Because only Crypto is used for money laundering, right?
You would never guess what other businesses that your reddit mind thinks are legitimate are also used for money laundering...
Try this: go to any OTC crypto market in any African country, or any country with high inflation and poor economic outcomes, like Philippines or Turkey.
Ask around for the going rate for USDT/USDC
Then check the official USD vs local currency exchange rate
Compare the two and ask yourself: why are ordinary people on OTC platforms willing to pay a substantial premium for USDT/USDC?
If you’re on HN, you’re likely smart enough to figure out why. And no, its not just plain “money laundering”.
Because it's hard to acquire and store USD. Banks - if they even have them - won't give them to you easily. Currency traders will charge a huge premium. And neither fixes the problem that you will be limited to hard cash - not easily spendable online and tough to store.
USDC/USDT are liquid on exchanges as well as OTC markets, very easy to store, and increasingly easy to spend.
Much of the western world is deeply ignorant of the sheer scale of this demand for USDT in the Global South. There are billions of people in these regions, and one thing is clear across all of them: they will prefer USD over their local currencies, but it's too hard to acquire this USD, especially in a digital form.
Hence, USDT/USDC.
I've personally hired people from Phillippines and Nigeria who preferred getting paid in USDT over their local currencies.
I think this is in large part because Anti-Money Laundering/Know Your Customer regulations and lagging financial infrastructure make USD not work as well as internet money for the Global South. The stablecoins just decided to throw that all away and hope that the regulators don't catch up.
But, is the utility of USDT/USDC all meaningful to BTC? Those people aren't asking to hold BTC and those who are are doing so because they want to avoid the regulations governments imposed on money transfers is my guess.
No, they’re doing so because holding USD is better than holding their own currencies.
It’s simply economically smarter to hold a currency that appreciates against your own. USD outperforms every currency, and USDT just makes it easier to hold.
Whenever this kind of thing comes up, I hear bitcoin enthusiasts use strange logic to claim that it's good because most of this power is coming from renewables, or that if it's not then it's incentivizing the switch to renewables by increasing demand, and so on.
Bollocks!
Unlike other technologies that are incentivized to become more efficient over time, because of how competition over mining rewards works, this technology has the characteristic of consuming more and more energy the more it succeeds.
It's designed to waste energy. Even if that was "green" energy, it's still just making heat out of electricity for pretend internet money. Energy that other things could be using.
You did not address the parent's point at all and instead made a pathetic attempt at deflection with a strawman. Both Netflix and Netflix customers benefit, in the form of lower electricity bills, if either find a way to use energy more efficiently. And since you can only spend 24 hours a day watching TV, the increased efficiency can only be offset by increased consumption to a minimal extent.
Bitcoin has no incentive to do this, and no ceiling on consumption, since any efficiency gains just get plowed straight into increased mining, and so energy consumption can only ratchet up, forever. Address that claim, please.
The price of a bitcoin sets an upper bound on consumption of energy where the miner will be in a place that is no longer profitable since energy costs money. On top of this, miners have no upward way to influence the price of bitcoin, only downward (selling of coins, or destruction of trust).
If we just properly externalized the cost of CO2 emissions it solves this problem along with many others. So why don't we do that?
I believe the argument is that it increases redundancy and resilience of the renewable power supply...
That redundancy is otherwise uneconomical to produce (if there isn't the demand).
When that redundancy is needed, that power can be redirected from the miners. Presumably the miners are expected to behave and switch off at such times, but there is no reason why that expectation can't be legislated.
Entertainment increases happiness and is a positive for humanity, even if I personally don't enjoy the entertainment. There is no comparison to wasting energy doing worthless make-work.
I think many on eg r/Bitcoin find the eternal price developments of Bitcoin quite entertaining. Perhaps Bitcoin is just a form of entertainment you don't enjoy? Or were do you draw the line?
Whether or not it’s a worthwhile use of energy is certainly debatable, but it’s not exactly “pretend internet money” when you can trade it for billions worth of USD in a single day with minimal slippage
But it is pretend internet money! These people are trading "a proof of work backed cryptocurrency", pretend internet money. It is indeed, by convention, worth real dollars, but there's no underlying thing except bullshit.
It could have been a sqlite db file on a raspberry pi somewhere, keeping track of digital jars of goat semen that people then pay real dollars for. But no, instead we're wasting one Australia worth of electricity on Bitcoin.
