crazy conspiracy theories thrown into a blender and the outcome is: "Bitcoin liberates!".
I think you really have poor mental models of the world. I'm sorry but there's not even anything else I can say.
The collective energy spent by Bitcoin miners equals the energy consumption of Argentina, yet the Bitcoin network only processes a small fraction of the number of transactions per day that Visa processes. For reference, Visa itself consumes only a small fraction as much energy as Argentina.
In other words, you must cover the cost of vastly more energy per Bitcoin transaction compared to the mainstream financial system. Environmental concerns aside, that amounts to a huge tax on every transaction that reduces the economic efficiency of the system. Note also that this is a per-transaction tax, regardless of transaction size, making Bitcoin less useful for small transactions.
There is also the fact that such a high energy cost per transaction causes the value of Bitcoin to be more strongly correlated with the price of energy. Energy prices are notoriously volatile; hence Bitcoin's value will also be volatile. Volatility makes a currency less useful (it introduces risk into every transaction and disincentives investment) and a very volatile currency will eventually be abandoned entirely. It should surprise nobody that the overwhelming majority of merchants who "accept cryptocurrency" as payment do so via services that immediately convert that cryptocurrency payment into their local fiat currency, because the majority of the world's fiat currencies have very stable values (compared to Bitcoin etc.).
I could go on but to be honest the technical objections to Bitcoin outweigh the economic objections, at least in my opinion. Happy to get into those objections as well if anyone is interested.
Western Union has a lower transaction rate than Visa, so does that make it necessarily less useful or valuable (either absolutely or per-kilowatt)?
Also, as you noted the energy usage is correlated with the value, not the transaction rate. Transaction rate limits could be changed arbitrarily without affecting the energy usage of the coin.
However you have the causal relationship backwards: The value of the coin determines what level of electricity spending is profitable for miners. The electricity spending of miners doesn't determine the value.
"Western Union has a lower transaction rate than Visa, so does that make it necessarily less useful or valuable (either absolutely or per-kilowatt)?"
The transaction rate is not what matters; what matters is the energy spent per transaction. Visa process many more transactions for much less energy than Bitcoin, and is therefore more efficient. I suspect Western Union's energy consumption is roughly in proportion to Visa's, but I have no data (the Visa example comes right out of their annual report, which covers both the number of transactions and amount of energy consumed).
"The electricity spending of miners doesn't determine the value."
The energy cost determines the transaction fees. Higher transaction fees make Bitcoin less valuable by imposing a greater burden on using the system. Yes, there are other factors that determine price of Bitcoin, but if nothing else changed ("all things being equal") then volatility in energy prices would trigger volatility in transaction fees and thus volatility in Bitcoin's overall value.
My point was that WU and Visa solve totally different problems which have different challenges. Why should it be expected they would have a similar cost per transaction?
> Higher transaction fees make Bitcoin less valuable by imposing a greater burden on using the system ... volatility in energy prices would trigger volatility in transaction fees and thus volatility in Bitcoin's overall value.
Good point, that is certainly a risk with Bitcoin.
EDIT: Actually thinking about it more I'm not sure why this would be true. Since the transaction rate is not related to the number of miners, volatility in energy prices might cause miners to enter/leave the system but I don't see why it would impact the coin prices.
Whichever miner mines the block that a transaction is included in must collect at least enough in transaction fees to cover the energy spent on mining. Since the block size (and thus number of transactions that can be recorded per block) is fixed, this implies that any increase in the global price of energy will raise Bitcoin transaction fees (all things being equal). This assumes that the transaction rate is always at the maximum possible; if the transaction rate is too low and blocks are not being filled, the effect is even more pronounced as there are fewer transactions over which the energy cost can be recuperated (last I checked, Bitcoin is already operating at its maximum transaction rate, but someone may want to correct me on that).
The reason it impacts coin prices is that higher transaction fees make Bitcoin less desirable as a medium of exchange and reduces demand. To put it another way, let's say I am paid in Bitcoin. If transaction fees increase, I will need to demand a higher nominal salary, at least enough to cover the transaction fees incurred when I spend my salary. Likewise, any merchants that accept Bitcoin payments will raise their prices, to cover the fees they will have to pay. Yet the same work is being done and the same goods are being sold; hence, inflation, or in other words, the value of Bitcoin has decreased.
If transaction demand stays equal, and the rate of transactions that can be processed stays equal, then why would the fees raise? If electricity costs go up, miners will be priced out of the market, and then difficulty will go down for other miners making it profitable again once the hash rate drops enough.
Miners can't choose the transaction fees, they will either process the most expensive transactions they see or just stop mining. If they stop mining, that doesn't impact the rate of transactions that can be processed.
The number of miners does not really matter. Whatever miner mined a given block must receive enough to cover the electricity cost, regardless of how many other miners are involved. There is also no particular incentive for a miner to reduce his own electricity consumption in response to the difficulty being reduced. The only reason miners will shut their equipment down is if they are unable to cover their electricity costs because e.g. nobody is willing to pay the higher transaction fees.
Obviously everything I described is a simplified model where energy costs change equally for all miners. The real world is not that simple, but there is some correlation in energy costs across different regions as there is a global market for typical fuels (coal, natural gas, uranium, etc.).
It is also important to remember that transaction fees are not in proportion to transaction sizes. People doing large Bitcoin transactions could absorb much higher fees, so in all likelihood nobody would be priced out of the market (and Bitcoin would be dominated by large transactions, which is more or less the case right now).
I am not suggesting miners will react to the difficulty change. The difficulty change reacts to the miners.
Miners will shut their equipment down as soon as the electricity costs become greater than the rewards. When some of the miners shut their equipment down, that causes a difficulty change which makes mining profitable again for the remaining miners, and also keeps the transaction rate the same. The miners have no way to impact what transaction fees are acceptable because they have no control over the transaction rate.
>Bitcoin network only processes a small fraction of the number of transactions per day that Visa processes
Btc is not replacing visa. Btc is replacing central banks. The appropriate comparison here is what is the energy cost of the banking infrastructure of the incumbent system.
>Environmental concerns aside
I am concerned that you are using electricity to power your computer, access the internet, and comment on HN. Are you the arbiter of "moral" energy use? Am I? Slippery slope, and an anti-human one at that.
>Energy prices are notoriously volatile; hence Bitcoin's value will also be volatile.
This is not how it works. There is an argument to be made for risk of on-grid miners sudden increase of electricity prices in the case of a power shortage. Miners don't like this type of risk, so they choose to locate at places with abundant supplies and stables prices of electricity. Miners sign long-term electricity agreements. Risk to off grid miners is another level removed from on grid miners.
>will eventually be abandoned entirely.
According to how you feel? All signs point otherwise.
>the technical objections to Bitcoin outweigh the economic objections
You are free to make your own fork, BIP, or new "crypto" and compete. Good luck. By the way, there are 7999 "crypto" coins competing and losing so far.
Aside from its transaction costs, which may be mitigated by the lightning network, Bitcoin is still a lousy currency. One important function of money is the creation of credit. If you have a large quantity of money that you don't want to spend in the short term, the money is better put to use by loaning it to a small business or couple purchasing their first house.
Without regulation or FDIC insurance, very few people would be willing to give their bitcoins to a bank so that it could be lent out to people who have a better use for it. Even if a Bitcoin bank could exist, an economic downturn could cause a liquidity crisis, where everyone tries to withdraw their Bitcoin at once. The banks would have no way of returning the Bitcoins to many of their customers. Because there is no central bank that can print out Bitcoin, the entire Bitcoin financial system would be in ruin following the crisis.
Do you really think it's feasible everyone else is simply missing some entry level economics knowledge? That's more likely than you missing something, or misunderstanding that very econ 101 knowledge?
I took more than 101, and not sure what you refer to there.
>Or maybe it comes from people who have read an Econo101 textbook and who have spent a lot of time trying to explain a crowd of Bitcoin enthusiasts why their reasoning is wrong
The market decides. Not an economics "expert", nor fitting btc to an arbitrary theoretical definition of money.
>It seems that tech has enabled a grand new theory about money to be implemented.
Are you aware of the Austrian school of economics?
I recently decided to think deeply about Bitcoin and I think my initial skepticism about Bitcoin was wrong.
Most of the criticisms of Bitcoin are centered around the fact that Bitcoin has a very low throughput. However this is not necessarily a problem. And here is one hypothetical example of how we can overcome this issue:
When countries owe each other money they used to transfer gold back and forth or trust someone else to do it for them. So all transactions within a country would happen in a local currency and then once in a while "settlement" would happen.
Bitcoin is digital gold for settlements among digital currencies. For eg I could start a new Stable coin called MyDogeCoin HQed in Switzerland and each MyDogeCoin is backed by 1 Bitcoin. Anyone who trusts me can transact in MyDogeCoins and can convert their MyDogeCoins into Bitcoins if they are willing to wait and pay a sizable fee to account for Bitcoins slowness. However most people don't need this it just needs to be possible. Now anyone using MyDogeCoin can send money to each other quickly as long as they trust me. This isn't any different to how you trust a country. And many countries like Zimbabwe aren't trust worthy at all. This has BTC behind it.
Now suppose you want to send MyDogeCoin to MyMemeCoin HQed in Singapore and is similar. We trust each other and hence we do the transfer. Once in a while we do a "settlement" on the BTC blockchain. This way we don't need that many TPS. And large untrusted nodes can use the BTC blockchain as a trustless settlement layer.
Since BTC is the final trustless layer its a foundation. Now I realized how BTC can have long term value and it could be around even a 100 years from now. Doesn't mean its not over priced now but it will have a non zero value over the long term and is revolutionary. Unless the government goes to war against it. The US government used to use gold and then basically defaulted and forced everyone to accept dollars by force. Thats not sustainable.
> Bitcoin is digital gold for settlements among digital currencies.
What are the implications of this on the network stability wrt mining? Doesn't bitcoin need transaction volume to remain a stable network?
My read is that the incentive structure changes. Right now, miners are motivated by block rewards. In the future, they'll be motivated by transaction fees. If transactions are rare, mining profitably is going to become much more difficult. Pair this with 51% attacks, and the long ramp-up of mining capabilities starts to look like it will regress after the the rewards go to zero. Can the network survive that?
To answer that question you have to make assumptions about the cost of mining, the cost of attacks and the cost of hash power at a point 117 years from now. But we know in the future hash power (technology) will be cheaper and thus bitcoin security will be cheaper, while bitcoin will be more valuable (or non-existing — it has to be either or).
Also remember if you have wealth in bitcoin you would likely mine at a loss merely to secure your own bitcoin.
I can’t imagine mining going away.
I think every appliance in a household will end up mining a little bit and it will be intrinsic to the fabric of the economy. The way the internet is now.
If you're freely giving away money (either in the form of null transactions or putting money into mining) just to secure value that you're holding, you've clearly mispriced the asset you're trying to secure!
If you put money in a savings account with interest below inflation, just to secure the value that you're holding, did you misprice the value? Or for example if you buy gold and then pay someone to watch it for you, does that mean you mispriced it?
Null transactions require mining. The question is if nobody wants to mine who will mine? Old mining chips are already so cheap they cost less than a cheap bitcoin transaction. It would not cost much to mine just to preserve the value of your holdings.
The point of submitting the transaction would be to incentivize mining by posting a bounty for it, in the form of a transaction fee. It would be just like paying other people to mine at a loss on your behalf.
> To answer that question you gave to make assumptions about the cost if mining, the cost if attacks and the cost of hash power at a point 117 years from now.
I'm not convinced that you actually do have to make too many assumptions. The claim I'm making here is that bitcoin has had a steady and predictable increase in mining demand as the currency has grown, but that iff bitcoin becomes solely a low-volume high-value settlement platform (instead of a buy-coffee high-volume low-value blockchain), there will be a demand shock once the block rewards go to zero. You can reason about this while keeping the hashrates and cost of achieving that hashrate abstract.
If volume grows, this argument is moot because there will be plenty of transaction fees to gobble.
Not sure how you measure an increase in mining demand, but given that we have had three halvenings now, doesn't that imply mining isn’t going away? They are getting less bitcoin, yet still mining. I don't think it will be a shock by then. Put another way, the shock in 2012, 2016 and 2020 have all made mining very profitable in the following years resulting in mining booms in 2013, 2017 & 2021 (so far.)
Transaction volumes over time have risen as well. If bitcoin has amy value to society in 113 years, people will pay to transact it. Whether that is one expensive transaction a month or a million every block I don’t know— but I think the latter is more likely.
> But we know in the future hash power (technology) will be cheaper and thus bitcoin security will be cheaper,
This is not in line with my understanding if BTC. The difficulty adjusts automatically, so the real cost isn’t hashing, but energy. And there is no inherent reason why any less energy would be spent/wasted on mining/securing BTC (assuming it will be worth more than today).
The costs of mining are both capital to acquire the equipment and replace it when it is obsolete... and energy. It’s not just energy. Recently that capital cost is about %50 of OpEx, but of course it varies. We cannot predict the future cost of electricity, but we can predict that technology will get cheaper, more generic and thus more ubiquitous. This is what I meant by “cheaper”.
I expect it will be cheap the way wifi is cheap on a raspberry pi. They just include it because you may use it and it’s cheaper to include it than to make both a version with and a version without the WiFi module. (If you inly use WIFI, then the sane argument goes for the redundant-to-you ethernet port.)
You are right about difficulty factor, but that just adjusts how fast blocks are won based on past 2 weeks.
Even when price of BRC has crashed, hash power doesn’t instantly go away.
Also an attack lets you re-organize recent blocks only. Increased depth gets more expensive pretty quick.
If mining chips are cheap and ubiquitous, then an attack us very hard, because you have to beat all the existing honest chips with your attack.
If mining is cheap to attack, the rewards of such an attack will be low.
If bitcoin is valuable, it will be expensive to attack.
In Bitcoin, the “local currency” equivalent to your “MyDogeCoin” example is called The lightning network.
Simplifying a bit to support your analogy:
Bitcoin lets you lock coins on the chain for a certain amount of time. Two people can do this, then trade bitcoin transactions back and forth without submitting them.
For example, I lock coins and give my coworker a bitcoin transaction I have signed giving him $10 worth of bitcoin for my share of the days lunch. Next day he fives me one for $13 for his share, and I give the restaurant $43 for the bill— all these transactions are literally trading bitcoin IOUs, but in a nearly trustless way.
This means a great deal of transactions can happen off chain without the risk of theft.
That's all fine, but the argument isn't that BTC has some use case. The argument is that BTC has some use case that is so valuable that the combined value of all BTC should be in the tens or hundreds of trillions of dollars.
There are also trustless ways to do that. Bitcoin's Lightning Network does exactly this in trustless way, and it's feeless, instant and private. Every "Lightning bitcoin" is cryptographically backed by real bitcoin. In the end, all transactions are settled on the Bitcoin main chain.
Then there are centralized credit networks backed by Bitcoin. Paypal and Visa (with a custodian / bank) already provide this, in combination with a seamless exchange to local currency that is accepted by the merchant. For custodians, it's possible to algorithmically prove reserves, so that every user can verify that their "bitcoin IOU" is backed by actual bitcoin, but no one currently provides this afaik.
> then basically defaulted and forced everyone to accept dollars by force
I found 3 instances of "defaults" over the history of the U.S. Federal Government[0], and I cannot figure out to which of those occurrences you might be referring. Bretton Woods was the agreement that made the USD the world's reserve currency, and that lasted for 30ish years while the U.S. was still on the gold standard.
Venezuelans and Iranians aren't using crypto in any large numbers outside the dreams of speculators. Real people who actually need to do commerce prefer to transact in USD when the local currency falls short. You're never going to lose all your dollars because somebody guessed your email password.
I'm Venezuelan, for me, getting paid in BTC is orders of magnitude easier than any other alternative.
Paypal closes your account (after letting you deposit some amount which they will hold for 6 months before letting you wire it out to some other normal bank account) if you're Venezuelan.
Transferwise doesn't even serve Venezuelans and when they decided to stop serving us, a friend got his account blocked (he signed up before they banned Venezuelans) and unlike Paypal they just kept the money with no option to withdraw it.
Venezuelan bank accounts cannot receive international wire transfers.
Colombia/Brazil, the nearest countries (a round trip could cost you less than $200 pre-pandemic) don't let Venezuelans open up bank accounts unless they got a residence card.
This is in part due to USA sanctions, but the Venezuelan government is also at fault too (currency exchange controls, etc).
Ironically, USA is where it's easiest for a Venezuelan to open up a bank account. But pre-pandemic you had to spend more than $1000 (now it's more) in travel and accommodation to the USA to accomplish this. Not to mention you need a Visa.
It's also relatively easy and cheap (less than $1k) to remotely open up a business + bank account, again in USA, and do business through there which is what people are starting to do now (even though it's been possible since years ago if I'm not mistaken).
This is what I'm about to do in order to be able to do business (i'm a freelance programming contractor) with my clients easier, but it's still more expensive and harder than just set up a wallet + a localbitcoins account.
Yes, my aunt isn't going to buy bread with bitcoin, we all know that, but thanks to bitcoin her daughter can get paid as freelance Graphics Designer by her clients. Lots of remittance going on through bitcoin too.
One of the properties of gold that roughly held true for centuries was a stable value. When gold threatened to become too scarce for a growing economy the incentive to mine, explore, and develop new mining technology increased. Goldbugs often point out that an ounce of gold has always been close to the price of a nice suit (admittedly a fuzzy measure, and it’s sometimes a really nice suit, and sometimes just a really nice jacket).
Bitcoin has gone from pennies, to around $100 for a year, to around $1000 for a year or two, to between $20000 and $3000 for a few years, and now to $50-60k.
I guess you could argue that this is just going to take a few decades to stabilize, but that’s a pretty big bet, and a pretty weird way to design the next monetary framework.
There was a pretty interesting Clubhouse discussion on the weekend where Eric Weinstein praised the genius of Bitcoin but bemoaned the stupidity of its design (“a QWERTY problem”), and Lex Fridman tried to charitably compare Bitcoin to JavaScript as a flawed tech that had great distribution and has been making the best of it since then. They were both rudely dismissed by a group of Bitcoin maximalists as “not getting it”.
The question I’ve asked since the start is, if this is a functional idea, why is the dumb beta version still the dominant implementation? There’s a bizarre religiousity and post hoc rationalizations for some of the weirdest decisions in its design, and mistaking speculative mania and nominal price for success, while proposed uses for Bitcoin and the blockchain have been quietly discarded. Bitcoin’s valuation is more of a symptom of post-2008 monetary conditions than a long-term challenge to them.
Because it's the one that's caught on. There's no actual need for inherent utility of it that can't be papered over by running everything through one of a few big exchanges. Or, preferably, ONE big exchange, where all settlements can take place off-chain and the blockchain sits in a big vault and everyone just trusts you can redeem your account balance for Bitcoin if you ever want it, but you won't want it, because the balance is more valuable than the actual Bitcoin.
(I'm drawing a comparison to gold here, but this is also true for other commodities, and for that matter, stocks.)
> Or, preferably, ONE big exchange, where all settlements can take place off-chain and the blockchain sits in a big vault and everyone just trusts you can redeem your account balance for Bitcoin if you ever want it, but you won't want it, because the balance is more valuable than the actual Bitcoin.
That's an important point, because it prompts the question: what is the problem that Bitcoin is solving if the preferable outcome is that it does exactly the same things that gold and centralized banks already do?
The more that I hear people justify slow transaction times, high fees, and a general lack of platform evolution, the more it sounds to me like the only problem that Bitcoin is solving in the real world is that gold is already stable, and speculators need a new thing to jump on. The arguments people are making today about why slow transactions are irrelevant are not the same arguments that people were making when Bitcoin was new. It's revisionist history. And when people are talking about centralization as the end goal... this is also part of why I'm skeptical about claims that proof of stake is going to solve anything on the environmental front, or that microtransactions are ever actually going to get better.
The overwhelming perspective I'm seeing here is that nobody involved in speculating on Bitcoin cares about the technological side at all, and I don't see what incentive there is for anyone to make mining easier, cheaper, more democratic, or more environmentally friendly. The whole point seems to be that people want to get in early and then erect as high barriers of entry as possible. What makes people think that anyone speculating on Bitcoin is going to care about proof of stake? At the point where bitcoin becomes a nationally backed currency that is just a backbone for other smaller systems and is (for most people) completely independent from their regular everyday transactions -- there's no advantage to creating that world, that is the world we already have. The only difference is that a few people on Reddit haven't gotten rich off of the world we have.
The fact that the majority of the market is still standardized on Bitcoin despite a plurality of clearly better coins drives home to me that the discussion about Bitcoin has nothing to do with practical merits of the system, and everything to do with a bunch of people trying to extract as much money as possible before tragedy of the commons sets in. We can make centralized banks without bitcoin. If that's the end goal, then we should absolutely get rid of the blockchain because blockchain is not necessary for a centralized bank exchange with a small number of government-level actors.
I'm surrounded by people who tell me that Bitcoin is a giant innovation, but who are then openly hostile to any kind of improvement to the platform and who are continually dismissing valid criticisms of its technology and governance model as irrelevant because those criticisms don't directly impact Bitcoin's value as a purely speculative currency. What you're describing when you propose a single, centralized exchange is, "we want to make banks a second time the same way, except less efficiently with fundamentally outdated technology, because we want some of the pie this time."
Which, great, but as a non-speculator, why on earth should I support that or care about it?
The problem it solves is that currently, it's not possible for any single central entity to prove anything about ownership changes directly. Now, you can simply trace every on-chain transaction on the chain -- it's as if there were a universal log of every SWIFT transaction, available to the public. It's incredibly useful for forensics! And we can leverage the huge amount of compute power directed here to do useful work as a side effect, by putting in identity stakes and layer2'ing things like proof-of-identity or proof-of-ownership.
But no, it doesn't solve those problems. Because you're talking about setting up a central exchange and layering separate currencies on top of it. You're talking about the majority of settlements and transactions taking place off-chain.
So when you think about tracking on-chain transactions, what you're really talking about is tracking government-level, giant transactions that are largely divorced from the kind of detailed forensics that people would want to do. Which... there are better ways to audit giant government-level agencies than a blockchain.