Even in the theoretically trustless world of cryptocurrency, you still need to trust that if you give 1USD to someone in exchange for $1 worth of Bitcoin, they will actually give you that $1 worth of Bitcoin, and vice versa. And the history of cryptocurrency seems to indicate that virtually everybody who has ever occupied that role for cryptocurrency is not worthy of that amount of trust.
It also doesn't really fit the definition of money, certainly not good money, it's a speculative asset or at best a transaction intermediate. Almost nothing is priced in Bitcoin, it's priced in dollars and converted to a Bitcoin quantity at the time a transaction is to proceed due to extreme volatility. There's no closed-loop economy where pricing is so specified - even in El Salvador - because you then have to sell it to pay your suppliers and your taxes. You don't sell money, if that makes sense.
Using the fact you can sell it for minimal slippage, you could call Apple shares money, but they're not. They're shares. Nothing is priced in Apple shares.
The attributes of money are: durability, portability, divisibility, uniformity, limited supply, and acceptability.
Bitcoin is not accepted basically anywhere (the overwhelming majority of places that claim to, use a service like BitPay that immediately sells it and gives the merchant actual money). It's also not uniform, because each sat carries with it the entire transaction history. It's also not particularly portable because its global transaction count is limited to 7tps and it costs an unbelievable quantity to do so from time to time. It's also not durable because everyone keeps losing their wallets and the lost bitcoin is effectively destroyed. All it has is limited supply and divisibility -- and portability, depending how compelling you find my argument against -- but you really do have to get all 6 to win.
Coinbase attorneys regularly compare crypto to Beanie Babies.
> "It is akin to the sale of a parcel of land, the value of which may fluctuate after the sale. Or a condo in anew development. Or an American Girl Doll, or a Beanie Baby, or a baseball card," Coinbase attorneys stated in a motion it filed in August 2023. [1]
That’s the thing though: you can’t trade a billion dollars if Bitcoin for USD in a day! Tether, sure, but not actual money.
The original USD sunk into the system is mostly gone, spent on electricity, mining rigs, hookers, and blow.
If you attempted to withdraw that much money, you’d be stonewalled.
The only way to do it would be to hire some coders, set up your own “trading” web site, and convince a million rubes to part with a thousand each on average. You’d have to do this for years while loudly saying “Bitcoin is not fake money” in every Internet forum you can spam, because otherwise the music might stop before you can cash out.
it takes a lot of computational power to secure something so important like protecting a whole digital currency. you can only make profit by creating renewable resources in bitcoin ecosystem.
If it was really a digital currency sure, maybe we could debate on that. But there's no way now the current real usage of Bitcoin is worth that much electricity though.
A crypto enthusiast friend once made that argument to me and it was so baffling.
By this logic, we should all leave our lights and air conditioners on while we're at work or on vacation because it will increase demand and hasten the transition to renewables.
I'm no crypto enthusiast, but that's not the same argument. You are not moving demand to physical proximity of the renewables in that case, whereas miners claim they can.
The correct answer is to connect the energy source to the grid or to do something useful with it at the point of generation. If it's being consumed instead to guess random numbers the economic incentive to do something useful with it is suppressed.
Sure, but the gotcha there is that we shouldn't be using resistive load heaters, they're only 100% efficient. Heat pumps are several hundred percent efficient - 300-600% in fact. Whereas resistive heaters convert electricity into heat directly, heat pumps use energy to move heat against a temperature gradient.
The idea that you can be paid to waste this power just creates economic incentives against the improvements we actually need to be making.
Miners don't really want to use energy only when it's at a surplus though. Because the equipment is expensive and due to the difficulty increasing it's only viable a short time. So this is an argument that also doesn't really fly (and draws attention to another issue; the e-waste)
Leaving stuff on when you are away is completely different than how bitcoin mining demand response works.
Firstly, at regular electricity prices, bitcoin mining is profitable and it is profitable for the utility to run renewables (which in turn means it is/was profitable to build renewables). When there is substantial demand or low supply, then it is profitable for the utility to pay the bitcoin miners to turn off, because the alternative to import power is more expensive. This in turn makes your electricity cheaper. In addition, the additional steady state demand for power allows for more renewables to be built, which further increases the supply during low supply periods. Your AC does not automatically turn off when this happens.
I am one of those enthusiasts making "strange logic" claims. I've been making this claim well before others but I feel that I keep getting downvoted on them off of people's emotion rather than rational logic.
The transition from fossil fuels to renewable energy sources has altered the environmental impact of additional electricity consumption. Where once any increase in consumption was considered harmful due to its reliance on fossil fuels, the rise of renewables introduces scenarios where the marginal environmental cost of electricity can be beneficial if the demand is flexible.