Similarly, leveraging the blockchain to handle things like proof-of-identity doesn't work if the transaction speed for ordinary people can't keep up. If you want to use Bitcoin for proof of identity transactions, you need ordinary people interacting with the network, not a central exchange. Because again, if you have a few central exchanges that everyone is interacting with, then it's almost strictly better to just let them handle proof of identity and proof of ownership in shared centralized databases.
The only reason Bitcoin could matter is if it actually did scale enough that it was feasible for ordinary people to use it for micro-transactions and as a performant, robust API. But the problem is that Bitcoin as a technology is poorly suited for that use case, and none of the people hyping are interesting in solving those problems, evolving the technology, or moving to other coins that would be better suited.
In a world with centralized exchanges and secondary layers on top of bitcoin that consolidate and batch transactions, all of the problems you're describing end up being easier and better to solve by just having the centralized exchanges coordinate with each other, the same way that banks already do. And to the extent that banks don't coordinate with each other right now, it's unrealistic to assume that the blockchain is going to suddenly change their incentives or force them to do so.
Currently the MSFT identity approach uses blockchain as an identity stake and then layer2's the access. The identity stake allows for anyone to verify that the credential is valid and belongs to a real person without everyone involved having to run the entire chain back to that point, with a secondary chain providing a changelog. Since you only need to exist once, this can cost $5 or so without major issue. (We can't use a centralized database for this because people in the US are afraid of the government.) NHS is using it as a cross-region credentialing system, since it's easier for them to accept a blockchain entry than work out all the regulatory nonsense about actually sharing history, or getting their systems to work together securely.
I would say first read the article, which goes in detail what it solves. I'm not doing a TL;DR for you here but the post title does have a lot to do with it. You're stuck on speculation side. There are other parts to the problem which also needed a solution. As the time progresses the reward is smaller and then becomes negligible if bitcoin ever fulfilled it's ultimate goal. This is the reward for early adoption.
I did read the article, it's an explanation of how blockchains work. And I know how blockchains work.
What the article doesn't explain is why decentralized consensus and ledgers matter for a system that is increasingly obviously designed to be centralized and used in a centralized manner.
Yes, Bitcoin allows transaction resolution in a distributed ledger. The problem is that everything else around Bitcoin's design, implementation, and community is ill-suited for creating a decentralized currency. There are a hundred coins out there that use a blockchain to "create time". The article does not explain why Bitcoin in specific is worth paying attention to, other than because speculators are currently already paying attention to it.
First to market and the technology that works good enough. Nothing has come around that is better, enough, to warrant a switch. Once that happens we will go with better technology, it has always been the case.
The current banking system is better right now, because it's at least usable and scalable. Of course the current banking system is centralized and expensive, which is a problem, but if a substantial portion of Bitcoin's userbase is arguing for that transaction speeds and costs are irrelevant because Bitcoin will be centralized too, then I'm not giving them credit for that.
And frankly, it's not at all true that no other coins have come around that are better. Monero is vastly better at privacy than Bitcoin in pretty much every way. There are already coins on the market that are using proof of stake today. In pretty much every area, the state of cryptocurrency has evolved over Bitcoin -- but, importantly, none of those coins have become better systems for speculative investing. And I would argue that's the "better enough" that most Bitcoin advocates care about.
I also don't see any reason to assume that once Bitcoin goes more mainstream that a community that is currently hostile to change because it might affect their wallets is suddenly going to be less hostile to change. Bitcoin could be evolving today. People could be switching to better coins today. But they're not. It's not going to be easier to make those improvements in the future.
Bitcoin is the technology. The idea that we need wide adoption of a technology that is ill suited for the problem it is trying to solve, just so that we can drop that technology and choose something that's actually usable on its own without first reimplementing the entire concept of banks -- it just doesn't make sense as a long-term strategy.
You're discounting the whole problem the bitcoin solves because of speculating. Since dawn of time there have been only 2 types of money, token and ledger. Bitcoin came around and created a third type of money and the genius of it is to do that it had to create a new concept of time. That's the cool part that the article goes in depth about. I'm sorry but it's hard for me to believe that anyone who read that article can go back to "speculation" arguments.
There are tons of coins that do what Bitcoin is doing, except better. They also create their own concept of time. They handle distributed anonymity better, they integrate very clever concepts like zero-knowledge proofs and proof of stake. Bitcoin does not have a monopoly on the concept of a distributed ledger or any of the other concepts that are actually interesting about blockchain technology.
But Bitcoin is particularly bad at everything surrounding the concept of a distributed ledger. In fact, it is set up in such a way as to make working with its distributed ledger more difficult than it needs to be. It was an interesting first pass at this technology, but it has been very clearly surpassed by other coins in pretty much every single way.
So the question is, given that Bitcoin is particularly bad at what it does, given that other cryptocurrencies are doing the same things that the article praises except better, why are people sticking with an outdated technology? I would posit that people who are really genuinely excited about concepts of "creating time" would be moving to better coins that are doing even more clever things than Bitcoin is, and the people who remain are largely remaining because they're interested in the speculation part and for them concepts like "first to market" are very important.
But I don't see how anybody would ever say they prefer Bitcoin because of the technology. It's outdated.
>There’s a bizarre religiousity and post hoc rationalizations for some of the weirdest decisions in its design, and mistaking speculative mania and nominal price for success
This is a feature, not a bug. It is very difficult to change the protocol. We have a 100% certain monetary policy.
I agree with you that perception of what btc is and isn't changes with time.
If you have a proposal, you are free to create and propose a BIP, or fork off.
Well, it’s no major mystery WHY you get religiosity and post how rationalizations. Those with Bitcoin, especially those with a LOT of their net worth tied up in Bitcoin, will work the hardest to protect that investment.
Of course, rich people have always done that (post hoc justifications for their wealth), but when that wealth is not codified and protected by anything other than speculative value, it just increases the volume of that effect even more. The lack of technical fundamental superiority of Bitcoin vs other approaches (and no need to mention alternatives, y’all know them) increases the fervor of defense of Bitcoin as that’s basically the only thing keeping it up.
Anyway, as long as Bitcoin has perceived social value, it may still have niche uses like allowing you to get money out of Venezuela. And maybe slightly cheaper than wiring large amounts of money.
So actually you’re left with just: 1) pure social perceived value and 2) small use case when you have utter failure of the formal financial system. The first case is a self-licking ice cream cone, but... Unfortunately, #2 could end up being a self-licking ice cream cone, too, because now you have a bunch of people kind of invested in the formal system failing. I’m not really worried about it as the number of Bitcoin true believers is low vs the total population (and there have often been such people with a stake in system failure), but it is something to keep in mind.
But not everyone just acts mechanically in response to financial incentives, as there are some cryptocurrency advocates who see the need to shore up the formal system and advocate for that.
This is where it's good that the article did such a solid job of explaining the difference between a token and a ledger.
Any ledger which represents value in a purely abstract sense has to start at zero value— and any ledger which represents ownership of some concrete asset has to be kept aligned with reality, which makes it a nonstarter for a trustless, distributed system.
As an aside, the value of "one Bitcoin" is a bit of a distraction: market cap is the relevant measure, as long as we're using an existing currency as the unit of account, and the only market cap at which a distributed ledger could be relatively stable is many trillions of dollars.
So, for a trustless and decentralized ledger to become the next monetary framework through voluntary action, it has to start cheap, and persist for long enough to become expensive. There's simply no other way of doing it.
As for why Bitcoin, and not some other cybercoin: well, jury is out, isn't it? But money exhibits very strong network effects, and Bitcoin's first-mover advantage is considerable. A global marketplace doesn't have any reliable way to communicate other than price signals, and either BTC forms a Schelling point as the new baseline store of value, or it doesn't.
It hasn't yet, but it remains the most credible candidate. If you were a small central bank, nervous about the effect of 2020 USD and EUR printing on the buying power of your foreign exchange reserves, and you wanted to buy a little chunk of some distributed ledger "just in case", which one would you pick? Probably the first one you heard of, and the one with the largest market cap: Bitcoin and BTC, respectively.
I hear this idea a lot, that Bitcoin is obviously flawed design that would be done differently if we could do it over again, so either it's the myspace of crypto and something better will supersede it, or it's the QWERTY keyboard (or maybe MS Windows 3.0) of crypto — locked in as a standard due to network effect but it's a sad thing because it's basically a garbage design that we're all stuck with now.
But it's always kind of vague what is fundamentally different about this imaginary, perfected version of bitcoin. Is it the block size, i.e. Bitcoin Cash is really the ideal bitcoin? Seems highly debatable, but anyhow, the block size is a debate about tradeoffs between centralization and throughput rather than an obviously embarrassing decision. Or is it more about the issuance schedule and supply cap?
Generally, if the current bitcoin is an embarrassing beta version that we're stuck with due to network effect, what does the better bitcoin look like? Does it exist already? That seems like a more interesting conversation than a meta-discussion about why we're stuck with this "dumb beta version" or why bitcoin maximalists are so mean.
There are various "stablecoins" that show you can have some of the benefits of crypto without wild price fluctuations. There is another interesting project called SORA that features a digital central bank managed via sortition (basically like juries, but more complicated).
This idea is a big one behind the development of modern crypto currencies. Ideas like "Layer 2", "Zero Knowledge Rollups", and "Parachains" are all built on the idea that not everything that happens needs to be on the main blockchain.
Personally I suspect that eventually a more modern blockchain will become the base level of record, or more likely that we may never settle on a single one, but indeed with proper layering it could all be BTC in the end.
But why use bitcoin? It is completely inferior to a lot of the coin technology that came after which can be used as "moneY' and not a store of value. I think that ultimately this will be its downfall and something else will replace it. Unlike gold it doesn't have any inherent value and isn't necessarily forever. It's almost impossible to lose a few tons of gold, whereas bitcoin can be wiped out (on a national "store" level) with one dumb (or insane) wallet holder(government official)
The "hate" people express against bitcoin especially here on HN is often towards the implementation. People clearly see the flaw in PoW if they are not emotionally attached to it because they have no money at stake. You should not misinterpret that as hate because they missed the train to richness.
Objectively PoW does not scale.
Objectively we have DLTs (blockchains) with Federated Byzantine Agreement (FBA) instead of PoW/PoS that can do everything Bitcoin can and more without the most severe downsides that come with PoW/PoS.
The future will probably bring even better tech and if we learned something from the past then its that better solution always take over the old worse solutions.
Bitcoin ultimately has to fail because its not a system that could be upgraded. Its most fundamental core properties are intentionally not changeable.
But did you really include Lightning Network in your mental calculations? If so, care to elaborate on what exactly would stop it from working? (I mean it already works now, there is nothing technical that is going to stop it from scaling)?
Exactly. Lightning was anticipated from the very first email group conversation on Bitcoin. It is not ready for primetime usage, but it is rapidly approaching that point as Lightning improves.
The "killer app" of Bitcoin is the shared CPU power / consensus, not necessarily the plain layer-1 transactions.
No clue where you got that from but satoshi expressed in his emails that he was under the impression that bitcoin would scale on its own in the early days.
Just like he tough that millions of people would us their desktop to mine and therefore decentralization would only ever increase over time.
"Most transactions cancel out at the account
level. The binks demand bitcoins of each other only
because they don't want to hold account money for too
long. So a relatively small amount of bitcoins
infrequently transacted can support a somewhat larger
amount of account money frequently transacted."
This is simply not possible on bitcoin unless you have wallets holding money from many people. At which point you no longer own your wallet.
There is no way Tx of average humans would significantly cancel out within the time of a block.
Thats why LN just makes the time to settlement "infinite" and that's why it partially increases centralization again to cancel out more Tx. If that was the goal it could have been implemented in layer 1.
Anyway all that aside, lets just assume LN would work as perfectly as the devs hope it will do one day. Its sill way worse than existing FBA solutions that can handle most of this on layer 1 directly and already have fully working second layer (payment channels) implemented. Even if bitcoin and LN could eventually provide a similar good solution, whats the point if it already exists and why would anyone assume the existing solutions stop evolving while bitcoin and LN slowly catches up?
If we assume LN has reached all its goals in 10 years it also means the goals are outdated by 10 years.
We can arguing about what LN may be capable of doing one day but its never gonna be a valid argument against solution that deliver today.
Lightning network is just a brand name for the cryptography that was needed to make Satoshi’s payment channels work.
So, while Satoshi’s opinion isnt really relevant to bitcoin’s future, since you brought it up, Satoshi clearly didn't think layer one was the inly way yo go.
That right, its not relevant. He was wrong on many tings and right on many others.
Still what LN may or may not be able to deliver is also not relevant as an argument against existing solutions that deliver today.
LN fundamentally changes nothing. Its still uses bitcoin Tx it just combines many Tx and does the on-chain settlement at a later point thus reducing the number of on-chain Tx increases speed and reduces fees. But if we reduce Tx on the chain we dont solve scalability we just bump into the limits a little later. LN on a global scale would still need orders or magnitude more on-chain Tx then possible.
And if LN would actually reduce on chain Tx to a level where we would no longer need to worry about on-chain limits then we rendered bitcoin useless because we literally reduced the need for Tx to basically zero. Whos gonna pay for mining if block rewards vanish and LN makes on-chain Tx vanish as well?
Bitcoins "goal" is that on-chain Tx should always be near the max so the fee per Tx is the lowest possible and reward are the highest While LNs "goal" would be to reduce the on-chain Tx to near zero because every on-chain Tx is extremely expensive.
It probably meets somewhere in the middle. which means its still gets worse and worse the more Tx are made even if they are made over LN. Thats the definition of "not scaling well".
LN and bitcoin are supposed to by a symbiosis but LN is the parasite that works best when it almost kills is own host.
You can see it though the actions of large miners. They are not supporting LN. They could pour millions in the development and advertisement of LN but they dont want it, it reduces their profit.
Its just very very deeply flawed overly complex system that only exist because some people would not accept that the layer 1 has deep flaws. Is rather obvious that building on top is not the right way forward. An since changing layer 1 is not possible in any meaningful way the only way forward is to abandon it. Which wont happen as long as people make money with it.
>what exactly would stop it from working?
The absolute end state is that hashrate drops or stops increasing due to the fact that it isn't profitable anymore which leads to double spend and essentially destroys any trust in the system and renders it useless.
No one know at which point hashing will no longer be profitable for a long enough time to cause this cascading effect. But once it started the price crashes > pushes more miners out of businesses > further reducing hash rate > panic > price drop more > repeat
All while mining hardware becomes cheap because demand goes to zero and supply increases, which makes a double spending attack cheaper.
Then once a double spend has been observed its game over. There inst even a theoretical plan how to move on at that point. In simple words it would move the requirement for block conformations to infinite so there is no point in doing any Tx anymore. Everyone just has to wait which further reduces any rewards for miners.
The difficulty adjusts yes, but the total hashrate has to increase forever. It can decrease for a while but long term it has to increase or the risk for double spend increases too.
The difficultly adjusting does not prevent the network form attacks at all.
If 80% of miners go out of business someone can buy the hardware from them wait for the 80% difficulty adjustment and then start the attack. He could mine blocks faster than anyone else so even if someone mines a block his chain will eventually be longer. There is no know way to recover from something like that.
“ LN fundamentally changes nothing. Its still uses bitcoin Tx it just combines many Tx and does the on-chain settlement at a later point thus reducing the number of on-chain Tx increases speed and reduces fees.”
Ever other system could (and does) use this as well to boost throughput by reducing speed. Or like LN does by looking up funds in advance to increase speed again. Its always gonna be way less efficient than having order of magnitude faster layer 1. and only offload micro Tx to the second layer.
Also increases cost because you add additional parties in the system who wants to get paid for providing the service and liquidity. It simply can not provide a better service in the end.
>People clearly see the flaw in PoW if they are not emotionally attached to it because they have no money at stake. You should not misinterpret that as hate because they missed the train to richness.
The vitriol that Bitcoin evokes from HN commenters can really only be explained by jealousy, the environmental concern is just a cover for covetousness.
This is true, because the vitriol was there prior to anyone complaining about Bitcoin's power usage (i.e. when it was too small to matter).
I remember when I first heard of Bitcoin. I quite frankly found it technically intimidating. It was a totally new concept. I didn't get it. I took my own discomfort as a sort of signal that it was really important; something totally new. So I studied it. I had to put time and effort to read the books, play with the code... Eventually I got it and found it to be one of the most elegant pieces of technology and sociology of my lifetime.
I think a lot of geeks never made that first push past the intimidation. As the value has gone up, the sour grapes have as well. This is a group of people that should have been first on the wagon, but instead many of us found out the hard way we weren't on the cutting edge as much as we liked to think. Myself included, I have some Bitcoin but I'm not a BTC millionaire, like I would have been had I pushed harder through my intimidation faster.
The problem is that there could easily be flaws in Bitcoin that have been there all along. We’ll know the answer to this if it eventually fails.
I too wish I’d made more effort to buy it earlier. Presumably that sentiment applies to the majority of humans on earth, whether you are now a Bitcoin millionaire or not.
If you do the same kinda research about FBA you will "get it" too and you will know that PoW is useless.
You probably wont make money form that but still I hope you dig into it. I myself saw "the beauty" in bitcoin once and later saw it in FBA again.
After all it solves the same problem just in a very different way.
There are FBA coins out there so people who want can trow money at something an maybe make profit if they gain value. But its not new so who knows how early people who join now really are.
Can't compare it with buying bitcoin at a few bucks that's for sure.
My take is HN commenters try to typically reason through articles with thought and an open mind. I would wager there are so many bitcoin bros who hype ad nausea that beckons the skepticism you see here.
I believe the distinction is that if you or I are accused of sour-graping Bitcoin, we cry crocodile tears on the internet, but if Bitcoin bros aren't taken as serious thought leaders of the future world economy, they stand to lose a lot of money, potentially leveraged.
It's a sexist term that degrades the countless amounts of female Bitcoin investors as well as those who identify as trans or POC. I'm surprised it's allowed on HN.
You have called lock downs "arrogant and threatening authoritarian movements" and told someone that saying racist hate groups lead to violence is "hyperbole that isn't going to work for you much longer". You also said that "hn is filled with indignant nocoiners".
I think acting offended by 'bitcoin bros' is hypocritical.
My own comments (many of which I don't remember making, it's possible my account was temporarily compromised) shouldn't have any bearing on the offensive remarks made by others.
> The vitriol that Bitcoin evokes from HN commenters can really only be explained by jealousy, the environmental concern is just a cover for covetousness.
Obviously some people are jealous that they didn’t hold Bitcoin earlier and make a lot of money.
But equally, people who hold Bitcoin now are incentivized to dismiss any critique of Bitcoin, since they stand to profit directly from Bitcoin’s reputation.
Therefore the motivations of all participants must be borne in mind, and no ad hominem carries any special weight since all participants have incentives for motivated reasoning.
Funny how there was no "environment" argument in the whole message but someone came alone an made sure to devaluate it anyway.
The argument was that PoW can not not scale. Its an obvious objectively verifiable fact and its completely irrelevant what kind of environmental side effects bitoin has or will have in the future.
For all we know it could run on fusion reactors and biodegradable ASICS only and it still would not scale.
I don’t understand the recent preference for taking assertions and declaring them “obviously objectively verifiable fact”.... but that is a good indicator they are false.
Bitcoin can and has scaled. And that is a fact, from Segwit and Taproot to Lightning the capacity and cost have improved dramatically.
Last time I checked block time was 10 min just like 10 years ago. (obviously objectively verifiable fact)
Last time I checked max TPS was like 7 or something so it has like what doubled in the last years? (obviously objectively verifiable fact)
LN is forever beta (obviously objectively verifiable fact) and does not even address bitcoins scalability problem. It just off loads Tx to reduce on-chain Tx. (obviously objectively verifiable fact) That does not make bitcoin any better. (obviously objectively verifiable fact) Just like Wrapped Bitcoin does not make bitcoin any better but it did reduce load on the chain so thanks to WBTC the chain inst as much fu**ed as in 2017 yet. (obviously objectively verifiable fact)
Compared to FBA solutions with block times in the single digit seconds and TPS way over 1000 These improvements are as irrelevant as its gets. There is no proposed way to make bitcoin scale to any level that would make it useful on a global scale. And the fun part is, even a proposal that could do this would not go trough. It would just lead to another fork.
Counterexample: when I recently read about its energy consumption (per byte stored), I sold my bitcoins in disgust, at roughly today's prices. I've held almost continuously since 2011, although I trimmed my position a few times.
If I come across something that works without PoW, is safe against quantum computers and somehow eliminates the threat of forks (seems impossible), I'll invest in that.
As per my original message you should look into FBA.
Its not a coin but some coins do use it.
Whether you want to buy such coins and which one is none of my business, but the tech is there and works since years.
> when I recently read about its energy consumption (per byte stored), I sold my bitcoins in disgust
You fell for the meme...
Energy consumption as compared to what? What energy sources? This line of argumentation feels very misleading to me and always has because it is presented with a very specific framing. Here's an alternative framing for example:
This will likely be dismissed as shilling of a shitcoin, but on the off-chance anyone is actually willing to take a look, this cryptocurrency meets your criteria (which is exactly why I bought it): https://www.algorand.com/.
The pedigree of the team behind it is ridiculous, most notably its creator: Silvio Micali - one of the co-inventors of zero-knowledge proofs as well as other cryptographic primitives.
EDIT: it's not quantum-safe yet, but that's a problem they're actively researching, and given the team they seemed credibly positioned to solve it.
What exactly is the "threat" of forks? Being able to fork the network is often seen as a feature, not a issue. If you're building a decentralized network, you sometimes have to have consensus when doing upgrades globally. This is in reality a fork but everyone agrees to keep with one of them. Those who don't agree, can continue running the other one if they feel like it.
unwanted/unplanned forking is a "threat" in the sense that it causes uncertainty. Idk about this specific project and how they handle this but for example the XRPL has amendments which come with software update but are not enabled they are open to votes. Each amendment must constantly get over 80% positive votes for 2 weeks to be accepted. The validator nodes who voted against it are overruled by this they must install the latest version to be able to vote on the amendment therefore they do have the code and if the consensus is to enable the new code their node will do so. This prevents forking.