Bitcoin mining has the potential to act as a load balancer for the electricity grid. By increasing its energy consumption during periods when renewable energy production exceeds demand, and reducing consumption during peak demand periods, Bitcoin mining could help stabilize the grid and make renewable energy generation more economically viable.
Bitcoin mining's demand for electricity is unique in that it is primarily cost-driven. Renewable energy generation capacity is particularly volatile. Bitcoin mining power usage can be flexible and responsive to the availability and cost of electricity.
The ability of Bitcoin mining to consume excess renewable energy when it's available (and potentially at low or negative prices) could improve the financial viability of renewable energy projects by increasing the floor price these new projects can sell electricity at. This can encourage the development of additional renewable energy capacity by providing a reliable demand for their output during otherwise unprofitable periods.
To understand why people don't find this compelling (and are sick of hearing it), you probably need to first understand that people consider Bitcoin's profitability a false economy.
In other words: your scenario is identical to GP's except that someone is paying you to run your AC while you aren't at home, rather than just doing it because you can. The logical question is then to ask why they're paying you to run your AC, and that is the uncompelling part: it's not clear that we should be paying people to burn energy to crack hashes.
The carbon fee would lower and possibly sometimes completely remove the incentive to mine Bitcoin on a grid that is coincidentally emitting CO2, when the current electricity generation mix has a large share of fossil generation.
As most (if not all) uses of electricity, Bitcoin mining is sensitive to the electricity price. Introducing a a carbon tax / carbon dividend, doesn't magically make any particular use of electricity economically unviable all of the time. It just pushes the cost equilibria to different values.
People’d find it outrageous if beanie baby collectors were sacrificing 2% of US food production on altars to their beanie babies, because doing so made the beanie babies more valuable to other collectors. Even if some of the collectors were growing their own food for the purpose, et c, et c—it’d still bother a lot of people. Maybe most people.
> it's not clear that we should be paying people to burn energy to crack hashes.
In particular when we artificially increase the energy require to crack said hashes. If hash-cracking was, for instance, bid out on a competitive marketplace[0] instead of limited by difficulty bitcoin would need far less power to perform its 'role' as a 'currency'.
[0]Want to mine a block? Bid for the mining rights (in USD or BTC).
I'm not arguing whether the use of electricity is compelling or not.
I'm arguing that the unique energy demand characteristics of bitcoin mining allow it to support building renewable energy projects and balance electricity costs and thus it has effective positive contribution to the environment.
Whether it's used to mine bitcoins or cool a house is irrelevant, except that the demand for cooling a house is location and time sensitive, whereas bitcoin mining is cost sensitive. This flexible consumption gives it unique properties that support deployment of renewables.
Please explain what you mean by "false economy". Is the economy for skins in a game you don't care about "false" because you don't like that game?
> except that the demand for cooling a house is location and time sensitive
Not if someone paid me to do it. That's the point. If there was money in hauling ACs around the US and running them on the cheapest electricity the local market could provide, we'd have exactly the same false economy.
(Besides: the GP points out that Bitcoin appears to be sufficiently profitable on NYC electricity prices, which are not cheap. They also appear to be sufficiently profitable on "retiring coal plant" prices[1], which undermines any kind of unique incentivization of renewals argument.)
I think the underlying argument also misses the “willingness to pay” on at least a couple parts of the transaction. Specifically assuming the grid provider is going to pay you to use their electricity. (Transmission is still costly and maybe turning off capacity is a better option.) Further, missing the core “willingness to pay” for btc or any other cryptocurrency.
Gold worked as a currency as it was independently verifiable from either side of a transaction. Modern currencies work so long as they’re backed by credible assurances of their value. Ie passing off fakes is dangerous and they may be used as “legal tender.” (That term could itself be further defined via google.) crypto currencies seem to lack this functionality. (Not wanting to abide by any law outside core network mechanics is functionally close to establishing a new form of sovereignty. Only sovereignty doesn’t work like that.) Also note how hyperinflation is dangerous to the assurance of value of a currency. Similarly, any form of instability could shake those assurances.
Modern currency is also almost trivially, embarrassingly parallel.
> Not if someone paid me to do it. That's the point. If there was money in hauling ACs around the US and running them on the cheapest electricity the local market could provide, we'd have exactly the same false economy.
How is such a purely hypothetical scenario useful as an argument?