Intentional forking as a feature is ofc still possible. Validators owner who disagree with an amendment to the point that if it is accepted they would want to stay on the "old chain" and thus fork it, can simply remove the "yes" votes from their validator list essentially ignoring their votes and thus separate from each other. By the time one cluster enabled an amendment and the separated cluster does not, a fork happens*. This requires some kind of coordination and is unlikely to happen unexpected. A largely unpopular amendment would simply not reach the 80%. And one that reached 80% is unlikely to be consider so bad by the remaining 20% that they would want to fork. But the possibility is there it just never happened in the 8+ years its running.
*ofc it would also go the other way around. An amendment that wont reach 80% could also cause a cluster to intentionally separate and enable it there which would also case a fork.
First you bring up something that is neither a cryptocurrency or properly decentralized (XRP and the XRP Ledger [Ripple]) then you simply miss the question as a whole.
The question was: "What exactly is the "threat" of forks?"
Your answer seems to be the answer to the question "How can we prevent forks?"
"Uncertainty" is certainly getting at some sort of answer, but falls short as you're not really explaining what kind of uncertainty and why it's bad in the first place.
>The question was: "What exactly is the "threat" of forks?"
Yes uncertainty was the answer. If a fork happens you dont know which side is going to die or if both keep going on. You dont know which sides coin someone wants if he wants to be paid in the coin named prior to the fork.
You may not even know there is a fork because it happen on accident and is only discovered after it happened.
I would say this is the "threat" the "bad part" and it is bad because it is unwanted by most users of the system but that's just my opinion. There is now way to proof its unwanted by most user nor does that mean its bad for everyone. So this goes nowhere. If you think its good I'm happy to agree that this is purely an opinion.
A controlled/planed intentional fork seems to be what I assume most people would want but that again is "good" solely because its my opinion.
Hence my message pointed out the fact that we can have the "good" part about forks without the "bad" part about forks if the system prevents the "bad kind" of forks to happen. Your message already pointed out the benefit of forking and preventing unintentional forking would not affect these benefits.
Now to the other part which was really just an example how another system managed to prevent unintentional forking without preventing forking itself. I'm sure there are tons of other solutions so the fact that you don't seem to like this one is kinda irrelevant, it was just the example that I know best and was probably the first around.
Still gonna "fact check" this because why not^^ You seem to be confusing stuff. I wont go any further into a discussion about that tho because quite frankly its all out there to read for anyone who cares. It not my goal to shill stuff or prevent people from reading and believing whatever FUD they choose. Everything can be verified, no need to trust what I tell you, its all public since many many years.
First, the XRPL is not a cryptocurrency and I never said it is, its a distributed ledger. XRP is a cryptocurrency/digital asset/token whatever you wanna call it. There is no consent over the definition for these words so its not really debatable.
The XRPL is however definitely "properly decentralized" regardless of what FUD you may have read about it.
Decentralization is rather well defined and whether something is or isn't can be objectively "measured". Although I ofc dont know what _your personal_ definition for "properly decentralized" may be, its decentralized as in no single point of failure or control exists in the system. If you use another definition then it may or may not fit. But this is the most common simplified definition.
For a system that has to "decentralized" reach 80% agreement this means at least 3 independent entities are necessary to make it de-facto decentral. However, 2 colluding would break this already so obviously more than 3 is wanted. 3 would be the theoretical minimum. How many _you personally_ want to have to make it "properly decentralized" _for you_ isn't really a debatable topic, its an opinion. More is objectively better and less than 3 is objectively not decentral anymore.
The XRPL currently has about 30 _legally independent_ validator operators. There is no means to measure independents however. And no means to evaluate what would be needed to make 80% collude. BUT its important to know that colluding would not give them any financial benefit, in fact it would just stop the XRPL from working, which they all voluntary choose to support so that does not make much sense.
There is no double spending or the like possible if someone gains control over 80% of the validators. It could be turned off or they could push an amendment though that does whatever they want but its all public. No honest node can be tricked into breaking its own rules and add any kind of invalid transaction, reverse something or allow dou...
The hair dryer, unlike a blockchain, is not a technology for durable, immutable and highly available storage, so I wouldn't judge it based on energy per byte second.
The energy wastage argument isn't "environmental concern". If bitcoin were to scale up enough to combat Visa, it would twice as much energy as all the generators in the world put together can produce, just to do what Visa already does, but without fraud detection, ID verification, or reversibility.
I'm not confident that it would. There doesn't seem to be a clear connection between the transaction rate and the power use. That's not to say that the power use is or isn't "worth it" or whatever.
But, I think that one way the "energy per transaction" framing is misleading, is for exactly the "if you scaled up the transactions, the power use would scale proportionally" idea.
First, it isn't clear to me that it is even possible to scale up the transaction rate without either making the security worse or substantially modifying the design (or possibly both), but if you did manage increase the transaction rate, it isn't clear to me that this would impact the total energy use rate at all.
Well, ok, it might influence the power used by influencing the price or the issuance rate.
But, aside from that, I expect that the power use would be determined by whether someone profits by increasing the amount that they spend on power in order to mine bitcoin. This doesn't depend on the transaction rate.
Err, ok, I suppose technically if the transaction rate were higher, miners might get more transaction fees, and really the relevant thing is issuance rate + transaction fee rate,
but I suspect that the average transaction fee would decrease if the number of transactions were increased, so that impact should be small I think, because those two should largely cancel out.
Hm, ok, so if the transaction fees are determined essentially as an auction, what is the effect on the average fee per transaction, of multiplying the number of items (slots in the block) available per amount of time? I think this depends on the demand curve for transactions. I don't know what that curve looks like.
If we pretend that it is linear (just pulling that out of a hat. Though I guess if we zoom in far enough it should look locally linear, unless we zoom in too far and then it will look piecewise constant due to discrete numbers of people... whatever.), then, --- I should get back to work, shouldn't be doing this calculation right now.
As an engineer with twenty years experience in this space and nearly as long studying the economics of it, I have yet to see a replacement for PoW that solves the problem that PoW solves.
Proof of Work is trustless decentralization.
Proof of stake is trusting the dudes who premined the coin and sold you a “fix for bitcoins inherent problem” to hype their ICO.
If you were right, after 10 years one of those PoS currencies would be winning. Can you even remember the proof of stake currencies from 2011?
Why did they fail? After all they had a huge economic advantage over bitcoin mining as they cost effectively zero electricity.
Its right in the message above. FBA is the result of researching how to make a bitcoin like system without PoW.
PoS however is based on the ideas of PoW, it just moves the flaws, its not a solution.
FBA was "invented/discovered" before PoS coins even existed.
Essentially FBA is a distributed voting solution. Instead of let the person who has solved the PoW write the Tx in a block, everyone just votes on Tx order. The threshold is rather arbitrary. Most systems use something around 80%. In practice every valid Tx has near 100% votes anyway because no one listens to dishonest nodes. But nodes can go offline or Tx propagation can be delayed so a Tx could have only reached part of the network and thus not reach 100%
Not a big deal even if a Tx has less than 80%. Nodes just re-vote for the Tx for the next round.
Double spend is solved by the ordering alone. If one Tx is first the second that moves the same funds somewhere else, breaks a fundamental Tx rule so nodes wont vote to include the second. Which one came first is irrelevant. Each node just votes for the one he got first and in a possible second round it votes for what the majority of other nodes said came first. So the distributes system can not reach a state where a Tx is stuck.
This is all very very very much simplified ofc but you can easily lookup systems and dig into details if you are interested. There are real "blocklchains" running with FBA since many many years so it without any doubt works. Although like I said in my original post it can allays be improved.
What you described doesn't even address the reason PoW exists. So, I’m sorry but it sounds like you are repeating something you heard without understanding the issues at hand. I suggest you read “There’s nothing cheaper than proof of work” by Paul Storzc
Enlighten us please? Suggesting to read a book of which the title already suggests some completely irrelevant content about "cost" or PoW surely does not convince me or anyone. I dont care about the energy/cost or the fact that bitcoins may speed up the destruction of this planet by a incredible tiny tiny fraction that has zero effect on my life. I couldn't care less, and it wasn't part of my argument at all.
People can have an argument about that, its fine but mine wasn't so you cant debunk it by telling me to read a book that seems 100% irrelevant.
PoW was simply used to solve the double spending problem in a decentral way. Which is exactly what FBA solutions do without it.
Solving the double spending in a decentral way is the key "invention" of bitcoin NOT PoW. PoW existed way way before, it was just used to create the solution to the problem it was not invested/discovered for bitcoin nor was it the key element.
People came up with different solutions solving the same double spending problem in a decentral way but without using PoW. Some solutions are objectively better regardless of energy consumption and other secondary properties. They are objectively better because they scale to high throughput, allow short block times, have a proper and path forward to improve these properties over time with very limited "risk" of causing forks for every proposed change.
There hasn't been a secure decentralized PoS protocol. Mostly they rely on one or more trusted validators. Cardano's Ouroboros is apparently the first secure decentralized PoS, that is mathematically proven to be as secure as Bitcoin. I don't know if that's true, but that's what they say.[0]
I can't really understand their papers, but they've been published in peer-reviewed journals, so they're at least somewhat legit. And if it's a scam then someone should be able to attack it.
Why would it be the last is the question?
Clearly something better has to come or already came. After a large step forward there is usually a tremendous amount of innovation coming. Why would you assume 10 years passed and bitcoin is still the first AND the only good one.
Lazy people who don't read an article and comment becomes a proof point that Bitcoin is onto something? That's an extremely weak argument point.
And arguably there's a much larger mob of people who haven't critically thought through any of Bitcoin - who own Bitcoin - but that are financially incentivized to promote Bitcoin or are biased to want Bitcoin to become something.
Convincing yourself that someone commenting negatively about Bitcoin is simply jealous is also a common thing I've seen many Bitcoin owners use to justify ignoring legitimate counter-narratives of a lot of propaganda.
Bitcoin is nothing like gold. Gold has inherent value. If I buy 100% of the world's gold, gold would still be valuable. If I buy 100% of the world's bitcoin, it's the same as owning no Bitcoin. Gold would be immensely valued during an extreme global crisis (WWIII, massive solar flare, etc) whereas bitcoin would be entirely useless.
> If I buy 100% of the world's gold, gold would still be valuable
Sure, yes. It would be valuable in the way that a barrel of oil is valuable. It has a number of practical uses in electronics, medicine, etc. Valuable as a currency or means of transferring wealth? Not as much. It's cumbersome for that role.
Bitcoin's value is not "coins". It is valuable for what it does (transfer wealth). It's a ledger, not really "coins".
Did you read the original article? It's actually worth the read if you didn't yet.
The point of this comment was to debunk how Bitcoin is a good store of value. Gold is great in that aspect because the unique color, density, and stability make it trivial to identify, which gives it has immense strategic importance. This is why nations hold much more of it in reserve than they would need from industrial applications.
This comment of mine explains why I think Bitcoin is not a good form of money. Transferring wealth may be the most important function, but it's far from the only one.
https://news.ycombinator.com/item?id=26319657
The article is certainly interesting. Unfortunately, the main source of inconsistencies with ledgers comes from human factors rather systemic ones. Fat finger errors, identity theft, credit card chargebacks, and fraud are all inconsistencies created by humans and can only be resolved through trusted centralized authorities.
Yes, you're right. It's very common for people to refuse to attempt to understand something new and change their mind on a topic. At the same time, crypto has the potential to change the status quo for everyone and those invested in the existing financial systems don't want their pride hurt, adding to the refusal to impartially analyse crypto and make their own decision.
If you liked this article, you will probably also enjoy "Mysteries of Modern Physics: Time" by Sean Carroll (I listened to it as an audiobook, I don't know what other formats it is available in).
Proof-of-history using verifiable delay functions (VDF) is a valid consensus mechanism that scales of PoS and PoW networks [1]. Solana is build on top of it and it looks very promising as a fast consensus mechanism.
OP pretty much explains the intuition behind why history as a sequence of events in a blockchain works, but Bitcoin PoW is different from PoH as maintaining order is the main work done and not a side-effect.
I wanted to share a cool algorithm related to the time as consensus. My intention was not to shill a specific project.
I follow alternative consensus algorithms and trustless decentralized app tech in the blockchain space because I think it is interesting and democratizing tech. I do not own half of the coins I follow and couldn't care less for speculation. Technologically, cryptocurrency is still an exiting domain and scepticism is in place, but the blind hate for anything blockchain on HN is a bit OTT.
Maybe try reading the post again? I have no affiliation or even opinion about that coin, but it is painfully clear for that post only that the proposed problem of value is
"valid consensus mechanism that scales of PoS and PoW networks".
Half of the comments on this page complain about how Bitcoin uses too much energy and how PoW is wasteful. This is a direct (allegedly, if what they write is correct) solution to exactly that.
On a somewhat related note, I just wonder for my personal interest, why do you write it that way? "BitCoin". You are just signalling everyone that you haven't done any deep research, you have not read any meaningful amount of articles or books or studied it in depth... It is spelled "bitcoin". "BitCoin" is how a housewife would spell it (no disrespect or negativity towards housewives, it is simply an example of a person who does not know much about bitcoin and has just heard the name on the tele or something).
I probably understood even more than you were willing to share: your level of knowledge about this topic.
> gender role trolling
What does gender has to do with anything? You brough it up, not me. Also where did I "troll" you? The word "housewife"? Not sure why you would take offence in that, for me it is not a negative or lower-value term, it simply refers to a person that has chosen and has had the possibility and privilege to spend most of their time at home taking care of their family. I could just as easily have used "hairdresser" or "bricklayer", those people have equally likely little to do with crypto and have the same level of knowledge about bitcoin that you seem (assuming by that spelling, in which I could be wrong of course) to have. That's why I wonder, where did you pick that up? That spelling? Nobody in the industry spells it that way, that's all.
You're dismissing a whole branch of computer science on decentralised systems with no argumentation as to why. Consensus algorithms, solutions to the CAP trilemma, uncensorable decentralised applications that run as long as people are willing to use them, trustless oracles, decentralised dispute resolution, democratised loans and finance. Those are some applications that grew out the cryptocurrency space.
Bitcoin network is constantly readjusting mining complexity, so that every new block will be mined in approximately 10 minutes. Then, they substitute the notion of time with the sequence of Bitcoin blocks. Yeah, well done!
Bitcoin proponents are becoming more and more insane.
It's always been like this, I'm not sure what you mean by "becoming". According to this article, the concept comes from a series of papers from the 1990s.
EDIT: To be honest, knowledge of the hash of a block can be used as a proof that something has happened AFTER a particular event (similarly to a picture of a hostage with the newspaper).
But you can't prove that something has happened BEFORE a particular event using Bitcoin hashes.
Also, this "feature" is unrelated to Bitcoin being a cryptocurrency. You can have cryptocurrencies without "global time" (e.g. NANO).
Yes, you can do it if you put the hash of a message INTO the chain as a transaction (I think they do something of this kind). But in this way you will share the limits of the Bitcoin network. They claim they do it in some efficient way, though. But I wouldn't trust it without checking their algorithm.
Anyway, any other "linear" blockchain (e.g. with PoS consensus) can do the same work. No wasting of resources is needed.
Or is it the detractors that are becoming more and more insane? Perhaps it's both. There are so many detractors who seem to have the need to go "hurmph!" every time someone mentions Bitcoin, and often times they have knowledge gaps that destroy their credibility. In every Bitcoin related thread here on HN, there's tons of detractors who make ridiculous claims around the utility and mechanics of Bitcoin that it's hard to take them seriously. Why are they so invested in shouting down Bitcoin in the first place? If someone doesn't like Bitcoin, they can simply not use it. There's nothing wrong with healthy criticism, but it's there's an air of emotional insecurity in these people that makes me wonder whether they're former Bitcoin supporters who got burned after 2017 because of their misconceptions.
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[ 5.5 ms ] story [ 406 ms ] threadhttps://allenfarrington.medium.com/bitcoin-is-venice-8414dda...
Bitcoin is a Venice, time, a Ponzi scheme, a climate disaster, digital gold, dead (x400), criminal, a bubble...
The half-baked hot takes that reach the frontpage of HN are getting better and better.
[1] https://john-tromp.medium.com/a-case-for-using-soft-total-su...
Time, in the human sense, seems somewhat irrelevant because humans can't/don't hash manually.
Disclaimer: This site doesn't work in Firefox on Android for some reason, so I'm asking in total ignorance of the article's content.
They can’t all be negative in real terms.
Nah. It motivates rational beings to spend that capital on anything at all, as fast as possible, because the alternative is a net loss of purchasing power.
Deflationary currencies on the contrary motivate actors to think before spending, because any spending has to be balanced with the future gains that won't come from holding it and seing it accumulate value over time.
Yet fiat enthusiasts keep parroting that the linear and intentional destruction of value through inflation, in order to encourage further mindless consumption, is a good thing? What is so bad about a currency that maintains its value throughout time? This would allow someone to actually save, rather than be forced to buy some stupid widget they don't need, or become a part-time fund manager trying to decide between a series of risky assets. As it stands, simple savings accounts pay zero and lose money to inflation, so if you don't become a one-man hedge fund or pay someone else to become one for you, you just lose your money.
I discussed gambling on Bitcoin, considered it carefully, right near the beginning. Didn’t bother. Don’t regret it. I mean, why should I be enriched by Bitcoin? It’s not clear that Bitcoin is a good thing. I could have invested in cigarettes or oil companies but I wouldn’t do those things. I have no regrets about not buying Bitcoin, just as I have no regrets that I haven’t gone to work for Facebook and accumulated lots of cash.
I find it so odd that people would assume I’d regret it. Life isn’t about finding easy ways to collect money, why would you think it is?
It all depends on the audience, but on HN in particular you are right. The site is rife with people who could not fathom the value at launch and who've been in denial since without ever putting the work to learn about the ecosystem.
Notice how "debates" around cryptocurrency on HN never delve into technical arguments, and compare that peculiarity with discussions on Reddit for example.
Why would you think that Bitcoin needs to accomplish that particular task? As far as I know ending climate change has never been mentioned as a goal or desirable outcome of the project.
Ethereum is at least working hard on other algorithms that are energy efficient. But in the Bitcoin space, the tremendous investment in energy-intensive mining equipment means that the entrenched players have an interest in persisting the way that things currently work, rather than seeking an energy conserving replacement.
This silly task (called HashCash https://en.wikipedia.org/wiki/Hashcash ) was chosen not because those numbers are somehow important to the algorithm or network, but rather as a way to slow down the rate of block creation: forcing people to waste energy on finding these numbers, in order to have their blocks accepted by the network.
It is important for bitcoin's security that the block chain can only grow slowly, since conflicts (like double-spending) are resolved by choosing the longest chain; if someone makes their own block chain that's longer than the main bitcoin chain, the network will switch to that and any payments on the previous chain will be forgotten. Using HashCash to slow down block creation makes this harder to pull off.
The difficulty of the HashCash task (the required number of zeros for the next block's hash) changes depending on how long it took to find the last block, such that it always takes about 10 minutes to find a block, regardless of how much energy is spent on this task, or any technology improvements (e.g. CPU vs GPU vs ASIC). In other words, wasting more energy on mining bitcoin, or making more efficient bitcoin mining hardware, will not find blocks any faster; the mining task will become harder to compensate, so it still takes about 10 minutes per block.
Bitcoin allows transactions to contain a 'fee' with a blank recipient, and each block can also contain a small payment 'from nowhere' as a reward/incentive. Miners create blocks which send these fees and rewards to themselves, then try to solve the HashCash task to make the block valid. Whoever solves it first sends their block to the network, it gets accepted as the longest chain, and hence that miner has received the fees and reward.
Miners can't make more money by solving HashCash faster, since it always takes about 10 minutes for a block's HashCash to be solved, at which point everyone starts looking for a following block (since that will form the longest chain), which may be even harder to find. Instead, wasting more energy on mining makes it more likely that a miner will be the one who finds the next block; since, on average, someone performing X% of all mining will find X% of all new blocks (and hence receive X% of the fees and rewards).
This creates a competition between miners, to try and waste more energy on HashCash than each other. This race-to-the-bottom breaks even when the energy wasted finding a block costs the same as all of the fees and rewards in that block; i.e. when all of those wasted megawatts are being spent for literally nothing (net).
There are other ways to slow down the creation of blocks, or to resolve conflicts which don't incentivise long chains; other cryptocurrencies are experimenting with such things.
In a way I appreciate bitcoin for its absurd and unambiguous wastefulness. It's sort of the perfect expression of consumerism, destroying the precious and irreplaceable earth for something immediately disposed of.
Energy consumption != energy production. Bitcoin is incentivizing reusable energy and moving energy to cheaper locations, further from cities. I suggest you look into how it's actually quite positive for the Earth.
We also know that this theory is really, really stupid: The kind of self-justifying idiocy that people don't come up with unless they're already deeply committed to a point of view come what may, logic and fact need not apply.
I was going to add a disclaimer to my post along the lines of "not saying I believe or disbelieve this theory", but I was tired of adding disclaimers to all my posts.
> Are you really going to claim that there isn't a demand for green energy already?
Is a disingenuous argument. Of course there is already demand for green energy. Meanwhile, Bitcoin increases the demand so much that people are apparently outraged by the increase.
Assuming that you think you're serious: Increasing the demand for energy (and it's not "demand for green energy" it's demand for energy, period) is not, has not been and never will be a green strategy in itself.
This is easy to understand, unless you choose not to.
https://davidgerard.co.uk/blockchain/2020/06/03/guest-post-t...
1. Wind/solar energy are being trumpeted around the world as the cheapest source of electricity available. 2. Bitcoin miners' profits are directly `sale price of BTC - buy price of electricity`. Other costs are marginal in comparison. 3. BTC mining is a extremely competitive, trivially mobile, trivially liquid, global market. 4. Given 1, 2 & 3 there is a lot of fretting that BTC is creating a coal-powered financial system.
With the recent spike, the currently reasonable cost for a fast, median-sized transaction is $10.46 [1] [2] According to the fretting articles I read, that is enough to power an average home for a 23 days and motivates sending over 300kg (700lb) of C02 into the air [3] That's 35 gallons of gasoline at 20lb CO2/gallon.
:/
For what it's worth, I get the concern. But, I also see equal shares of BTC hate|BTC fanboyism everywhere I go. Latching on to the environmental concerns of BTC is trendy right now. It's hard to argue against without sounding like an asshole and it's not entirely false. But, it's not entirely honest either. Everything I read and calculate shows that BTC makes total sense as a defacto green energy subsidy. But, that does not spark outrage. So, instead there is a lot of fretting about the second rise of a coal-powered economy.
IMHO, the way Ethereum is going is great: Bootstrap with POW then switch to POS after enough investment is built-up that staking actually means something. It's arguable that the best use of BTC at this point is to burn them all to bootstrap more POS tokens. We just need alternatives that inspire enough confidence to motivate people to convert their BTC over.
[1] https://awebanalysis.com/en/convert-satoshi-to-dollar-usd/ [2] https://bitcoinfees.earn.com/ [3] https://digiconomist.net/bitcoin-energy-consumption/
Then you must be reading in a bubble, as this is nonsense. Self-justifying fantasising.
Throwing energy away (which from an outside POV, this is merely an example of) is not and never has been a green energy strategy. I mean that very literally: the green people are very keen on electricity demand reduction, always have been, and are not going to change this. Because they're not wrong.
Key terms to google: Energy conservation, Energy Efficiency, energy demand reduction, Negawatt
You can have everyone work hard to reduce their energy usage. You can have tax-funded subsidies to motivate green supply increase despite targeting reduced demand. And, that's all lovely and great.
At the same time, you can have a voracious, highly mobile demand for the cheapest energy around. You know, the kind that solar and wind is supplying, but sometimes in mildly inconvenient locations. This does not actually reduce the supply for everyone else. It's not a zero-sum game. Supply follows demand. This horrendous cadre of buyers directly pay for increased production of cheap green energy that otherwise would not have been set up at all. Thus, ramping up equipment production and economy of scale. And, motivating the creation of supply that otherwise would have been too risky to invest in.
It makes no sense to talk about something being limited "right now". Limits are about the future.
Can you please rephrase and clarify?
- a lot of it is spare power that would be wasted otherwise (only partially true).
- it uses less energy overall than governments spend protecting their fiat money's value (not that comparable since fiat can also be used as currency).
- the gold industry uses a lot of energy too (but I doubt Bitcoin will reduce the energy spent on gold, it will probably just add up).
EDIT: completed gold mining point following comment
I'm not sure it will add up. It seems to me that different stores of value compete directly with each other, because you can store value one way or the other way.
Why do people keep making the comparison to gold mining? It's inappropriate.
Gold mining is bad for the value of gold, because it increases the amount of gold in the world. Eventually, the gold coffers on Earth will deplete and there will be no more gold mining.
Bitcoin mining is necessary for the value of bitcoin, otherwise there can be no certainty of the blockchain. After most of the bitcoins get minted, the mining will still have to continue out of transaction fees.
The cost of mining bitcoin needs to be compared to the cost of gold storage and handling of gold transactions, not gold mining.
A lot of us could live a more simple life (i.e. no cars, fewer children). But humans are attracted to comfort and the ability to pursue their dreams.
It's fiat currency combined with total energy crisis. It only retains value as long as people are willing to tolerate exponential destruction of resources by the already wealthy who can afford to bankroll any possible conversion of energy directly into 'money', no matter what workaround is required.
If it becomes 'the miners run for one second every day' and there is no way to cheat, these are the people who simply take the same amount of energy they were draining before, and come up with a way to store it the whole day… that or the world blacks out every day, because miners.
Bottom line is unless they get everything they want and dream of, including the eradication of government currency, the escalation will inevitably lead to a collapse where all the work becomes meaningless, valueless. All that energy will have been burned for NOTHING.
We just don't know when that will happen. Bitcoin is time, all right: time running out. Don't be caught still holding it when it pops.
On the other hand, the finite supply/deflationary aspect of it is also the perfect antithesis of consumerism, in that it favors hoarding (spending less) instead of spending your paycheck as you get it.
The way I see it, it's either "burn" the energy in proof of work (the machines leave behind only heat and bitcoin) or let a closed institution take this energy to provide this trust.
In the end, it's all tradeoffs and incentives decided by politics and made possible by technologies.
If you could have a trusted time source, you could at a stroke get rid of one of the most egregious flaws in bitcoin, its vast wastage of energy, because of its 'proof of work' mining. Bitcoin miners are running at full pelt 24/7, picking random numbers and doing math on them in the hope of striking lucky and discovering the next block. The mining difficult is artificially picked so that blocks are discovered about every ten minutes.
However, imagine if bitcoin miners could all declare a cease-fire, for 9m59s of those ten minutes, i.e. they just do nothing for that long, consuming virtually no energy, and then they all furiously mine at full speed for the last second (with the difficulty adjusted so the global mining should take a second). This process would be just as fair as the current one; if you have more/faster hardware, you will still mine more, in the same proportion as before. The total energy usage would be reduced 600-fold!
But - the reason you can't do this is that there's no way of stopping cheating. Who can tell if the other miners are really idling for those 9:59? This is where the time source comes in. Imagine you have a trusted time source: it could, every ten minutes, broadcast a random number. Miners would have to listen for this number, then mine a block containing it, to prove that they didn't start work early. Problem solved!
Back to the real world: just about everyone can agree on time; we have NTP and can even use certificates to authenticate clock sources, we can even use multiple sources to make it harder for time to be faked. So why can't blockchains do the same thing? Why don't they use multiple time oracles to stop the colossal energy wastage?
And, when bitcoiners tell you that relying on a centralised source, or even a quorum of sources, is completely unacceptable, why then are the same people happy to use smart contracts where the use of centralised oracles is apparently both acceptable and commonplace?
It wouldn't. If X$ worth of bitcoin is handed out every block, then miners competing for that prize are willing to collectively spend up to X$ per block on average.
If they could only mine for part of the time, then they'd simply acquire more hardware and mine at a higher hashrate during the shorter time.
My example is also missing the obvious next step though - once you are using a trusted source of data (or even a wide selection of trusted sources), the whole blockchain idea becomes pointless, you don't need to do any mining at all, you can let the trusted sources run a distributed database...
It's reasonably straightforward to build systems under such constraints; e.g. see https://en.wikipedia.org/wiki/Relativistic_programming
This just isn’t true. Only a vanishingly small fraction of these people has ever touched smart contracts.
https://solana.com/solana-whitepaper.pdf
The core insight, I think, is this:
> Proof of History is a sequence of computation that can provide a way to cryptographically verify passage of time between two events. It uses a cryp- tographically secure function written so that output cannot be predicted from the input, and must be completely executed to generate the output. The function is run in a sequence on a single core, its previous output as the current input, periodically recording the current output, and how many times its been called. The output can then be re-computed and verified by external computers in parallel by checking each sequence segment on a separate core. Data can be timestamped into this sequence by appending the data (or a hash of some data) into the state of the function. The recording of the state, index and data as it was appended into the sequences provides a timestamp that can guarantee that the data was created sometime before the next hash was generated in the sequence. This design also supports horizontal scaling as multiple generators can synchronize amongst each other by mixing their state into each others sequences. Horizontal scaling is discussed in depth in Section 4.4
I think you're largely describing two separate camps within bitcoin hodlers. Some are 'gold-bug' types that value security and individual liberty above all else, and so are very conservative in their attitude towards Bitcoin development. Others are 'cyberpunk' types that value technological capability and functionality, and are much more liberal and exploratory in what they'd like to see Bitcoin become.
When you say "same people", I think they are rare, and this statement makes a bit of a false lack-of-dichotomy.
There are decentralised oracle networks like Chainlink which secure $10s of billions of dollars locked in smart contracts
1. Bitcoin is environmentally damaging. It produces 37 megatons of CO2 per year and consumes 78 terawatt-hours of electricity annually. Much of that electric consumption is powered by coal. Not all energy consumption or CO2 output is bad, but value should be provided commensurately to society for the damage incurred. And yet:
2. It is a terrible currency. Promoters claimed we could pay for things with Bitcoin, that it'd replace fiat currency. But the design of Bitcoin in particular makes it an awful currency. To prevent deflation, a currency should be able to increase its supply to maintain reasonably constant velocity as demand increases for it as a medium of exchange. With its limited number of coins, Bitcoin cannot increase supply to maintain velocity: its only solution is to fractionalize, a form of deflation. And deflation is what we get. Massively: everything you own, and all your income, constantly becomes worth less expressed in Bitcoin, day after day.
3. It's a terrible currency, part two: currencies should have very low transaction costs. Bitcoin transaction costs exceed $20. The response to this is to recentralize it in the form of services that cheaply transact Bitcoin rights management through traditional databases. Eliminating the very value proposition of Bitcoin.
4. After having given up on defending it as a currency, the next claim is that it's a "store of value." But stores of value should have some degree of consistency of value: volatility is not a virtue. Bitcoin supporters are right that fiat currency, to the degree it is exposed to inflation, is at risk of not being the best store of value, which is why we don't normally keep huge amounts of resources piled up as cash. But Bitcoin is an awful store of value because it has no fundamental utility that moderates its price swings. Normal assets - real estate, bonds, gold - have some sort of fundamental utility or cash flow that helps to moderate price action over time. The asset must have some sort of use first, then it can become a good store of value. Because of the above flaws, Bitcoin has no good use, which thusly makes it a poor store of value.
None of this is a fundamental problem of crypto, just Bitcoin. Crypto could be very useful! But with many millionaires minted from a lucky speculation and their entire ego reliant on deceiving themselves that their speculation was clairvoyance, critiques of Bitcoin are invariably met with a flea market of intellectually mangy defenses that ultimately boil down to saying "well, look at its price!"
Bitcoin is "money" and not a "currency." Bitcoin works very wonderfully as money.
Bitcoin is not very wasteful in energy, contrary to the pushed narrative by those that want everyone to believe this is truth. Bitcoin uses a tiny fraction, currently around 7-9% of the electricity that the global banking system currently uses. Bitcoin uses a very large portion of renewable energy sources, and will continue to balance it's energy use towards efficiency and optimizations.
Your part 2/3 etc, it's not a currency. Bitcoin is pure money. We also do not really ever use gold for currency. It is money. Bitcoin is a better money than gold. Once you stop drumming on the wrong path, you'll more easily understand the differences and stop banging your head about how it's a bad currency. It's not a great currency, while it is the very best form of money.
Your whole bit about meandering into defending it's value as currency or store of value, is just highlighting your total misunderstanding of the value of gold, or the new digital version of gold as money. Money IS a store of value.
Lastly, Bitcoin really has no fundamental problems. Nobody that knows about bitcoin gives a flying fuck about the price.
But it's cute. You like Bitcoin. You're a good cheerleader.
It's like that with Bitcoin fanatics.
"Money" and "currency" do have definitions built up over time by economists and financiers over the past centuries. They are not the same as is used, apparently, in the Bitcoin-Disney fantasy park.
Conventionally - and by conventionally, I mean as it is used by all economists and financiers for centuries - currency is a subset of money. A currency is the dollar, the Euro, the yuan. It doesn't have to be fiat, but today usually is. Money is any type of highly liquid asset typically used for the payment of debts, which includes currencies but can include short term bank notes as well. Although there have been times in history where gold was used as money, it is generally not used as money now, although like most assets it can be converted into money. Bitcoin can be money too, but it's a crappy money, for the reasons I described above. Generally, economists don't spend a lot of time splitting hairs about money and currency, because they're very similar concepts.
"Money" is not a synonym for "store of value." You will not find that in any economic textbook, or even Wikipedia for that matter.
Even if you wanted to use the fantasy park definition of money as anything with a store of value, you chose not to even defend Bitcoin as a store of value. Possibly because it's a terrible store of value.
Again: this is just Bitcoin. Crypto can be designed better. The fact that Bitcoin fanatics obsess over Bitcoin in particular is just proof that they're talking their book.
Furthermore, there are not "blockchains," there is one blockchain, and then there are a thousand or more scams trying ride Bitcoin's shoulders. They are entirely pointless systems that are not made to solve anything, they don't solve anything, and they were not made by mathematicians or cryptographers.
Bitcoin can be thought of as a clock, but the unit that is being transfered can't be thought as time because for it to be mappable to time, you need a linear function and Bitcoin's emission is exponential because of the halvings.
[1] https://medium.com/amberdata/why-the-bitcoin-supply-will-nev...
P.S. I prefer thinking of a blockchain as a "drunk" clock, because of the variance that comes with the finding of a valid PoW. It might sway a bit left and right, but it mostly goes in the straight line in the end.
Doesn't the consistent emission of Grin depend upon the number of users and transactions also rising at the same consistent rate? Can we really count on that like we can count on the ticking of time?
Compared with gold, yes you can estimate when new gold is unearthed, but at the same time, there is a theoretical limit to the total amount of gold in the ground, right?
The effect of adding one coin to a pool of coins, on a steady schedule, results in inflation along a logarithmic curve. Inflation is about how much money is created relative to how much exists, so the second minute of Grin is 100% inflation, the third minute is 66%, and so on.
Also, people lose their cybercoins. It might average out that Grin hits a steady state, or even deflates a bit, depending on how frequently people or corporations lose their keys, die without heirs, send to a nonexistent address, and so on.
But even without this, the mining reward remains consistent even as overall inflation becomes negligible. Inflation never stops, but it does hit a point where it may as well have.
Bitcoin, by contrast, is guaranteed to be deflationary, and in fact the property that everyone holding BTC gets a permanent bump in asset value every time a bit of the ledger is lost strikes me as... moderately hazardous to the health of those who hold large allocations of the ledger.
I don't think this has much bearing on the article though, just wanted to tip the hat to another Grin respecter.
Sheer wasted electricity.
PS let me rephrase my point: you write "I have ahem lost more than enough time on articles about Bitcoin, and its tiresome wide-eyed fanatics. The comments are bad enough." implying that you have decided for yourself that you are not wanting to spend any more time on adding meaningful things to this conversation.
Who do you think is interested in this information? Why on earth would you think it's a useful thing to share (on top of that with that negative attitude that makes it painful for a normal person to read)? If you don't want to participate, just don't.
https://news.ycombinator.com/item?id=26316375
https://news.ycombinator.com/item?id=26316392
See the replies. There is nothing more to add to this deeply dull line of thinking.
An analogy for you: like working with an Evangelical Christian who always assumes that your annoyance at their pestering _can only be jealousy_ that Jebus won't let you into heaven.
"Mining wastes electricity" is a trite talking point we will see in every discussion.
It was founded by ETH co-founder Charles, who formed an academia network of CS PhD researchers to deal with 3rd gen blockchain problems and solutions.
It is 3rd gen blockchain built to handle the problems of ethereum and other blockchains that came prior.
https://docs.cardano.org/en/latest/explore-cardano/relevant-...
Casper the Friendly Finality Gadget: https://arxiv.org/abs/1710.09437
Combining GHOST and Casper: https://arxiv.org/abs/2003.03052
A very simple summary is that it's a fairly traditional consensus protocol, in which if anyone breaks the rules it's possible to prove who did it and penalize them by burning their stake. It achieves scale by using aggregated signatures.
Bitcoin supporters will never sell, thus there is no bottoming out. It's actually just money, you're likely missing something.
Well done, Mr. Satoshi.
Needing new buyers for price to increase is not the definition of a Ponzi scheme. Because that is true for any speculative asset due to the price setting mechanism. Your argument entails that the price of Bitcoin is highly inflated over its fundamental value, i.e. that it is a speculative bubble. Speculative bubbles are very different from Ponzi schemes. A Ponzi scheme has the following definition according to the SEC: >“A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves."
Ponzi schemes require a central fraudster to pass on money directly from old to new investors with the underlying asset obfuscatedly held on promise by the fraudster.
With cryptocurrency the buyer has control of the commodity, you actually have control of the crypto, there is no promise of a consistent return with little risk, there is no central entity defrauding targets with promises that hold the asset in reserve passing on money directly from new to old investors.
What we do have is a speculative bubble which will no doubt be devastating for new investors when it collapses. But the definition of a Ponzi scheme is not met.
It is also completely wrong. A Ponzi requires a central actor (like Charles Ponzi) to actively pay profits to earlier investors with funds from more recent investors.
If you understood that you would understand it is not a Ponzi. I think you think you're trying to say "Pyramid scheme," which it also is not. It's hardly even a "scheme."
https://en.wikipedia.org/wiki/Ponzi_scheme
I'll be laughing at your comment in 5 years time once a single Bitcoin will be valued above $1M USD while your fiat currency savings will have lost at least 50% of its current purchase power.
Screenshot this.
—Jorge Luis Borges, “The Zahir”
https://longreads.com/2016/06/14/borges-and-money/
Comparing it to a bank with fiat a bank usually ensures the consistency of transactions so miners perform this action (and also developers of bitcoin if there are security holes) and your wallet is an account and bitcoin have a transaction cost which is like using a debit card associated with an account.
Graeber explains how money was created by states to enforce its authority and basically coerce people into participation. The anonymity of monetary debt and the fact that the system is controlled by the "powers that be" make it kind of the opposite of altruism.
PoS solves the problem of mining and wasted energy.
Cardano's Ouroboros is a provable and secure Proof-of-Stake blockchain protocol.
https://docs.cardano.org/en/latest/explore-cardano/relevant-...
For a value of "solves" that doesn't actually include anyone solving anything YET. Maybe in 18 months!
Bitcoin is old, secure, proven, and most importantly _simple_.
Of course what you sacrifice with Proof of Stake is sovereignty. A random person cannot participate in the network unless they have X amount of existing resources. So that's the trade-off as I understand it. Depends on where your values align. No doubt that existing financial institutions would prefer to be core partners with a performant PoS chain.
That's not as true as I would have thought. Surprisingly, a single person can have a profitable mining setup on Bitcoin today. It might only be $10 USD per day profit, but it's something. To me, that is an achievement.
However, in practice, it seems that it almost works the other way around.
To mine on BTC, you cannot enter the game with 10$ to your name. You can't buy a mining rig, it is way too wasteful to mine on your existing CPU, etc.
However if we look for example at staking in Ethereum, there are decentralized (no trust required) pools that allow you to stake however little amount of ETH. The chain itself will require at least 32ETH to run a single meaningful staking contract, but through pooling this is directly practically accessible to anyone with even small amount of ETH.
Just making money, yes you can pool together. And that's a great feature of smart contract networks. But we are also seeing smart contracts being brought into Bitcoin that allows the same things. I just think sovereignty and making money shouldn't be conflated.
bizarre.
What do you see in Cardano that makes it a poor candidate for a future blockchain? Governance? Functionality? Algorithms? Investment?
but more meaningful opposition would be in why use a DPoS network now that we can have PoS networks without the delegation? if you value decentralisation and think it has a future why would you go for a DPoS network that can so far just send tokens, there are better dpos networks like cosmos or polkadot, and ethereum is moving to pos. What is cardano actually (still attempting) to solve that hasnt already been solved by polkadot/cosmos?
Why use haskell as the contract language? do you think in the limited pool of blockchain developers there are many people are wanting to write haskell? and that they are going to port all the existing tokens/defi/contracts made over the past few years to a haskell+utxo model? who is expected to build on this. in 15 years of dev work ive met a handful of haskell devs, they are all in academia and dont make production software.
And alongside that, and why i refer to it being pumped, is that it is getting so much publicity but barely being used. i just looked at the block explorer and in the past ten blocks three are empty and the rest have a top of 10 transactions being processed. Where are the supposed network effects driving it? shouldnt the blockspace be in demand? especially with the recent price surge, if the price is going up but it has empty blocks surely that is a bad sign?
Don't worry, HN comment sections will be filled with indignant nocoiners for years to come.
Because it doesn't seem to be going away faster than the newer generations. There is a real chance that if cryptocurrency ends up being a thing forever that BTC is the winner. And that is an environmental disaster until we get to 100% clean energy worldwide.
The way the scaling operates, as it goes along, even if you had FREE energy piped from a hyperspatial link in the heart of the Sun… eventually the ASIC farms themselves will begin to cook the planet.
It doesn't stay alive and profitable unless it keeps burning energy MORE. The fact that the energy's going to come from the dirtiest and most dangerous (cheapest) possible fuels, is certainly a problem and will continue to be one for as long as such fuels exist, but in the literal absence of fuel and cost of fuel, the exponential-growth thing just switches to the computers turning (now free and infinite) energy into calculation.
There is always a bigger server farm, because such a thing costs money, and those with money are the ones who can and will make more of it. With cryptocurrency, that's just literal, and their profitability is always a perfect and direct match with how hard they can cheat or abuse any possible rule there to constrain them. The end result, perfectly untraceable and fungible, as long as the system is allowed to continue.
Disaster will always be more profitable, in cryptocurrency-land. I mean, I suppose you could play nice and barely make any money…
Most people want security in their assets, which is why a majority of folks read articles about bitcoin but never touch one.
All of these articles are great examples of creative writing. I do kind of enjoy them.
It's being widely adopted in countries with inflating currencies: Nigeria, Vietnma, and Argentina made it to #3 today (this link is slightly old). https://www.statista.com/chart/18345/crypto-currency-adoptio...
Bitcoin is essentially a proxy for another currency. Mostly the USD. These people need a way to protect their assets from what their own governments are doing to the value of their native currencies.
They cannot buy securities or foreign currencies for various reasons.
Bitcoin gives them a way. A way to convert their native currencies into USD, a stronger currency.
So while it's a good use-case for Bitcoin, it's not exactly a situation that's applicable to the world at large.
Yes, but this is only temporarily. It's like refactoring systems. You create a new system and a proxy and then have the old system communicate with the new one via the proxy (or vice versa). Eventually, the old system becomes obsolete, so you kill it and get rid of the proxy.
In your example, Bitcoin would obviously be the "old system" if everyone wanted to use it for moving money around, because there are plenty of more advanced alternatives that work far better.
So why is Bitcoin so popular? Because it's a speculative investment. A new asset class divorced from fundamentals, making it impossible to say when the value is too high. That's why people like it.
Most people use Bitcoin via exchanges, where they keep the coins. The average crypto user from Nigeria has zero interest in paying $10+ transaction fees every time they need to do anything with their money.
At this point, it doesn't matter if they own BTC or ETH or DOGE or whatever. They just want whatever allows them to move money around. The exchanges could simply keep balances in a database and reconcile them amongst each other via contracts, and it wouldn't make any difference as far as the end users are concerned (There are examples of this happening between exchanges).