It's like saying: "If nobody ever did physical harm to anybody, we could get rid of some part of law enforcement." Not useful because it's simply not the case and very likely never will be.
> They also appear to be sufficiently profitable on "retiring coal plant" prices[1], which undermines any kind of unique incentivization of renewals argument.
Bitcoin mining incentivizes any kind of generation that cannot be consumed by a more profitable process or use case.
If the price of electricity on a mostly fossil powered grid is low enough, then Bitcoin mining will be profitable.
Same goes for a mostly renewables powered grid.
There are two ways, politics can handle this:
A) Impose a high enough carbon tax on fossil generation. This will lead to higher electricity prices for the fossil grid, possibly making Bitcoin mining unprofitable. But it will also make other uses of electricity unviable.
B) Regulate that Bitcoin mining is prohibited under certain conditions (location, grid generation mix, ...)
B doesn't appear wise to me. Since it's highly subjective what kind of energy/electricity use one deems useful/legitimate. I personally find the use of a > 100 horsepower private car or a private jet totally illegitimate and would welcome regulation that drastically hinders these absurd uses of energy.
Bitcoin mining is not just an economic activity but a catalyst for innovation in renewable energy. By inherently seeking the most cost-effective power sources to maximize profitability, Bitcoin miners are driving the demand for, and thus the development of, cheap, renewable energy worldwide. This process aligns perfectly with the goal of expanding humanity’s energy supply, a necessity for continued growth and technological advancement. The decentralized, uncensored nature of Bitcoin provides invaluable financial infrastructure on a global scale, while simultaneously incentivizing the energy sector towards efficiency and sustainability. Viewing Bitcoin mining’s energy consumption as a problem overlooks the broader benefit: it acts as a buffer in energy markets, ensuring there’s always an incentive to increase supply and reduce costs. Criticisms focusing on environmental impacts should address the real issue—regulating harmful energy sources—not curbing the innovative push for more and cheaper energy that Bitcoin mining embodies. Condemning Bitcoin’s energy use echoes failed collectivist approaches, ignoring the potential for positive, market-driven environmental and economic outcomes.
There is a finite amount of energy though, so even if it would be optimal to have infinite supply, we can't.
And even if that weren't the case, your argument still makes no sense. Every watt that Bitcoin mining incentivizes is then consumed on Bitcoin mining, it's a zero sum game.
It's like building heaters in the desert: if you're willing to spend money for 1GW of electricity to run your heater, someone will build a 1GW plant for you. Now there is nominally one more 1GW plant in the world, but there is 0 extra available power, you're using up all of it to heat the desert.
Your argument reflects a fundamental misunderstanding of both energy markets and the role of Bitcoin in the modern economy. Asserting there’s a ‘finite’ amount of energy oversimplifies the issue and ignores the capacity for human ingenuity to tap into ever-more efficient and renewable energy sources. The notion of energy being a zero-sum game is a defeatist and static view that hampers progress.
Bitcoin mining, far from the wasteful ‘heating the desert’ analogy you propose, incentivizes the development of excess energy infrastructure that can be redirected or scaled based on demand fluctuations, acting as a catalyst for innovation in energy production and management.
Moreover, your argument smacks of a dangerous ‘divide the cake’ mentality, suggesting we should cap our aspirations and limit access to energy and technological advancement to maintain a status quo. Should we tell emerging economies that they must forego the benefits of modern technology because we’ve decided there’s simply no more room for energy growth? That’s not only patronizing but inherently regressive.
The beauty of Bitcoin and its underlying energy consumption is that it encourages the search for more efficient, cost-effective, and often greener energy solutions. This is not about wasting resources; it’s about driving forward a future where energy is more abundant, accessible, and sustainable for all. To stifle this under the guise of protecting resources is to deny the very essence of human progress and innovation.
> ignores the capacity for human ingenuity to tap into ever-more efficient and renewable energy sources
> Bitcoin mining, far from the wasteful ‘heating the desert’ analogy you propose, incentivizes the development of excess energy infrastructure that can be redirected or scaled based on demand fluctuations, acting as a catalyst for innovation in energy production and management.
You do realize that the article here is directly pointing to evidence that the bulk of large bitcoin mining operations are being driven from existing fossil fuel plants that seemed to be on their way to decommissioning?
This is what I don't like about your argument: it's a standard Bitcoin talking point, but people struggle to point to actual examples of Bitcoin mining spurring investment in renewable energy, while it's easy to point to actual examples of Bitcoin mining spurring investment in decommissioned/decommissioning fossil fuel power plants. The facts on the ground just do not support your argument, period.