Maybe it's a "less terrible" solution in poor countries with inflation challenges, but I don't see that as a strong proposition for the utility of bitcoin. Cigarettes are used as a medium of exchange in prison. That doesn't serve as a strong argument for using cigarettes as currency.
There are long phases in BTC's history where 100% of holders are in very handsome profits. And that's the problem?
If you're just making long speculative investments in btc and volatility is skewed to the upside, well sure that's fine but you're not using bitcoin as a medium of exchange, you're investing in it as a security.
Do we? Or have we lived in a world where asset prices were suppressed due to artificial intervention by central banks.
Interest rate setting is a market intervention. If left to its own devices the market rate would be driven down towards zero.
How do you figure?
Since there are always more reserves than required, and no alternative source of interest, the inter bank rate would be driven to zero by supply and demand. That's then the 'market rate'.
You can't hold reserves so the bank can charge you extra for borrowing money. Only banks can get zero.
How do you think central bank rates bind? It gives banks an alternative source of interest other than lending them to each other.
I interpret the phrase 'left to their own devices' to mean that there is no central bank and therefore reserves are as a concept are null and void, which then also nullify the concept of a federal funds rate, which would upend the concept of the federal funds rate being 'the market rate' in the first place.
I'll take your word for it about the mechanics of what happens to inter-bank rates under different reserve mechanisms, perhaps they would be driven to zero for the reasons you outlined.
However I'm unclear on what the macroeconomic ramifications would be of letting a small group of banks dictate the federal funds rate; I believe the purpose of this system is to achieve a congressional directive regarding price stability and labor utilization.
Banks can't get rid of reserves at the central bank in aggregate. They can only get rid of them to other banks. So there is no need for the central bank to pay them.
You can't hold reserves so the bank can charge you for borrowing money.
Since there are more reserves than required, and no alternative source of interest, the inter bank rate would be driven to zero.
How do you think central bank rates bind? It gives banks an alternative source of interest other than lending them to each other.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
Bank reserves aren't an important factor in the financial systems, they're there to ensure customers have access to money if they want to withdraw it and to allow banks to move money between each other. More importantly banks don't lend money out of their reserves (so-called "fractional reserve banking"), they simply add the loan amount to the customer's account and also to their own liabilities i.e. they "create" money.
Out of all cryptocurrencies that exist today, Bitcoin is probably the worst one for buying drugs online. It's pseudo-anonymous at best (compared to Zcash that is actually anonymous), slower than many others and if government agencies have tracking tools in the cryptocurrency space, Bitcoin is probably the most popular target for those tools.
Monero/XMR is the only 100% private, fungible cryptocurrency. All transactions enforced private by default, with no option to send an un-private transaction.
hint: posts mostly consist of "<famous guy> tweeted about <my favourite shitcoin>, this is good for the price of <my favourite shitcoin>".
The baseless negative comments with no interaction with the article content confirms for me that Bitcoin is on to something. Sour grapes syndrome is a result of pride, I think.
In comparison to what?
What do we get in return? Many consider the benefits to be worth it.
Fantastic question. I've been waiting 10 years for a convincing answer; still waiting.
Can you please just answer this - do you suppose they all halt what they are doing and wait for an undeterminate amount of time for you to also get it, before they can go on with their businesses and lives?
It is such a weird sentiment to me because it would never occur to me to devalue the value others get out of things I don't understand. I hate bonds, I don't "get" why anyone would want to buy bonds, people have tried to explain it to me. I decided that I will never buy a bond in my life because they are just the dumbest form of investment. I can hold that sentiment whilst saying "I don't get why they buy them but clearly there is a lot of value from the vehicle and it is clearly a valid form". I don't see why I should need to understand an monetary vehicle or like an investment vehicle to understand that some people do, and those people have a valid opinion.
Well, where are we now? What significant advancements have occurred since 2013 as a result of Bitcoin (other than the catastrophic climate impact)? What new technologies are powered by crypto other than niche, nerdy shit which no-one outside of a handful of enthusiasts cares about? Bitcoin is now 12 years old - if Bitcoin is the next World Wide Web, then who is the Google of crypto? Who is the Amazon? Hell, does Bitcoin even have a Lycos or a Yahoo?
And yes, I acknowledge that millions of people own Bitcoin and are trading it. But what reason is there to believe in Bitcoin, other than the fact that other people believe it? Yes, I know that you could say the same of fiat currency: dollars only have value because we believe they do. But the difference is that I use fiat currency every day to accomplish real things that have an enormous material impact on my life. The only thing I’ve ever used Bitcoin for is to buy drugs - what else am I ever going to do with it, except hope that the value increases so I can sell it to another speculator?
Maybe the crypto enthusiasts are laughing at me for asking these rhetorical questions as if there isn’t an obvious answer - in which case, let me know! I don’t want to miss out on the crypto wave if it really is as big as people keep telling me. But I’ve read books about Bitcoin, delved into crypto-related code, and spent many hours of my life studying blockchain technology and trying to understand what all the fuss is about. That was a couple of years ago, and I got bored and gave up. I’ve been telling myself to take another look given the recent price surge, but I just can’t motivate myself. What am I missing? Why do people act as if this is all so obvious?
For any task (beyond speculation and illegal activities) that bitcoin is used for, there exists other, usually much better services that can be used instead.
The claimed benefits of BTC are (1) to remove government control of money, and (2) to eliminate the need for trust, but (1) ignores why we have chosen to give governments control of money in the first place when gold still exists (and can be traded electronically), while (2) requires you to ignore the other half of the transaction where you buy something with the money rather than just putting it in someone else’s account — reports of being ripped off by a vendor goes back to Akkadian cuneiform, and things like chargebacks and courts are there to deal with this, putting rules on what was once anonymous shiny rock that anyone could mine in a literal rather than metaphorical sense.
Third party escrow services, the better business bureau, the police... all of these can (and should in many cases) exist with bitcoin. It doesn't have to be either/or.
It’s a catch-22: to be useful, it can’t be useful.
also the military/police/law/government defend you from being killed for your bitcoin.
That's an understatement. There are two restaurants within 100 miles of my home that accept BTC, let alone use LN.
If LN ever sees anything more than toy usage, it will fall over instantly, and become unusable.
1. The gold mining industry has nothing to do with bitcoin.
2. The gold mining industry has nothing to do with money.
3. The gold mining industry does not use anywhere near 0.1% of the entire energy production of the planet.
4. Just throwing the army in there for some reason, huh.
5. The lightning network does not "process an unlimited number of transactions".
6. The Lightning network does not scale.
7. Nobody knows how to make the Lightning network scale.
8. If the Lightning network worked, which it doesn't, it doesn't need to run on top of Bitcoin, so Bitcoin still does not need to burn 0.1% of the world's energy.
Because it’s a necessary to ensure you can buy and sell things when you want to.
Yeah, right, it worked so well for alcohol... It DOES (/s) work so well for drugs in the US right now... And hey imagine whether it's easier or harder to ban something that doesn't take any physical space in your suitcase and can be transacted with only internet connection.
"""and even though bans are not magic, even a half-arsed enforcement of such a ban is enough to prevent a currency becoming endemic."""
Only the US is incentivized to have USD be the world's reserve currency. Meanwhile, 7 BB people around the world prefer a denationalized reserve currency, countries will prefer to interact with each other with a less trackable currency (e.g. Iran and the current sanctions), and based on the usage of tax loopholes by every multi-national company (e.g. FB, Apple, Google) every business will prefer transacting in less trackable currency (especially with crypto-coin tumblers). This demand for a denationalized reserve currency will be supplied by some crypto-coin (maybe BTC, maybe something else). FWIW, I don't think having a "less trackable currency" is a "good thing", I'm just saying there are large organizations that benefit from it financially and therefore it will exist.
Frankly once the S&P companies purchase enough BTC (e.g. TSLA, Square, etc), a BTC 51% attack will need to be defended against by the US military to ensure national stability. If BTC (or any crypto-coin) can hit "too big to fail" in the US, the rest of the world's militaries will all build a defense strategy around BTC mining. As as consequence, cheaper energy will also be an investment into national security.
There are still more problems with BTC specifically, like "slow transactions" but as may here have said, we can either use a geographically sharded blockchain (e.g. BTC-California, BTC-USD, BTC-CAD, BTC-RUP), where each shard allows fast transactions, and slow reconciliation, or we will just leverage credit for fast transactions like we do today, with slow reconciliation between banks like we have today. I don't see "centralization" as a problem, because having bank accounts and credit are very useful as an individual (as individuals will likely only transact with credit cards like we do today).
Will BTC become "too big to fail" in the US? Unclear. Another crypto might get there first. However, there is no scenario where the world's reserve currency continues to be tied to a single nation.
The US is merely the largest reserve currency and has been trying to reduce that role for well over a decade now - being a reserve currency merely means foreign crises lead to dollar flight which has knock-on effects on US trade. There's no real upside - demand for dollars is based on the stabiliy and size of the US economy, nothing more. EUR, JPY and GBP also operate as reserve currencies due to the strengths of their economies.
https://www.ussc.edu.au/analysis/the-reserve-currency-myth-t...
https://www.brookings.edu/blog/ben-bernanke/2016/01/07/the-d...
What need there is for an international reserve currency is filled by the IMF's SDR, an asset whose value is based on basket of USD, EUR, RMB, GBP and JPY:
https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/14...
If that is the case, then BTC certainly isn't going to end the US military.
Increasingly, mining operations have to make special arrangements with entire power grids to suck up their energy and basically just burn it in arbitrary calculation. The scale at which this operates, and the increase over time, are both what makes up a lot of the problem, and what makes it impossible to hide.
If you'd prefer a world where people value bitcoin BECAUSE due to its unpopularity and externalities, governments resort to drone striking such operations when discovered, all I can say is: well, that solves the energy wastage issue, as blown-up ASIC farms aren't good at burning energy anymore. Maybe it solves the constant devaluation against energy cost issue, too! But I think you're missing the point and looking at only the end product of the industry.
In order for this scenario to become a reality, many governments would have to collaborate to make mining infeasible. But they would be incentivized to not collaborate so they can instead tax their miners and get the profits for themselves.
If you’ll excuse my admittedly also-naïve wargaming of their responses:
“Dear ISPs, this is the government. That stuff you do to block piracy and illegal porn? Do that for bitcoin.”
“Dear Banks, this is the government. Purchase of bitcoin is now a federal offence. Tell us if anyone tries to exchange them for money.”
“Dear The Power Company, this is a government order. Turn off power to these properties who are engaged in illegal Bitcoin mining.”
“Dear everyone, this is the government. Your taxes can only be paid in dollars, not in bitcoin.”
(Not that I would say such things will never happen, only that I expect America to become irrelevant on the world stage before it happens; and even in the most extreme USSR-mimicking scenario that is not something I expect before 2041).
Another scenario is if it grows slowly amongst the countries that have unstable currencies. Slowly it takes over the USD as the world currency. At a certain point, the US would have to allow it to participate in that economy.
Such nations collectively switching to a different currency like the Euro or the Yuan is way more plausible than switching to Bitcoin; and not only do none of the USA, the Eurozone, nor China have economic policies compatible with giving up direct control of inflation, the usefulness of a shared single currency isn’t enough to outweigh the political costs for the UK to use the Euro (famously), or South Korea to use the Yuan, or Canada to use USD.
Money in the scale of governments isn’t like money on the scale of individuals. For governments, money isn’t even like it is for the richest individuals, different as it is between the rich and normal people.
And why wouldn't a government whose citizens do not trust the government's currency, not incentivize its citizens to use a denationalized currency instead of funding potential threats?
e.g. The Venezuelan government would way rather its citizens use BTC over USD or Colombian currency, in order to ensure inflation/deflation is globally decided by neutral parties, rather than decided by a single foreign entity with potentially malicious intent.
> The Venezuelan government would way rather its citizens use BTC over USD or Colombian currency, in order to ensure inflation/deflation is globally decided by neutral parties
Why would those parties have Venezuelan interests in mind rather than their own? One of the arguments against the Eurozone (I’m not qualified to judge it on quality, but it is given as an argument) is that Northern Europe “should” have different inflation to Southern Europe to help boost the local economies. Can’t do that with a single currency, they say, and that would apply more the wider that zone spreads. A single global economy — fiat, digital, or metallurgical — would never be able to resolve it.
Yup! I agree, there will be many holdout countries. However, even the UK uses the USD as the world's reserve currency.
> Why would those parties have Venezuelan interests in mind rather than their own?
Venezuela was fucked because a handful of people are performing bad monetary policy. While the interests of each mining operation would be their own interests, in aggregate, the interests of all BTC mining is a globally averaged monetary policy. Unaffected by corruption, or stupidity (whichever you think is a more apt description of Venezuela's current monetary problem).
And what in the standard deviations of all nation’s needs?
I don't know what a globally averaged monetary policy will look like (or who it'll benefit the most), but I can say that for any population currently living with a monetary policy below the average (i.e. because of corruption or stupidity), it'll be an improvement and they will adopt a denationalized currency to get it.
No, the Venezuelan government has tried to create its own cryptocurrency called the Petro in order to have control of it.
https://www.reuters.com/article/us-cryptocurrency-venezuela-...
Legitimizing crypto currencies by creating one, without increasing trust in the government just results in more of the Venezuelan people buying a denationalized crypto.
> It’s possible that, as Jiménez suggested, Venezuela’s peer-to-peer bitcoin activity wouldn’t be where it is today without crypto-friendly initiatives from the government itself. It’s also possible that bitcoin adoption in Venezuela may be driven by the sheer rate of Venezuela’s hyperinflation, which outpaces other crisis economies. [0]
[0] https://www.coindesk.com/bitcoin-adoption-venezuela-research
Physical force is the strongest currency on Earth. Arguing it’s not is arguing millions of people die for entertainment rather than shifts of power.
If Bitcoin is the revolutionary future millions will die on that hill to make it so.
Now let's say in a few years, that inflection point happens where crypto sees an exponential rate of adoption. Every other country begins to use it, some ban it, many others adopt it. At that point, if not using crypto will put the US at a disadvantage, they have no other choice but to adopt it as well.
A semi-related example is the way many companies "disrupt" the markets e.g. Uber/Airbnb wasn't a threat to many cities, until it was. At which point, the demand for Uber/Airbnb outweighed the government's ability to do anything about it.
It's not the best example since some cities have done things about it and Uber/Airbnb, being a company, is easier to target.
With crypto, its decentralized nature makes it much more difficult to control and attempting to ban it will raise issues around free speech.
That's not to say countries won't try and succeed in getting it banned, though in the case of the US, I don't think it's as cut and dry.
You’re saying all militarized countries on Earth will come to a point where Bitcoin is prominent and they will forfeit their power over their citizens without any fight?
You’re proposing Bitcoin will bring world peace without conflict?
Also, I don't think I agree with the notion that adopting crypto would result in a country forfeiting their power over the citizens. There are plenty of ways to integrate crypto into existing governments while still maintaining control.
I'm not claiming this will happen, more of contemplating on how a global decentralized currency can take over.
As far as bringing world peace, I don't think a decentralized currency would do any such thing. It's probably one of the required steps towards it, but one of many.
Meanwhile, the USA could try to preempt this future, but only the USA is incentivized to have USD be the world's reserve currency. As such the USA would need to threaten every other country in the world to stop using BTC, but its not clear if that causes BTC adoption to drop, or the Streisand Effect to kick in.
And ofcourse, "mutually assured destruction" stops any large country from employing too large a threat against any other large country.
If we are talking about a coordinated aggressive action to cripple the economy of a superpower nation, you're basically triggering "mutually assured destruction". As such its most productive to assume that doesn't occur.
Why anyone out themselves in harm’s way like that?
Risk isn't inherently a deterrent. If the reward is perceived to be high enough, there will be a first adopter.
At this point Bitcoin and Eth have about a trillion USD of built up burned work. Is that enough to prime the pump for a POS-based world economy? I dunno. Probably?
Remember; the last time Bitcoin tried to change its mining algorithm, the democracy voted for a split. Ethereum has said they're moving from Proof of Work to Stake; I'm not surprised, given the Ethereum developers seem to abhor Work in all of its forms, including making progress on Ethereum itself, so we'll see if that actually happens in a few decades.
PoS is a theory right now, with some minor market traction, but nothing to the degree of BTC or ETH. Don't levy it as a promise which absolves the environmental sins of cryptocurrency, when its so obviously unlikely to do so. Bitcoin is the zeitgeist; its actively destroying the planet; its not moving to PoS.
They still have to migrate the rest of the network to it, but that's a relatively easy task. Once you have consensus, adding more data to reach consensus on is basically just adding a hash value to each block.
I don't think anyone seriously thinks Bitcoin will replace militaries completely.
May Satoshi save us all.
The importance of the role of the dollar as a reserve currency is also just an urban myth:
https://www.ussc.edu.au/analysis/the-reserve-currency-myth-t...
https://en.wikipedia.org/wiki/Petrodollar_recycling#Petrodol...
Most lay-persons don't understand it as a tax and therefore do not complain about it until they cannot afford things (housing, food, etc), and at which point the government distracts by bundling (hiding?) the inflation problem with the stagnant wage / income equality problem.
Eventually (every 2 decades) minimum wage in increased to catch up to inflation. Basically the inflationary tax strategy results in the US budget getting 2 decades of "extra taxes" (burdened by the lower middle class and the working classes[1]), then a reset, and then repeat.
[1] Note inflation as a tax strategy is actually a negative tax on low-interest debt holders like businesses, and home owners. It is also has a net-neutral effect on the investing class, because assets inflate proportionally. Meanwhile, credit card debt and other high-interest loans are not reduced as much (i.e. X% inflation of 19% credit card interest is a lot lower than, X% inflation of 2.5% mortgage interest).
> Say the US government issues a bond, some bank buys it, and eventually they sell it to the Federal Reserve. The US government has the same debt, and it seems to me that the only thing that has changed is that the bank now has cash where before it had a bond.
This is mischaracterizing the situation. It actually is: 1. A bank buys a newly issued bond; 2. The government spends that bond money on the private sector. 3. The Fed buys the bond by changing the values in its database (i.e. "printing money").
The best I can do to explain MMT is this:
1. The government spends as much as it wants and collects as much debt as it wants.
2. The government plays a game of chicken with the private sector (including other countries).
2.1. As long as everyone plays along, its a ponzi scheme that spirals upwards until it hits a ceiling (hyper inflation).
3. Meanwhile, until it hits the ceiling, it creates "manageable inflation" and/or deflates the rest of the world's assets.
3.1. As long as the rest of the world plays along (which it does), the extra cash funds innovation (i.e. the private sector) and improves quality of life world wide (i.e. better pharmaceuticals, cheaper computing, etc).
3.2. Meanwhile, in the US the "manageable inflation" is paid for by the poorest.
My personal thought: the world's interconnected market is so complex, that no one understands cause and effect (including the people making the rules). Currently, there is an emergent property of that complexity that the US, Japan, etc can "print infinite money" and some large group of people somewhere are left holding the bag worse-off for the US' decision, but no one really knows who this group is nor how much those people got fucked. Even the impacted individuals don't realize they are impacted because individually its a small impact, and innovation keeps improving their lives enough to not complain.
Hopefully a denationalized crypto (i.e. no ability for a single nation to print money) will help us simplify all of this to be understandable again.
[0] https://www.youtube.com/watch?v=3QYJjisPMQY
From what I can read, no one knows how it works, people just know that it works.
Without a simpler design how can I know I’m not being harmed? I think this is one question that will help drive people to adopt a denationalized currency.
FWIW, I do not own any BTC or other crypto coins.
P.S. I highly recommend you research MMT. I think you'll find that no-one (including the most experienced economists) understands the details of how the emergent property works, they only understand that it works.
Because over the last decade the US has been quietly transitioning to the MMT mental model. MMT is how we got out of the 2008 recession and also how we are funding both the pandemic stimulus packages (in 2020 and again in 2021).
The inflation we previously discussed in this thread is, in my understanding, a direct consequence of MMT.
> "Congress has been showing us — in practice if not in its rhetoric – exactly how M.M.T. works: It committed trillions of dollars this spring that in the conventional economic sense it did not ‘have.’ It didn’t raise taxes or borrow from China to come up with dollars to support our ailing economy. Instead, lawmakers simply voted to pass spending bills, which effectively ordered up trillions of dollars from the government’s bank, the Federal Reserve. In reality, that’s how all government spending is paid for." [0]
> When President Trump signed the $2 trillion CARES Act into law, the federal government sold bonds to fund the new spending, expanding the government debt. However, the largest purchaser of those bonds was the Fed. ... As a currency issuer, the federal government can create more money to buy Treasuries and pay off its debts, making an involuntary default impossible. Under the Fed’s jurisdiction, it could purchase all U.S. Treasuries tomorrow and retire the entire U.S. federal debt, something Japan has already done with nearly half of its debt. ... Is the Fed’s financing of the debt created by the CARES Act fueling inflation? Not quite. The annual U.S. inflation rate currently stands at around one percent, half of the Fed’s two percent target. In fact, over the past decade, the Fed has struggled to increase the U.S. inflation rate. There actually is not enough spending (aggregate demand) in the U.S. economy to hit the Fed’s inflation goal. [2]
> Modern Monetary Theory (MMT) is alive and well in the United States. While MMT is derided by mainstream economists, the federal government is practicing MMT. From running massive federal government deficits, to the operations of the Federal Open Market Committee (FOMC) by the Federal Reserve Bank, the United States is practicing a policy of MMT that is currently underpinning the economy of the United States. ... The U.S. Federal Reserve (Fed) began its own form of quantitative easing (QE1) on November 25, 2008 by purchasing $600 billion in agency mortgage-backed securities (MBS) and agency debt. [3]
> While MMT may seem like a purely theoretical construct, it should be recognized that many governments, including the U.S. government, are effectively already putting MMT into practice. [4]
If you're still not convinced that the US is actively applying MMT in practice thats ok, lets wait and find out more. Meanwhile, thanks for catalyzing my motivation to research all of this! :)
[0] https://www.nytimes.com/2020/06/09/opinion/us-deficit-corona...
[1] https://www.cnbc.com/2020/04/29/op-ed-pandemic-moves-modern-...
[2] https://policy-perspectives.org/2020/10/23/modern-monetary-t...
[3] https://intpolicydigest.org/the-u-s-has-embraced-modern-mone...
[4] https://www.fa-mag.com/news/america-is-on-the-road-to-mmt-58...
However, the continued liberal application of QE 1. Could hit a hyper inflation ceiling (hurting the poorest). 2. Weakens USD compared to other currencies (as we have seen through 2020. Hurting every entity that holds cash i.e. typically the poorest). 3. Reduces the ability for the US to apply QE in the future. Hurting our ability to tackle the next crisis, which will predominantly hurt the poorest.
All of this to say, a portion of the lost trust in the USD is being put into crypto to hedge for the medium term, and (for better or worse) to create a long term denationalized currency where no handful of politicians can choose to use QE rather than making good fiscal policy decisions quickly.
I'm not making a judgement about its merits, it might end up horrible.
All I'm saying is, there is a trend towards denationalized currency as a hedge against bad monetary policy. Based on this trend something like BTC will likely become the new gold standard used for slow transactions (i.e. reconciliation) between governments and large corporations.
Will it be BTC? I don't know. Will it be a good thing? I don't know.
I do know, the trend suggests a particular future, and trying to root out the motivations suggest the trend will continue.
But, if you are willing to acknowledge both Square and Tesla are run by very intelligent people, these are quotes about their motivations:
> However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere. [0]
> Square believes that cryptocurrency ... provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose. [1]
Based on my research into the motivations for BTC (or any crypto), these quotes are not unique. The majority of the root motivations seem to be 1. "to hedge against bad monetary policy" and 2. "to create a global monetary system" i.e. create a single global monetary policy.
Meanwhile, if enough S&P companies follow Square and Tesla the US government will find BTC is "too big to fail" and adopt it wholly. But I'm not convinced other S&P companies will follow. Lets see.
[0] https://twitter.com/elonmusk/status/1362600676174557186
[1] https://www.cnbc.com/2020/10/08/square-buys-50-million-in-bi...
> Why is there not a daily hackernews thread complaining about the energy consumption of the US military?
People are willing to pay a high energy cost for safety. Bitcoin doesn’t provide me any safety and it doesn’t have the strongest military in the world claiming it’s worth anything.
If you think Bitcoin will topple governments be prepared for a long future of conflict and casualties. Maybe it will be worth it but I doubt it.
So all in all it’s a massive energy waste thought experiment.
What makes you think the US wouldn’t put it’s population in front of the rest of the world in a life or death war scenario?
For instance, I have no problem paying taxes for social services. I have a major ethical problem with my tax dollars being used to fund military action. Bitcoin is not the only piece of the crypto puzzle but if I could keep my assets out of the hands of the US government, I would do it for purely ethical reasons.
What you’re proposing is that Bitcoin needs a massive shift in thought that overthrows all forms of militarized government. Possible? Maybe but highly unlikely without millions of people dying.
The new Bitcoin power would also need its own military to do this. So we’re back at square one or where we are today.
That is unless you think Bitcoin is also the answer to world peace which seems even more far fetched.
Who controls the power grid, the land, the roads, the infrastructure? How is that power enforced? Physical force.
No one gives away power without a fight. If Bitcoin is the future people will need to die to make it so.
I guess you are about 11? May be 15?
Before you were born a great power was toppled, called The Soviet Union. It happened over three years, 1989-1991. We can all see the domino effect, for sure.
The way the government forces you to make good on your tax obligations is wage garnishment: they tell your employer not to pay you but pay the government instead because you're in arrears. In general, I think you overestimate the willingness of third parties to become criminals for your sake.
What if the moon were made of cheese?
I don't see any connection between the growth of BTC and the shrinking of military budgets or the reduction of warfare.
In analogy, it is same reasons why we lock our doors and don't leave keys in parked car.
Do you seriously assume that some nations and some organization, do not, actively seek, how to take things that do not belong to them ?
It's not.
Or maybe it comes from people who have read an Econo101 textbook and who have spent a lot of time trying to explain a crowd of Bitcoin enthusiasts why their reasoning is wrong but no one has been listening to them so far so they are bored.
Back in the time I used to spend my days on a forum about Economics. Every other week there was a random guy who signed up just to explain us his grand new theory about money. It seems that tech has enabled a grand new theory about money to be implemented.
That does not make it less true that money does not have magical properties and bitcoin will not create a new world order.
Is anyone really claiming that? The OP's post doesn't seem to be in this spirit anyway. It's more like "Bitcoin has true usefulness, it will keep some meaningful value for a long time, enable other use cases that didn't even exist before.". Nobody is saying that it is going to replace all other forms of money.
To be a money it somehow has to. What is the value of a dollar ? The set of goods you can buy with a dollar. As long as the value of a bitcoin is expressed in another currency that is weird to call it a money.
You are referring to unit of account.
https://nakamotoinstitute.org/mempool/bitcoin-as-a-store-of-...
I'm not an economist, but nothing has convinced me yet that bitcoin is not the best form of money.
Are those things that can change over time? Certainly - but it hasn't happened yet.
Transaction cost is pretty low in multiple views:
- You can globally settle billions of dollars worth of bitcoin for less than 10$ [0]
- FIAT Settlements between banks is a complicated and non-auditable process, which is internationally speaking also very slow
- You can build layers on top of bitcoin, i.e. the Lightning Network or liquid, which reduces transaction costs and time by a lot (sub cent range in the lightning network)
Energy usage is not tied to transaction throughput. It is vital to be very high in the future, as it secures this global and auditable settlement network. Mining is a very competitive business. Renewable and unused energy IS the cheapest energy available (without govt. subsidies), thus the most competitive miners will use them. Mining also "subsidizes" research in cheap energy, as it gives you a competitive advantage.
[0] https://twitter.com/CoreFeeHelper/status/1366787351985287168
(1) Most people don't settle on large volumes (thats typically banks/states/institutionals) so small volumes have a high cost percentage making it not a good daily driver. The fact that there is any transaction cost makes it challenging to work with as a daily money vehicle for consumers.
(2) It requires energy to exist and keep a ledger, it also requires energy to mine. Your comment on renewable energy isn't accurate sadly and unused energy works only if you can get access to it which isn't universally available. In some jurisdictions renewable energy beats on price but this is largely on huge projects that are bid into utility grids (At least in North America). It will get there but still needs more time.
I don't see how mining subsidizes research in cheap energy.
Understand they have been debated ad nasueum and the reason is that they haven't really passed muster for the use case we are talking about.
Don't equate my arguments as saying bitcoin is bad - it doesn't have a good universal use case for money and it does have negative environmental benefits associated with it.
(2) It requires real world resources to be spend and uses the most globally available resource, energy. I see it as a feature not a bug.
Renewable energy is the cheapest though[0] and thus the one that competitive miners need to use. Non-competitive miners get driven out very fast thanks to the difficulty adjustment.
Any percentage of optimization you can get in your energy production you can use to outperform other miners, thus get more of the block subsidy and drive out inefficient miners.
Bitcoin mining de-risks investments in energy producing facilities. You always have a buyer for your energy, which is a problem especially in renewables. [1]
[0] https://en.wikipedia.org/wiki/Cost_of_electricity_by_source [1] https://www.sciencedirect.com/science/article/abs/pii/S13640...
Such a horrific, unproductive use of energy is definitely a bug from a scientific perspective, maybe not for a financier.
It is very productive for a large population of the world.[0]
Not everyone gets paid in a stable currency or has easy access to it.
[0] https://www.youtube.com/watch?v=xLYYh4aPXAM
> Not everyone gets paid in a stable currency or has easy access to it.
Bitcoin doesn't appear to solve this issue at all. How is private manipulation of Bitcoin any different than an authoritarian manipulating the local currency? If I was in a country with unstable currency, I'd want Euro or US Dollars, not bitcoin.
As I and the video mentioned Euro and USD is not easily accessible in those countries, Bitcoin doesn't need permission though.
What you refer to as private manipulation is called supply and demand, maybe try reading Econo101 :)
Does Econ 101 cover asset bubbles or financial manipulation? It's been so long, that I can't remember, but I promise you that prices can reflect things other than supply and demand once you manage to get past that first class.
> Bitcoin doesn't need permission though
No authoritarian would EVER cut off or filter the internet in their country. Nope, has never happened, will never happen.
You're right, Myanmar just did that! Scary to think of it. Fortunately Bitcoin works over more communication protocols, but no internet is certainly not in any way easily defendable today. But i still think that physical and banked usd, euros and gold are more easily seizable by a government. A no internet scenario is probably economic suicide by any government.
I really don't get what you mean by financial manipulation in regards to bitcoin.
Bitcoin entered a speculative bubble in the middle of 2017.
The supply got less, while the demand didn't decrease. The intrinsic value increased because of the network and lindy effect, which is why institutional investors jumped in. Bitcoin entered a speculative bubble the moment the first block was created.
I would say we just don't know the price of bitcoin yet, hence the heavy volatility.
What would you price it at? Are you shorting it?
Media hype typically drives demand, not supply. Supply in bitcoin is a very fundamental concept and controversial topic, which is a function of proof of work, difficulty adjustment and block subsidy.
What exactly in supply and demand is manipulation? You can't just shout manipulation and argue with "media hype", which historically for bitcoin is very mixed[0] and affects any asset class?
[0]https://99bitcoins.com/bitcoin-obituaries/
I would not bet that the government is incapable of cutting off access to bitcoin.
Contrary to the Bitcoin crow I don't spend my days thinking about it so my argument may seem weak. You mention bitcoin being 'the best form of money'. Assuming there is a hierarchy of forms of money, from what I understand the main advantage of Bitcoin is that Government can not manipulate its quantity. I wonder if a world where there is no possibility for governments to use monetary policy in times of trouble to stabilize the economy is desirable.
The economy is very complicated. There are no models that can predict the output of changing its parameters. It wasn't possible before to have the properties in money that we have with bitcoin (a gold standard was easily removable by a powerful government). The current central banking system is an experiment as much as anything before it and anything that will follow.
I see it like this. I want my economic output to be measured in something that is:
- salabale over time (1 btc is always 1/21 million of the monetary base)
- salabale over space (i want to work remote)
- understandable and auditable (the bitcoin concept can be understood by everyone, the code is auditable by mid-level developers)
Why is that good? Why should I, if I have 1 bitcoin, always have ownership of a fixed proportion of the entire societal monetary base?
This seems like a great deal for someone who has a bitcoin, and a terrible situation for new workers and the economy as a whole. If the economy expands, your fixed proportion of the monetary base sees you profit off the backs of others for nothing more than sitting on currency. Not investing, not even speculating, just sitting on it.
If you don't invest your bitcoin in productive assets you will be behind peers who do that, however they carry a risk.
Today you carry risk if you don't invest your savings. However with low-income you can't, as you need emergency funds.
As an employee, in a growing economy denominated in bitcoin, you would see your pay drop frequently as the money supply gets stretched. There's no reason at all to think BTC-denominated salaries would be able to stay constant as the value of the money rises.
> I also would like to be able to save without having to put my economic output at risk.
That's not the same thing, a fixed proportion of the money supply does not guarantee that, nor is it a necessary precondition.
Further, this is not in the interest of wider society - work today should be valued more than work yesterday. If you want to grow your money, you make it work.
This is just a rehash of the problems with the gold standard now. But worse.
Assuming the world productivity is denominated in 21 million bitcoin, if world productivity grows by 3% per year, my salary of 1 bitcoin gets more purchasing power. This is where you get a lever with your employer, he needs you to earn less, you don't have to negotiate to earn more (same applies to minimum wage, it needs to be adjusted upwards in a inflationary monetary system)
Every money is inherently more valuable yesterday than today, as you can divest it. I would argue that it is very much in the interest of the wider society to have their savings not inflated.
The best way to make your money work will always be to invest it in productivity, be it in educating yourself or investing it in companies. This investments need to be a lot more smarter and more sustainable than those of today, as the base money is not worth less every year.
I think wasteful spending is a property of an inflationary money, where smart spending would be a required property in a non-inflationary money.
Like I said, most of the rest is just a rehash of gold standard stuff.
Exactly, however bitcoin is infinitely better money than gold and makes the "gold standard" viable. Fortunately the gold standard has a lot of proponents globally, some of whom started embracing bitcoin.
I just hope that the experiment bitcoin keeps on going and I'm guessing we will see some form of resolution, maybe even in this decade. There is a lot to learn still.
Do you mind giving me some of your arguments why it's terrible?
[0] https://wtfhappenedin1971.com/
There's plenty of literature out there about the end of gold standards in various countries. The upshot of it is that economies get warped by constrained currency supply and those who already have tend to get more, over those who produce or invest.
More specifically, Austrian economics is overtly and proudly ideological rather than empirical; it is about advancing an agenda not describing reality.
It's worth taking seriously, but as a particular group’s body of theology and religious propaganda, not as science.
Your last sentence was decent; the rest of your post was... not very useful.
True, it's not so much an argument as a fact. As the other poster says, it's basically a set of idealogical positions.
> implying "go do your own research"
You're right, I shouldn't have left that to implication.
I'm not trying to win a debate here, nor am I interested in debating the merits of a system that I don't think has any.
but you are going to pay more for the same goods and services
if your bitcoin is 3% more valuable, when you use it to buy milk it's going to cost you 3% more
the game is working only because today if bitcoins increase their value you can exchange them for more fiat money
in a bitcoin economy one bitcoin is worth exactly one bitcoin, forever, whatever that buys
You seem to have it backwards, this is where the Econo101 book from the parent comment might help ;) /s
Inflation drives down the purchasing power, hence why milk gets more expensive every year, even though we get much more efficient at producing it. Remove inflation and 1 bitcoin buys you a liter today and 1.03 litres next year.
and so do salaries, they are a cost to someone ...
as long as your purchasing power stays the same salaries will go down as well.
it's simply natural.
you can't really believe that billions of people will get rich by sitting on the salary of a single year
BTW that liter of milk will generate 3% more profit to the seller. there is no incentive to lower the prices if hoarding is so rewarding
You won't get more rich by sitting on your salary, but you will also not get more poor like you do today.
If the milk seller doesn't lower his prices a competitor will do that, as he is able to do that with the bigger margin the better productivity brought.
That's a political issue, it has nothing to do with how currencies work
If the milk seller is going to lower the prices to beat competitors, workers will compete on salaries as well
nothing different from what we have now, the only difference is that rich people could amass fortunes much more easily than today
they'll just need to keep their money in the bank (i.e. their gold reserve will keep appreciating by the virtue of existing)
Rich get richer today by being closer to the money source. In the "bitcoin standard" non-rich people can even keep their money in the bank and don't lose purchasing power by not risking it.
Rich and non-rich will always want to take risk to increase their net worth, however the assets must perform much better to outperform the money. Unlike today where almost all investments appreciate when measured in fiat.
edit:
> That's a political issue, it has nothing to do with how currencies work
Would you agree that it would be a good thing if the base monetary layer would enable that? I only see that happening with a monetary policy that respects savings and is not alterable by a few elected and unelected officials
assuming they don't need the money to live and realise that 5 years ago they spent a today fortune on a liter of milk...
You assume your salary remains fixed. Why would it? As a portion of global productivity, your contribution shrinks.
Your labour certainly isn't.
Transaction rates - Artificially kept low to profit miners.
Privacy - Every Bitcoin transactions is on a public blockchain.
Transaction fees - Using Bitcoin for even one transaction a day gets expensive.
Online only - Unlike cash only works with network access.
Conformation Time - Failing to wait for conformation in effect allows double spend attacks. Think 10 people buying computer equipment from different stores at the same time.
Assuming the implementation was changed to support wider adoption, a fixed currency has significant economic issues. For example, making or taking a loan in a currency that’s gaining value quickly becomes untenable.
PS: Of course all of this could be changed, but acknowledging issues is the first step in selecting a new set of tradeoffs.
You don’t need a bitcoin backed token, lightning does it.
Transaction rates are not artificially kept low. In fact most the vast majority of the time bitcoin has excess capacity.
Privacy- this is a legitimate concern but it is improving, slowly. Taoroot and Lightning are both privacy improvements.
So your daily transactions aren't meant for bitcoin. A distributed ledger that replicates all data globally for eternity is not an appropriate method for recording coffee purchases. Though I have done it. Bitcoin makes sense for settlement, and lightning is appropriate for coffee.
That said, I regularly clear bitcoin transactions for $1 or less in fees, and it is cheaper then every other form of payment in the world. You may think a SWIFT transaction is “free”, but its merely the cost is hidden. And don’t forget the inflation tax, that is a global wealth tax on any money held in an inflating currency. So compared to that, $1 to send $100 is cheap.
Online Only- I don’t think there is a solution to this criticism, but not sure what the issue is.
Lightning allows speed without double spend problems. Personally when moving large (for me) amounts of money I font mind waiting an hour for the confirmations. I certainly won’t trust a payment without them.
But bitcoin is voluntary, it doesn't have to be perfect in every regard.
You can look it up, larger blocks where allowed in the past, 1MB is a completely arbitrary size that was overkill at the time but hasn’t increased. Even 1$ transactions are quite expensive though they are often much higher.
The lighting network has it’s own separate set of issues. It’s Bitcoin backed but loses some of Bitcoins advantages: https://arxiv.org/pdf/2006.08513.pdf
> Online Only- I don’t think there is a solution to this criticism, but not sure what the issue is.
It’s simply a dependency. Shops may have issues accepting CC payments after a hurricane for example, but they can always take cash.
The biggest problem with bitcoin is that scammers spread FUD to justify their scam coins and too many people believe the FUD.
You are repeating FUD here and basing it in your non-understanding of how bitcoin works.
The fact that I need to connect to some peer-to-peer network or third party service for every transaction is a limiting factor. It reduces the efficiency of the system and increases latency, and it adds additional points of failure.
In fact it can be solved for electronic transactions and there is a mountain of published research on the topic that dates back to the late 80s. Here is a recent research paper:
https://eprint.iacr.org/2017/1220.pdf
The idea is to ensure that users who attempt to double spend can be identified and penalized later (e.g. by being added to a blacklist; some systems actually ensure that all transactions in which the cheating user participated can be identified, so merchants who try to evade the blacklist can also be penalized). The money has to be issued by a bank under the security definition. If anonymity is not a requirement -- and presumably a Bitcoin enthusiast does not care about anonymity since Bitcoin is not anonymous -- this can be easily achieved by using ordinary digital signatures.
The credit card network, by the way, is much worse in this regard.
The value of the US dollar as a reserve currency is a faith-based article, and yet it works well. The confidence in the Fed to not unduly dilute the value has reinforced the resolve of the participants to continue to accept it as currency.
Bitcoin's paid many years of dues in this regard as well, and its garnered the confidence of its market participants despite its deficiencies.
Transaction clearance - Artificially kept centralised to keep states control supply.
Privacy - Every bank transaction requires real names.
Artificial scarcity - If everyone tried to withdraw the money from their banking accounts at or around the same time, all the banknotes in circulation would be unable to cover all the demand.
This is needed as otherwise banks could claim to have unlimited funds.
Bank notes provide privacy and are created on demand. Having 1:1 bank notes to M1 money supply would simply be wasteful.
I don't have any opinion about Bitcoin one way or another, though through these fascinating arguments I gain new insight about the money and its relationship with geopolitics, human civilisation and other aspects.
[1] https://www.yanisvaroufakis.eu/2013/04/22/bitcoin-and-the-da...
I have yet to have an economist explain to me why deflation us bad- computers getting cheaper is good, fixed income people being able to afford things us good. Inflation mainly allows government to hand out money yo wall street in exchange for bribes at the expense of everyone else. That’s not good.
You are confusing the consumer price index for “inflation”. It’s understandable, this lie is one of the earlier examples of fake news.
When the fed prints money it goes to wall street and politically connected people. (This is quite literally the definition of fascism- a private economy run by government)
Wall Street profits from the inflation, but the rest of the people get poorer.
Also people that put their money in the stock market for the long term will do much better than others. Even if they are poor, it doesn’t matter. Just buy SP500 with all the money you can spare.
At worst inflation is a tax on ignorance. If you keep buying crap you don’t need with your dollars instead of investing... it will suck for you.
What about those that are so poor that have zero money to spare in the first place? Well, that’s a situation that shouldn’t even exist. That’s why I live in European Social democracy where governments actually distribute wealth.
The US is not Zimbabwe. It’s not even comparable.
You can literally shove those dollars down the throat of the rest of the world for as long as the status quo is maintained.
At risk of being the "Let Me Google That For You" Guy, it's not too hard to find articles where economists give cases against deflation, e.g.:
https://www.brookings.edu/opinions/5-reasons-to-worry-about-...
https://www.economicshelp.org/blog/978/economics/definition-...
https://www.pbs.org/newshour/economy/why-is-deflation-bad
The basic argument is that in small amounts, both inflation and deflation can be fine, but either one can become a problem. The issues with too much inflation are fairly obvious; the issues with too much deflation is that downward price pressure falls on everything. If deflation is so reliable that prices are going to be meaningfully lower if I can put off a big purchase for as long as possible, I'm going to do that. If enough people follow my lead, that hurts sellers. Wages go down -- more than likely through layoffs rather than pay cuts. And anyone who's already in debt -- and this doesn't just include your Uncle Bob who routinely puts too much on his credit card, it includes companies using lines of credit -- can end up in real trouble.
> computers getting cheaper is good
Sure, but -- even though I've seen this example trotted out before as a pro-deflation argument -- the prices of manufactured goods steadily fall due to continual improvements in manufacturing processes, economies of scale, and general technological progress. This has been particularly noticeable in computers over the last three decades, but Moore's Law isn't a supporting argument for the benefits of monetary deflation.
Asserting that an argument is not an argument is not a rebuttal.
The claim that people having more purchasing power will stop the economy is self serving for inflationists and never supported by evidence.
In fact the opposite has been the case time and time again.
As I proved in the example you simply ignored.
So, like I said, I have never seen an argument. Just these kinds of self serving assertions.
There are a few different issues. First, volatility is universally bad for a currency, because it makes all transactions in the currency more risky. Money should always be a medium of exchange first and foremost; there should be little to no room for speculating on the value of money and people should not have to factor in unexpected changes in the value of money when determining prices. In general people will switch from more volatile to less volatile currencies because less volatile currencies make trade more efficient.
Unexpected deflation is particularly bad, because in addition to the general problems with volatility, it also triggers defaults on loans (because money becomes more difficult to obtain). Too many defaults in too short a period of time will create a "contagion" effect by reducing the collateral held by lenders (who use loans as collateral for their own debts), which triggers even more defaults. Worse, as lenders see their collateral vanish, they will try to make up the difference with money, taking money out of circulation and causing even more deflation and thus more defaults. This is the "deflationary spiral" scenario.
Inflation is not some trick to hand money over to "Wall St." Rather, a low, predictable rate of inflation is targeted so that there will be some "breathing room" during an economic crisis. It does not hurt people on a fixed income because it can be planned for and the fixed income can be adjusted for inflation (e.g. someone could hold a portfolio of TIPS). It also has nothing to do with the price of computers, which have become cheaper because of economic growth (and in fact have become cheaper over decades of inflation). Inflation also encourages investment activity by discouraging the hoarding of money, which is a good thing for the economy.
And I assure you, as someone who holds bitcoin that has greatly appreciated, I can’t wait to spend it on things that depreciate.
In fact my spending has increased now that my spending power has increased dramatically.
As for what we should expect...why should the current situation be so surprising? The vast majority of merchants who "accept Bitcoin" use a third party payment processor that immediately converts Bitcoin into a fiat currency. The number of people who use Bitcoin as money, rather than as a system to communicate payments made in some other currency, is vanishingly small. The "technology industry" has mostly focused on non-monetary applications of blockchains and a lot of attention has been paid to "permissioned" blockchains because they are overwhelmingly more efficient.
In the context of deflation goods getting 'cheaper' simply means that their nominal price falls, while real prices remain constant. If you thought that deflation makes people richer (or that inflation makes people poorer) then you were wrong.
Bitcoin fixes this.
Remember, if you have money in an interest generating account then you don’t have actual cash you have an IOU for cash with whatever institution you deposited that money with. Now, changes to the inflation rate or hyper inflation are another story, but consistent ~1.5% inflation is the goal.
Is this going to be a new slur from the community?
Compare someone with a billion dollars and someone with 0 dollars today. Then huge inflation comes... who lost more purchasing power? Not the person with zero dollars, that’s for sure!
You really need to take a step back and start thinking because there are multiple people here spending their time and energy trying to explain something basic to you from first principles. Have some self doubt about your worldview. You are dismissing sound logic based on what? Most of the things you reply don’t even make sense.
1 bitcoin will always buy more and more and more and more. So you have zero incentive to spend your money today and you have all the incentive to wait as far as you possibly can before spending anything. The economy would grind to halt. Isn't this obvious?
Besides, rich people can sit on their money instead of re-investing. They will never have to work and neither will their descendants. You basically established some kind of stupid cyberpunk feudalism.
Computers get cheaper every year such that even inflated dollars can be held to get a better computer next year.
And yet the technology industry has not ground to a halt. Food is low tech, cell phones are high tech.
It is obvious- this argument in favor of government being able to debase the currency to fund wars and somehow that’s good for poor people is never going to hold water.
But here is another thought- no matter how much you call it stupid, or fuedalistic, leftists gave been making this argument fir over a decade now and Bitcoin has only gotten stronger.
You may even be able to make it “illegal” if you ignore the constitution and laws, but you cannot stop it.
Bitcoin will be the tool that liberates the people out from under your technocratic thumb.
Thats what I find most exciting.
I think you really have poor mental models of the world. I'm sorry but there's not even anything else I can say.
In other words, you must cover the cost of vastly more energy per Bitcoin transaction compared to the mainstream financial system. Environmental concerns aside, that amounts to a huge tax on every transaction that reduces the economic efficiency of the system. Note also that this is a per-transaction tax, regardless of transaction size, making Bitcoin less useful for small transactions.
There is also the fact that such a high energy cost per transaction causes the value of Bitcoin to be more strongly correlated with the price of energy. Energy prices are notoriously volatile; hence Bitcoin's value will also be volatile. Volatility makes a currency less useful (it introduces risk into every transaction and disincentives investment) and a very volatile currency will eventually be abandoned entirely. It should surprise nobody that the overwhelming majority of merchants who "accept cryptocurrency" as payment do so via services that immediately convert that cryptocurrency payment into their local fiat currency, because the majority of the world's fiat currencies have very stable values (compared to Bitcoin etc.).
I could go on but to be honest the technical objections to Bitcoin outweigh the economic objections, at least in my opinion. Happy to get into those objections as well if anyone is interested.
Also, as you noted the energy usage is correlated with the value, not the transaction rate. Transaction rate limits could be changed arbitrarily without affecting the energy usage of the coin.
However you have the causal relationship backwards: The value of the coin determines what level of electricity spending is profitable for miners. The electricity spending of miners doesn't determine the value.
The transaction rate is not what matters; what matters is the energy spent per transaction. Visa process many more transactions for much less energy than Bitcoin, and is therefore more efficient. I suspect Western Union's energy consumption is roughly in proportion to Visa's, but I have no data (the Visa example comes right out of their annual report, which covers both the number of transactions and amount of energy consumed).
"The electricity spending of miners doesn't determine the value."
The energy cost determines the transaction fees. Higher transaction fees make Bitcoin less valuable by imposing a greater burden on using the system. Yes, there are other factors that determine price of Bitcoin, but if nothing else changed ("all things being equal") then volatility in energy prices would trigger volatility in transaction fees and thus volatility in Bitcoin's overall value.
> Higher transaction fees make Bitcoin less valuable by imposing a greater burden on using the system ... volatility in energy prices would trigger volatility in transaction fees and thus volatility in Bitcoin's overall value.
Good point, that is certainly a risk with Bitcoin.
EDIT: Actually thinking about it more I'm not sure why this would be true. Since the transaction rate is not related to the number of miners, volatility in energy prices might cause miners to enter/leave the system but I don't see why it would impact the coin prices.
The reason it impacts coin prices is that higher transaction fees make Bitcoin less desirable as a medium of exchange and reduces demand. To put it another way, let's say I am paid in Bitcoin. If transaction fees increase, I will need to demand a higher nominal salary, at least enough to cover the transaction fees incurred when I spend my salary. Likewise, any merchants that accept Bitcoin payments will raise their prices, to cover the fees they will have to pay. Yet the same work is being done and the same goods are being sold; hence, inflation, or in other words, the value of Bitcoin has decreased.
Miners can't choose the transaction fees, they will either process the most expensive transactions they see or just stop mining. If they stop mining, that doesn't impact the rate of transactions that can be processed.
Obviously everything I described is a simplified model where energy costs change equally for all miners. The real world is not that simple, but there is some correlation in energy costs across different regions as there is a global market for typical fuels (coal, natural gas, uranium, etc.).
It is also important to remember that transaction fees are not in proportion to transaction sizes. People doing large Bitcoin transactions could absorb much higher fees, so in all likelihood nobody would be priced out of the market (and Bitcoin would be dominated by large transactions, which is more or less the case right now).
Miners will shut their equipment down as soon as the electricity costs become greater than the rewards. When some of the miners shut their equipment down, that causes a difficulty change which makes mining profitable again for the remaining miners, and also keeps the transaction rate the same. The miners have no way to impact what transaction fees are acceptable because they have no control over the transaction rate.
Btc is not replacing visa. Btc is replacing central banks. The appropriate comparison here is what is the energy cost of the banking infrastructure of the incumbent system.
>Environmental concerns aside I am concerned that you are using electricity to power your computer, access the internet, and comment on HN. Are you the arbiter of "moral" energy use? Am I? Slippery slope, and an anti-human one at that.
>Energy prices are notoriously volatile; hence Bitcoin's value will also be volatile.
This is not how it works. There is an argument to be made for risk of on-grid miners sudden increase of electricity prices in the case of a power shortage. Miners don't like this type of risk, so they choose to locate at places with abundant supplies and stables prices of electricity. Miners sign long-term electricity agreements. Risk to off grid miners is another level removed from on grid miners.
>will eventually be abandoned entirely. According to how you feel? All signs point otherwise.
>the technical objections to Bitcoin outweigh the economic objections You are free to make your own fork, BIP, or new "crypto" and compete. Good luck. By the way, there are 7999 "crypto" coins competing and losing so far.
Without regulation or FDIC insurance, very few people would be willing to give their bitcoins to a bank so that it could be lent out to people who have a better use for it. Even if a Bitcoin bank could exist, an economic downturn could cause a liquidity crisis, where everyone tries to withdraw their Bitcoin at once. The banks would have no way of returning the Bitcoins to many of their customers. Because there is no central bank that can print out Bitcoin, the entire Bitcoin financial system would be in ruin following the crisis.
I took more than 101, and not sure what you refer to there.
The market decides. Not an economics "expert", nor fitting btc to an arbitrary theoretical definition of money.
>It seems that tech has enabled a grand new theory about money to be implemented.
Are you aware of the Austrian school of economics?
The Austrian school of economics is completely adverse to empirical data, which makes it functionally useless.
The only school of economic thought that is built upon the rejection of the scientific method.
https://en.wikipedia.org/wiki/Praxeology
When countries owe each other money they used to transfer gold back and forth or trust someone else to do it for them. So all transactions within a country would happen in a local currency and then once in a while "settlement" would happen.
Bitcoin is digital gold for settlements among digital currencies. For eg I could start a new Stable coin called MyDogeCoin HQed in Switzerland and each MyDogeCoin is backed by 1 Bitcoin. Anyone who trusts me can transact in MyDogeCoins and can convert their MyDogeCoins into Bitcoins if they are willing to wait and pay a sizable fee to account for Bitcoins slowness. However most people don't need this it just needs to be possible. Now anyone using MyDogeCoin can send money to each other quickly as long as they trust me. This isn't any different to how you trust a country. And many countries like Zimbabwe aren't trust worthy at all. This has BTC behind it.
Now suppose you want to send MyDogeCoin to MyMemeCoin HQed in Singapore and is similar. We trust each other and hence we do the transfer. Once in a while we do a "settlement" on the BTC blockchain. This way we don't need that many TPS. And large untrusted nodes can use the BTC blockchain as a trustless settlement layer.
Since BTC is the final trustless layer its a foundation. Now I realized how BTC can have long term value and it could be around even a 100 years from now. Doesn't mean its not over priced now but it will have a non zero value over the long term and is revolutionary. Unless the government goes to war against it. The US government used to use gold and then basically defaulted and forced everyone to accept dollars by force. Thats not sustainable.
What are the implications of this on the network stability wrt mining? Doesn't bitcoin need transaction volume to remain a stable network?
My read is that the incentive structure changes. Right now, miners are motivated by block rewards. In the future, they'll be motivated by transaction fees. If transactions are rare, mining profitably is going to become much more difficult. Pair this with 51% attacks, and the long ramp-up of mining capabilities starts to look like it will regress after the the rewards go to zero. Can the network survive that?
Also remember if you have wealth in bitcoin you would likely mine at a loss merely to secure your own bitcoin.
I can’t imagine mining going away.
I think every appliance in a household will end up mining a little bit and it will be intrinsic to the fabric of the economy. The way the internet is now.
You could also send null transactions which do nothing but pay a transaction fee
You make an excellent point!
I'm not convinced that you actually do have to make too many assumptions. The claim I'm making here is that bitcoin has had a steady and predictable increase in mining demand as the currency has grown, but that iff bitcoin becomes solely a low-volume high-value settlement platform (instead of a buy-coffee high-volume low-value blockchain), there will be a demand shock once the block rewards go to zero. You can reason about this while keeping the hashrates and cost of achieving that hashrate abstract.
If volume grows, this argument is moot because there will be plenty of transaction fees to gobble.
Transaction volumes over time have risen as well. If bitcoin has amy value to society in 113 years, people will pay to transact it. Whether that is one expensive transaction a month or a million every block I don’t know— but I think the latter is more likely.
This is not in line with my understanding if BTC. The difficulty adjusts automatically, so the real cost isn’t hashing, but energy. And there is no inherent reason why any less energy would be spent/wasted on mining/securing BTC (assuming it will be worth more than today).
I expect it will be cheap the way wifi is cheap on a raspberry pi. They just include it because you may use it and it’s cheaper to include it than to make both a version with and a version without the WiFi module. (If you inly use WIFI, then the sane argument goes for the redundant-to-you ethernet port.)
You are right about difficulty factor, but that just adjusts how fast blocks are won based on past 2 weeks.
Even when price of BRC has crashed, hash power doesn’t instantly go away.
Also an attack lets you re-organize recent blocks only. Increased depth gets more expensive pretty quick.
If mining chips are cheap and ubiquitous, then an attack us very hard, because you have to beat all the existing honest chips with your attack.
If mining is cheap to attack, the rewards of such an attack will be low.
If bitcoin is valuable, it will be expensive to attack.
Simplifying a bit to support your analogy:
Bitcoin lets you lock coins on the chain for a certain amount of time. Two people can do this, then trade bitcoin transactions back and forth without submitting them.
For example, I lock coins and give my coworker a bitcoin transaction I have signed giving him $10 worth of bitcoin for my share of the days lunch. Next day he fives me one for $13 for his share, and I give the restaurant $43 for the bill— all these transactions are literally trading bitcoin IOUs, but in a nearly trustless way.
This means a great deal of transactions can happen off chain without the risk of theft.
Then there are centralized credit networks backed by Bitcoin. Paypal and Visa (with a custodian / bank) already provide this, in combination with a seamless exchange to local currency that is accepted by the merchant. For custodians, it's possible to algorithmically prove reserves, so that every user can verify that their "bitcoin IOU" is backed by actual bitcoin, but no one currently provides this afaik.
I found 3 instances of "defaults" over the history of the U.S. Federal Government[0], and I cannot figure out to which of those occurrences you might be referring. Bretton Woods was the agreement that made the USD the world's reserve currency, and that lasted for 30ish years while the U.S. was still on the gold standard.
[0] Has the U.S. Government Ever "Defaulted"? https://fas.org/sgp/crs/misc/R44704.pdf
It's solving /some/ problems, for /some/ people, maybe businessmen that create jobs or wealth even.
Sure, but by that logic, selling crack cocaine solves some problems for some people, maybe businessmen that create jobs or even wealth.
Venezuelans and Iranians aren't using crypto in any large numbers outside the dreams of speculators. Real people who actually need to do commerce prefer to transact in USD when the local currency falls short. You're never going to lose all your dollars because somebody guessed your email password.
Paypal closes your account (after letting you deposit some amount which they will hold for 6 months before letting you wire it out to some other normal bank account) if you're Venezuelan.
Transferwise doesn't even serve Venezuelans and when they decided to stop serving us, a friend got his account blocked (he signed up before they banned Venezuelans) and unlike Paypal they just kept the money with no option to withdraw it.
Venezuelan bank accounts cannot receive international wire transfers.
Colombia/Brazil, the nearest countries (a round trip could cost you less than $200 pre-pandemic) don't let Venezuelans open up bank accounts unless they got a residence card.
This is in part due to USA sanctions, but the Venezuelan government is also at fault too (currency exchange controls, etc).
Ironically, USA is where it's easiest for a Venezuelan to open up a bank account. But pre-pandemic you had to spend more than $1000 (now it's more) in travel and accommodation to the USA to accomplish this. Not to mention you need a Visa.
It's also relatively easy and cheap (less than $1k) to remotely open up a business + bank account, again in USA, and do business through there which is what people are starting to do now (even though it's been possible since years ago if I'm not mistaken).
This is what I'm about to do in order to be able to do business (i'm a freelance programming contractor) with my clients easier, but it's still more expensive and harder than just set up a wallet + a localbitcoins account.
Yes, my aunt isn't going to buy bread with bitcoin, we all know that, but thanks to bitcoin her daughter can get paid as freelance Graphics Designer by her clients. Lots of remittance going on through bitcoin too.
Bitcoin has gone from pennies, to around $100 for a year, to around $1000 for a year or two, to between $20000 and $3000 for a few years, and now to $50-60k.
I guess you could argue that this is just going to take a few decades to stabilize, but that’s a pretty big bet, and a pretty weird way to design the next monetary framework.
There was a pretty interesting Clubhouse discussion on the weekend where Eric Weinstein praised the genius of Bitcoin but bemoaned the stupidity of its design (“a QWERTY problem”), and Lex Fridman tried to charitably compare Bitcoin to JavaScript as a flawed tech that had great distribution and has been making the best of it since then. They were both rudely dismissed by a group of Bitcoin maximalists as “not getting it”.
The question I’ve asked since the start is, if this is a functional idea, why is the dumb beta version still the dominant implementation? There’s a bizarre religiousity and post hoc rationalizations for some of the weirdest decisions in its design, and mistaking speculative mania and nominal price for success, while proposed uses for Bitcoin and the blockchain have been quietly discarded. Bitcoin’s valuation is more of a symptom of post-2008 monetary conditions than a long-term challenge to them.
(I'm drawing a comparison to gold here, but this is also true for other commodities, and for that matter, stocks.)
That's an important point, because it prompts the question: what is the problem that Bitcoin is solving if the preferable outcome is that it does exactly the same things that gold and centralized banks already do?
The more that I hear people justify slow transaction times, high fees, and a general lack of platform evolution, the more it sounds to me like the only problem that Bitcoin is solving in the real world is that gold is already stable, and speculators need a new thing to jump on. The arguments people are making today about why slow transactions are irrelevant are not the same arguments that people were making when Bitcoin was new. It's revisionist history. And when people are talking about centralization as the end goal... this is also part of why I'm skeptical about claims that proof of stake is going to solve anything on the environmental front, or that microtransactions are ever actually going to get better.
The overwhelming perspective I'm seeing here is that nobody involved in speculating on Bitcoin cares about the technological side at all, and I don't see what incentive there is for anyone to make mining easier, cheaper, more democratic, or more environmentally friendly. The whole point seems to be that people want to get in early and then erect as high barriers of entry as possible. What makes people think that anyone speculating on Bitcoin is going to care about proof of stake? At the point where bitcoin becomes a nationally backed currency that is just a backbone for other smaller systems and is (for most people) completely independent from their regular everyday transactions -- there's no advantage to creating that world, that is the world we already have. The only difference is that a few people on Reddit haven't gotten rich off of the world we have.
The fact that the majority of the market is still standardized on Bitcoin despite a plurality of clearly better coins drives home to me that the discussion about Bitcoin has nothing to do with practical merits of the system, and everything to do with a bunch of people trying to extract as much money as possible before tragedy of the commons sets in. We can make centralized banks without bitcoin. If that's the end goal, then we should absolutely get rid of the blockchain because blockchain is not necessary for a centralized bank exchange with a small number of government-level actors.
I'm surrounded by people who tell me that Bitcoin is a giant innovation, but who are then openly hostile to any kind of improvement to the platform and who are continually dismissing valid criticisms of its technology and governance model as irrelevant because those criticisms don't directly impact Bitcoin's value as a purely speculative currency. What you're describing when you propose a single, centralized exchange is, "we want to make banks a second time the same way, except less efficiently with fundamentally outdated technology, because we want some of the pie this time."
Which, great, but as a non-speculator, why on earth should I support that or care about it?
So when you think about tracking on-chain transactions, what you're really talking about is tracking government-level, giant transactions that are largely divorced from the kind of detailed forensics that people would want to do. Which... there are better ways to audit giant government-level agencies than a blockchain.
Similarly, leveraging the blockchain to handle things like proof-of-identity doesn't work if the transaction speed for ordinary people can't keep up. If you want to use Bitcoin for proof of identity transactions, you need ordinary people interacting with the network, not a central exchange. Because again, if you have a few central exchanges that everyone is interacting with, then it's almost strictly better to just let them handle proof of identity and proof of ownership in shared centralized databases.
The only reason Bitcoin could matter is if it actually did scale enough that it was feasible for ordinary people to use it for micro-transactions and as a performant, robust API. But the problem is that Bitcoin as a technology is poorly suited for that use case, and none of the people hyping are interesting in solving those problems, evolving the technology, or moving to other coins that would be better suited.
In a world with centralized exchanges and secondary layers on top of bitcoin that consolidate and batch transactions, all of the problems you're describing end up being easier and better to solve by just having the centralized exchanges coordinate with each other, the same way that banks already do. And to the extent that banks don't coordinate with each other right now, it's unrealistic to assume that the blockchain is going to suddenly change their incentives or force them to do so.
What the article doesn't explain is why decentralized consensus and ledgers matter for a system that is increasingly obviously designed to be centralized and used in a centralized manner.
Yes, Bitcoin allows transaction resolution in a distributed ledger. The problem is that everything else around Bitcoin's design, implementation, and community is ill-suited for creating a decentralized currency. There are a hundred coins out there that use a blockchain to "create time". The article does not explain why Bitcoin in specific is worth paying attention to, other than because speculators are currently already paying attention to it.
And frankly, it's not at all true that no other coins have come around that are better. Monero is vastly better at privacy than Bitcoin in pretty much every way. There are already coins on the market that are using proof of stake today. In pretty much every area, the state of cryptocurrency has evolved over Bitcoin -- but, importantly, none of those coins have become better systems for speculative investing. And I would argue that's the "better enough" that most Bitcoin advocates care about.
I also don't see any reason to assume that once Bitcoin goes more mainstream that a community that is currently hostile to change because it might affect their wallets is suddenly going to be less hostile to change. Bitcoin could be evolving today. People could be switching to better coins today. But they're not. It's not going to be easier to make those improvements in the future.
Bitcoin is the technology. The idea that we need wide adoption of a technology that is ill suited for the problem it is trying to solve, just so that we can drop that technology and choose something that's actually usable on its own without first reimplementing the entire concept of banks -- it just doesn't make sense as a long-term strategy.
But Bitcoin is particularly bad at everything surrounding the concept of a distributed ledger. In fact, it is set up in such a way as to make working with its distributed ledger more difficult than it needs to be. It was an interesting first pass at this technology, but it has been very clearly surpassed by other coins in pretty much every single way.
So the question is, given that Bitcoin is particularly bad at what it does, given that other cryptocurrencies are doing the same things that the article praises except better, why are people sticking with an outdated technology? I would posit that people who are really genuinely excited about concepts of "creating time" would be moving to better coins that are doing even more clever things than Bitcoin is, and the people who remain are largely remaining because they're interested in the speculation part and for them concepts like "first to market" are very important.
But I don't see how anybody would ever say they prefer Bitcoin because of the technology. It's outdated.
This is a feature, not a bug. It is very difficult to change the protocol. We have a 100% certain monetary policy.
I agree with you that perception of what btc is and isn't changes with time.
If you have a proposal, you are free to create and propose a BIP, or fork off.
Good luck.
Of course, rich people have always done that (post hoc justifications for their wealth), but when that wealth is not codified and protected by anything other than speculative value, it just increases the volume of that effect even more. The lack of technical fundamental superiority of Bitcoin vs other approaches (and no need to mention alternatives, y’all know them) increases the fervor of defense of Bitcoin as that’s basically the only thing keeping it up.
Anyway, as long as Bitcoin has perceived social value, it may still have niche uses like allowing you to get money out of Venezuela. And maybe slightly cheaper than wiring large amounts of money.
So actually you’re left with just: 1) pure social perceived value and 2) small use case when you have utter failure of the formal financial system. The first case is a self-licking ice cream cone, but... Unfortunately, #2 could end up being a self-licking ice cream cone, too, because now you have a bunch of people kind of invested in the formal system failing. I’m not really worried about it as the number of Bitcoin true believers is low vs the total population (and there have often been such people with a stake in system failure), but it is something to keep in mind.
But not everyone just acts mechanically in response to financial incentives, as there are some cryptocurrency advocates who see the need to shore up the formal system and advocate for that.
Any ledger which represents value in a purely abstract sense has to start at zero value— and any ledger which represents ownership of some concrete asset has to be kept aligned with reality, which makes it a nonstarter for a trustless, distributed system.
As an aside, the value of "one Bitcoin" is a bit of a distraction: market cap is the relevant measure, as long as we're using an existing currency as the unit of account, and the only market cap at which a distributed ledger could be relatively stable is many trillions of dollars.
So, for a trustless and decentralized ledger to become the next monetary framework through voluntary action, it has to start cheap, and persist for long enough to become expensive. There's simply no other way of doing it.
As for why Bitcoin, and not some other cybercoin: well, jury is out, isn't it? But money exhibits very strong network effects, and Bitcoin's first-mover advantage is considerable. A global marketplace doesn't have any reliable way to communicate other than price signals, and either BTC forms a Schelling point as the new baseline store of value, or it doesn't.
It hasn't yet, but it remains the most credible candidate. If you were a small central bank, nervous about the effect of 2020 USD and EUR printing on the buying power of your foreign exchange reserves, and you wanted to buy a little chunk of some distributed ledger "just in case", which one would you pick? Probably the first one you heard of, and the one with the largest market cap: Bitcoin and BTC, respectively.
But it's always kind of vague what is fundamentally different about this imaginary, perfected version of bitcoin. Is it the block size, i.e. Bitcoin Cash is really the ideal bitcoin? Seems highly debatable, but anyhow, the block size is a debate about tradeoffs between centralization and throughput rather than an obviously embarrassing decision. Or is it more about the issuance schedule and supply cap?
Generally, if the current bitcoin is an embarrassing beta version that we're stuck with due to network effect, what does the better bitcoin look like? Does it exist already? That seems like a more interesting conversation than a meta-discussion about why we're stuck with this "dumb beta version" or why bitcoin maximalists are so mean.
https://medium.com/sora-xor/sora-the-new-economic-order-3ec3...
Personally I suspect that eventually a more modern blockchain will become the base level of record, or more likely that we may never settle on a single one, but indeed with proper layering it could all be BTC in the end.
Sounds like something straight out of The Bitcoin Standard [1].
[1]: https://www.goodreads.com/book/show/36448501-the-bitcoin-sta...
What if it "was"?
The "hate" people express against bitcoin especially here on HN is often towards the implementation. People clearly see the flaw in PoW if they are not emotionally attached to it because they have no money at stake. You should not misinterpret that as hate because they missed the train to richness.
Objectively PoW does not scale. Objectively we have DLTs (blockchains) with Federated Byzantine Agreement (FBA) instead of PoW/PoS that can do everything Bitcoin can and more without the most severe downsides that come with PoW/PoS. The future will probably bring even better tech and if we learned something from the past then its that better solution always take over the old worse solutions. Bitcoin ultimately has to fail because its not a system that could be upgraded. Its most fundamental core properties are intentionally not changeable.
The "killer app" of Bitcoin is the shared CPU power / consensus, not necessarily the plain layer-1 transactions.
"Most transactions cancel out at the account level. The binks demand bitcoins of each other only because they don't want to hold account money for too long. So a relatively small amount of bitcoins infrequently transacted can support a somewhat larger amount of account money frequently transacted."
https://satoshi.nakamotoinstitute.org/emails/cryptography/th...
> satoshi expressed in his emails that he was under the impression that bitcoin would scale on its own in the early days
And it did. I don't think today still classifies as "early". See above for people already thinking far ahead for longterm solutions to scaling.
There is no way Tx of average humans would significantly cancel out within the time of a block. Thats why LN just makes the time to settlement "infinite" and that's why it partially increases centralization again to cancel out more Tx. If that was the goal it could have been implemented in layer 1.
Anyway all that aside, lets just assume LN would work as perfectly as the devs hope it will do one day. Its sill way worse than existing FBA solutions that can handle most of this on layer 1 directly and already have fully working second layer (payment channels) implemented. Even if bitcoin and LN could eventually provide a similar good solution, whats the point if it already exists and why would anyone assume the existing solutions stop evolving while bitcoin and LN slowly catches up? If we assume LN has reached all its goals in 10 years it also means the goals are outdated by 10 years.
We can arguing about what LN may be capable of doing one day but its never gonna be a valid argument against solution that deliver today.
So, while Satoshi’s opinion isnt really relevant to bitcoin’s future, since you brought it up, Satoshi clearly didn't think layer one was the inly way yo go.
And if LN would actually reduce on chain Tx to a level where we would no longer need to worry about on-chain limits then we rendered bitcoin useless because we literally reduced the need for Tx to basically zero. Whos gonna pay for mining if block rewards vanish and LN makes on-chain Tx vanish as well?
Bitcoins "goal" is that on-chain Tx should always be near the max so the fee per Tx is the lowest possible and reward are the highest While LNs "goal" would be to reduce the on-chain Tx to near zero because every on-chain Tx is extremely expensive.
It probably meets somewhere in the middle. which means its still gets worse and worse the more Tx are made even if they are made over LN. Thats the definition of "not scaling well".
LN and bitcoin are supposed to by a symbiosis but LN is the parasite that works best when it almost kills is own host. You can see it though the actions of large miners. They are not supporting LN. They could pour millions in the development and advertisement of LN but they dont want it, it reduces their profit.
Its just very very deeply flawed overly complex system that only exist because some people would not accept that the layer 1 has deep flaws. Is rather obvious that building on top is not the right way forward. An since changing layer 1 is not possible in any meaningful way the only way forward is to abandon it. Which wont happen as long as people make money with it.
>what exactly would stop it from working?
The absolute end state is that hashrate drops or stops increasing due to the fact that it isn't profitable anymore which leads to double spend and essentially destroys any trust in the system and renders it useless.
No one know at which point hashing will no longer be profitable for a long enough time to cause this cascading effect. But once it started the price crashes > pushes more miners out of businesses > further reducing hash rate > panic > price drop more > repeat
All while mining hardware becomes cheap because demand goes to zero and supply increases, which makes a double spending attack cheaper. Then once a double spend has been observed its game over. There inst even a theoretical plan how to move on at that point. In simple words it would move the requirement for block conformations to infinite so there is no point in doing any Tx anymore. Everyone just has to wait which further reduces any rewards for miners.
If 80% of miners go out of business someone can buy the hardware from them wait for the 80% difficulty adjustment and then start the attack. He could mine blocks faster than anyone else so even if someone mines a block his chain will eventually be longer. There is no know way to recover from something like that.
That’s changing everything.
Also increases cost because you add additional parties in the system who wants to get paid for providing the service and liquidity. It simply can not provide a better service in the end.
The vitriol that Bitcoin evokes from HN commenters can really only be explained by jealousy, the environmental concern is just a cover for covetousness.
I remember when I first heard of Bitcoin. I quite frankly found it technically intimidating. It was a totally new concept. I didn't get it. I took my own discomfort as a sort of signal that it was really important; something totally new. So I studied it. I had to put time and effort to read the books, play with the code... Eventually I got it and found it to be one of the most elegant pieces of technology and sociology of my lifetime.
I think a lot of geeks never made that first push past the intimidation. As the value has gone up, the sour grapes have as well. This is a group of people that should have been first on the wagon, but instead many of us found out the hard way we weren't on the cutting edge as much as we liked to think. Myself included, I have some Bitcoin but I'm not a BTC millionaire, like I would have been had I pushed harder through my intimidation faster.
I too wish I’d made more effort to buy it earlier. Presumably that sentiment applies to the majority of humans on earth, whether you are now a Bitcoin millionaire or not.
There is something to say for incentives. The positive incentive loop is what drives adoption, innovation, security etc.
My take is HN commenters try to typically reason through articles with thought and an open mind. I would wager there are so many bitcoin bros who hype ad nausea that beckons the skepticism you see here.
> the environmental concern is just a cover for covetousness.
...is an insulting way to dismiss a concern without adressing it.
I think acting offended by 'bitcoin bros' is hypocritical.
Obviously some people are jealous that they didn’t hold Bitcoin earlier and make a lot of money.
But equally, people who hold Bitcoin now are incentivized to dismiss any critique of Bitcoin, since they stand to profit directly from Bitcoin’s reputation.
Therefore the motivations of all participants must be borne in mind, and no ad hominem carries any special weight since all participants have incentives for motivated reasoning.
The argument was that PoW can not not scale. Its an obvious objectively verifiable fact and its completely irrelevant what kind of environmental side effects bitoin has or will have in the future. For all we know it could run on fusion reactors and biodegradable ASICS only and it still would not scale.
Bitcoin can and has scaled. And that is a fact, from Segwit and Taproot to Lightning the capacity and cost have improved dramatically.
Compared to FBA solutions with block times in the single digit seconds and TPS way over 1000 These improvements are as irrelevant as its gets. There is no proposed way to make bitcoin scale to any level that would make it useful on a global scale. And the fun part is, even a proposal that could do this would not go trough. It would just lead to another fork.
If I come across something that works without PoW, is safe against quantum computers and somehow eliminates the threat of forks (seems impossible), I'll invest in that.
You fell for the meme...
Energy consumption as compared to what? What energy sources? This line of argumentation feels very misleading to me and always has because it is presented with a very specific framing. Here's an alternative framing for example:
https://unchained-capital.com/blog/bitcoin-does-not-waste-en...
At least you sold high, so good on you!
The pedigree of the team behind it is ridiculous, most notably its creator: Silvio Micali - one of the co-inventors of zero-knowledge proofs as well as other cryptographic primitives.
EDIT: it's not quantum-safe yet, but that's a problem they're actively researching, and given the team they seemed credibly positioned to solve it.
See: https://www.algorand.com/resources/blog/chris_peikert_joins_... and https://www.algorand.com/resources/blog/algorand-contributes...
Intentional forking as a feature is ofc still possible. Validators owner who disagree with an amendment to the point that if it is accepted they would want to stay on the "old chain" and thus fork it, can simply remove the "yes" votes from their validator list essentially ignoring their votes and thus separate from each other. By the time one cluster enabled an amendment and the separated cluster does not, a fork happens*. This requires some kind of coordination and is unlikely to happen unexpected. A largely unpopular amendment would simply not reach the 80%. And one that reached 80% is unlikely to be consider so bad by the remaining 20% that they would want to fork. But the possibility is there it just never happened in the 8+ years its running.
*ofc it would also go the other way around. An amendment that wont reach 80% could also cause a cluster to intentionally separate and enable it there which would also case a fork.
The question was: "What exactly is the "threat" of forks?"
Your answer seems to be the answer to the question "How can we prevent forks?"
"Uncertainty" is certainly getting at some sort of answer, but falls short as you're not really explaining what kind of uncertainty and why it's bad in the first place.
Yes uncertainty was the answer. If a fork happens you dont know which side is going to die or if both keep going on. You dont know which sides coin someone wants if he wants to be paid in the coin named prior to the fork. You may not even know there is a fork because it happen on accident and is only discovered after it happened.
I would say this is the "threat" the "bad part" and it is bad because it is unwanted by most users of the system but that's just my opinion. There is now way to proof its unwanted by most user nor does that mean its bad for everyone. So this goes nowhere. If you think its good I'm happy to agree that this is purely an opinion.
A controlled/planed intentional fork seems to be what I assume most people would want but that again is "good" solely because its my opinion.
Hence my message pointed out the fact that we can have the "good" part about forks without the "bad" part about forks if the system prevents the "bad kind" of forks to happen. Your message already pointed out the benefit of forking and preventing unintentional forking would not affect these benefits.
Now to the other part which was really just an example how another system managed to prevent unintentional forking without preventing forking itself. I'm sure there are tons of other solutions so the fact that you don't seem to like this one is kinda irrelevant, it was just the example that I know best and was probably the first around.
Still gonna "fact check" this because why not^^ You seem to be confusing stuff. I wont go any further into a discussion about that tho because quite frankly its all out there to read for anyone who cares. It not my goal to shill stuff or prevent people from reading and believing whatever FUD they choose. Everything can be verified, no need to trust what I tell you, its all public since many many years.
First, the XRPL is not a cryptocurrency and I never said it is, its a distributed ledger. XRP is a cryptocurrency/digital asset/token whatever you wanna call it. There is no consent over the definition for these words so its not really debatable.
The XRPL is however definitely "properly decentralized" regardless of what FUD you may have read about it. Decentralization is rather well defined and whether something is or isn't can be objectively "measured". Although I ofc dont know what _your personal_ definition for "properly decentralized" may be, its decentralized as in no single point of failure or control exists in the system. If you use another definition then it may or may not fit. But this is the most common simplified definition.
For a system that has to "decentralized" reach 80% agreement this means at least 3 independent entities are necessary to make it de-facto decentral. However, 2 colluding would break this already so obviously more than 3 is wanted. 3 would be the theoretical minimum. How many _you personally_ want to have to make it "properly decentralized" _for you_ isn't really a debatable topic, its an opinion. More is objectively better and less than 3 is objectively not decentral anymore.
The XRPL currently has about 30 _legally independent_ validator operators. There is no means to measure independents however. And no means to evaluate what would be needed to make 80% collude. BUT its important to know that colluding would not give them any financial benefit, in fact it would just stop the XRPL from working, which they all voluntary choose to support so that does not make much sense.
There is no double spending or the like possible if someone gains control over 80% of the validators. It could be turned off or they could push an amendment though that does whatever they want but its all public. No honest node can be tricked into breaking its own rules and add any kind of invalid transaction, reverse something or allow dou...
It’s not too late, you can get back in, though you will have a tax bill. Maybe it can be a wash trade.
But if FUD that’s dishonest about bitcoin mining scared you off then you haven’t learned enough about bitcoin yet.
This us how bitcoin seeks the strongest hands. HFSP
While bitcoin is a record of transactions, and as such a database, it was not created to be a database.
Did you read the OP article?
But, I think that one way the "energy per transaction" framing is misleading, is for exactly the "if you scaled up the transactions, the power use would scale proportionally" idea. First, it isn't clear to me that it is even possible to scale up the transaction rate without either making the security worse or substantially modifying the design (or possibly both), but if you did manage increase the transaction rate, it isn't clear to me that this would impact the total energy use rate at all.
Well, ok, it might influence the power used by influencing the price or the issuance rate. But, aside from that, I expect that the power use would be determined by whether someone profits by increasing the amount that they spend on power in order to mine bitcoin. This doesn't depend on the transaction rate. Err, ok, I suppose technically if the transaction rate were higher, miners might get more transaction fees, and really the relevant thing is issuance rate + transaction fee rate, but I suspect that the average transaction fee would decrease if the number of transactions were increased, so that impact should be small I think, because those two should largely cancel out.
Hm, ok, so if the transaction fees are determined essentially as an auction, what is the effect on the average fee per transaction, of multiplying the number of items (slots in the block) available per amount of time? I think this depends on the demand curve for transactions. I don't know what that curve looks like. If we pretend that it is linear (just pulling that out of a hat. Though I guess if we zoom in far enough it should look locally linear, unless we zoom in too far and then it will look piecewise constant due to discrete numbers of people... whatever.), then, --- I should get back to work, shouldn't be doing this calculation right now.
Proof of Work is trustless decentralization.
Proof of stake is trusting the dudes who premined the coin and sold you a “fix for bitcoins inherent problem” to hype their ICO.
If you were right, after 10 years one of those PoS currencies would be winning. Can you even remember the proof of stake currencies from 2011?
Why did they fail? After all they had a huge economic advantage over bitcoin mining as they cost effectively zero electricity.
Can you answer that question?
FBA was "invented/discovered" before PoS coins even existed.
Essentially FBA is a distributed voting solution. Instead of let the person who has solved the PoW write the Tx in a block, everyone just votes on Tx order. The threshold is rather arbitrary. Most systems use something around 80%. In practice every valid Tx has near 100% votes anyway because no one listens to dishonest nodes. But nodes can go offline or Tx propagation can be delayed so a Tx could have only reached part of the network and thus not reach 100% Not a big deal even if a Tx has less than 80%. Nodes just re-vote for the Tx for the next round. Double spend is solved by the ordering alone. If one Tx is first the second that moves the same funds somewhere else, breaks a fundamental Tx rule so nodes wont vote to include the second. Which one came first is irrelevant. Each node just votes for the one he got first and in a possible second round it votes for what the majority of other nodes said came first. So the distributes system can not reach a state where a Tx is stuck.
This is all very very very much simplified ofc but you can easily lookup systems and dig into details if you are interested. There are real "blocklchains" running with FBA since many many years so it without any doubt works. Although like I said in my original post it can allays be improved.
People can have an argument about that, its fine but mine wasn't so you cant debunk it by telling me to read a book that seems 100% irrelevant.
PoW was simply used to solve the double spending problem in a decentral way. Which is exactly what FBA solutions do without it. Solving the double spending in a decentral way is the key "invention" of bitcoin NOT PoW. PoW existed way way before, it was just used to create the solution to the problem it was not invested/discovered for bitcoin nor was it the key element.
People came up with different solutions solving the same double spending problem in a decentral way but without using PoW. Some solutions are objectively better regardless of energy consumption and other secondary properties. They are objectively better because they scale to high throughput, allow short block times, have a proper and path forward to improve these properties over time with very limited "risk" of causing forks for every proposed change.
[0] Ouroboros - A Provably Secure Proof-of-Stake Blockchain Protocol https://eprint.iacr.org/2016/889.pdf
Bitcoin was not the first cryptocurrency. It was the first good one, though.
And arguably there's a much larger mob of people who haven't critically thought through any of Bitcoin - who own Bitcoin - but that are financially incentivized to promote Bitcoin or are biased to want Bitcoin to become something.
Convincing yourself that someone commenting negatively about Bitcoin is simply jealous is also a common thing I've seen many Bitcoin owners use to justify ignoring legitimate counter-narratives of a lot of propaganda.
Sure, yes. It would be valuable in the way that a barrel of oil is valuable. It has a number of practical uses in electronics, medicine, etc. Valuable as a currency or means of transferring wealth? Not as much. It's cumbersome for that role.
Bitcoin's value is not "coins". It is valuable for what it does (transfer wealth). It's a ledger, not really "coins".
Did you read the original article? It's actually worth the read if you didn't yet.
This comment of mine explains why I think Bitcoin is not a good form of money. Transferring wealth may be the most important function, but it's far from the only one. https://news.ycombinator.com/item?id=26319657
The article is certainly interesting. Unfortunately, the main source of inconsistencies with ledgers comes from human factors rather systemic ones. Fat finger errors, identity theft, credit card chargebacks, and fraud are all inconsistencies created by humans and can only be resolved through trusted centralized authorities.
OP pretty much explains the intuition behind why history as a sequence of events in a blockchain works, but Bitcoin PoW is different from PoH as maintaining order is the main work done and not a side-effect.
1. https://medium.com/solana-labs/proof-of-history-a-clock-for-...
every post including cryptocoin here gets a generic comment like yours about some other cryptocoin that is 'very promising'
I follow alternative consensus algorithms and trustless decentralized app tech in the blockchain space because I think it is interesting and democratizing tech. I do not own half of the coins I follow and couldn't care less for speculation. Technologically, cryptocurrency is still an exiting domain and scepticism is in place, but the blind hate for anything blockchain on HN is a bit OTT.
"valid consensus mechanism that scales of PoS and PoW networks".
Half of the comments on this page complain about how Bitcoin uses too much energy and how PoW is wasteful. This is a direct (allegedly, if what they write is correct) solution to exactly that.
Did you understand me? Then the spelling was good enough. Please don't attempt to derail with gender role trolling.
I probably understood even more than you were willing to share: your level of knowledge about this topic.
> gender role trolling
What does gender has to do with anything? You brough it up, not me. Also where did I "troll" you? The word "housewife"? Not sure why you would take offence in that, for me it is not a negative or lower-value term, it simply refers to a person that has chosen and has had the possibility and privilege to spend most of their time at home taking care of their family. I could just as easily have used "hairdresser" or "bricklayer", those people have equally likely little to do with crypto and have the same level of knowledge about bitcoin that you seem (assuming by that spelling, in which I could be wrong of course) to have. That's why I wonder, where did you pick that up? That spelling? Nobody in the industry spells it that way, that's all.
Bitcoin proponents are becoming more and more insane.
Don't give them too much credit. The notion of time in distributed systems has been defined "insanely" since at least 1978[0].
[0] https://en.wikipedia.org/wiki/Lamport_timestamp
But you can't prove that something has happened BEFORE a particular event using Bitcoin hashes.
Also, this "feature" is unrelated to Bitcoin being a cryptocurrency. You can have cryptocurrencies without "global time" (e.g. NANO).
https://opentimestamps.org/
Anyway, any other "linear" blockchain (e.g. with PoS consensus) can do the same work. No wasting of resources is needed.
There are 10 kinds of people in the world. The ones who understand binary and the ones that do not.
You can obviously replace binary with bitcoin :). The ones who do not get bitcoin, will continue to not get bitcoin.