Yes I am aware of the propaganda article contents.
Blaming Bitcoin for enabling these fossil fuel plants to continue is a red herring that distracts from the real issues: ineffective global energy policies and the threat Bitcoin poses to centralized financial systems. It’s easier for governments and critics to scapegoat Bitcoin than to admit their failure in promoting renewable energy or to face the uncomfortable truth that Bitcoin challenges their control over monetary policies. The narrative that Bitcoin only supports dirty energy is a convenient oversimplification, ignoring the broader economic incentives at play and the potential for technological innovation to drive a shift toward renewable energy sources. Let’s not mistake symptom for cause; the focus should be on fixing flawed energy policies, not demonizing a technology pushing for decentralization and innovation.
I’m still stuck on the first bit; you seem to sincerely believe that bitcoin is good for the environment, whilst also acknowledging it’s mainly powered by coal.
One can justify all sorts or environmental destruction with this your argument. Pouring oil on the beach is pushing local regulators to act, spurring the creation of less harmful lubricants.
Comparing Bitcoin mining to pouring oil on the beach is intellectually lazy. Bitcoin incentivizes the search for the cheapest energy, which increasingly means renewable. Unlike oil spills, Bitcoin’s ‘harm’ is driving a real search for energy innovation, not just cleanup. Moreover, it’s serving a crucial economic function, providing a decentralized financial system that aligns incentives with human progress. Trivializing such a groundbreaking innovation overlooks the broader benefits it offers in terms of both economic freedom and the push towards sustainable energy solutions.
The energy isn’t making anything and it’s causing harm mining due to its vast energy usage. Buzz words and greenwashing don’t change that. Scrounging for the cheapest power source doesn’t make it special, everyone wants cheap energy.
We have money whether or not you mine crypto and time will tell whether or not its groundbreaking innovations free us. So far it’s been scams, hacks, failures and waste. Let’s see what happens next.
Your dismissal of Bitcoin as mere ‘buzzwords and greenwashing’ overlooks its tangible achievements and real-world impact. Bitcoin is not about ‘scrounging for cheap energy’; it’s about fostering a decentralized financial system with over 100 million users worldwide and a market cap surpassing $900 billion. Beyond finance, Bitcoin’s transparent, immutable ledger offers unparalleled resistance to fraud, censorship, and corruption. Its technological innovations, like the Lightning Network and Taproot, are pioneering advancements in cryptography, economics, and beyond. With an uptime of 99.98% and a network secured by a record-high hashrate, Bitcoin’s resilience and reliability are indisputable. Dismissing it as scams, hacks, and failures not only ignores these significant contributions but also trivializes the global movement towards financial sovereignty and innovation. The real waste is in failing to recognize Bitcoin’s value and potential in driving forward not just financial, but societal progress.
Every industrial power user inherently makes the most cost-effective choices to maximize profitability. Some can't be selective, eg if you run trains or a steel mill you have to keep your power flowing whenever people want to move or prevent your furnace cooling off. But many industries can adjust production to fit power availability.
It's not clear to me that Bitcoin delivers sufficient economic value to justify the vast power demand. What utility do all these hashes provide, except to other people who bought into crypto trading? If there were some positive externality that'd be great, but there's no inherent value to crypto beyond the artificial scarcity.
Those who espouse the views you adhere to, which, let it be known, represent the prevailing orthodoxy, do so out of a marked deficiency in their comprehension of the true nature of currency. Their understanding is not founded upon rigorous study, nor is it informed by an appreciation of history and the lamentable legacy of state governance—the manifold tragedies it has authored, encompassing widespread destruction and the lamentation of countless souls. The auspicious circumstance in which humanity presently finds itself has been attained not because of, but rather in spite of, the modern nation-state and its fiat currency.
The worth of a decentralized and uncensored monetary framework is beyond imagination; it promises to unleash the inherent vigor and potential of an organic market-driven capitalism, unfettered and boundless. Such a system stands poised to precipitate the downfall of the fiat regime—a mechanism that has empowered governments of every stripe to engage in warfare and to subjugate their citizenry, not excluding even the most free and illustrious nation such as the United States.
Spare me the GPT-generated pomposity, and try making an argument in your own voice instead. Are you seriously going to claim that all war has been caused by governments and private interests have never engaged in violence? What nonsense.
While I have not claimed that private entities are exempt from engaging in violence, the essence of the state, is it not, lies in its exclusive dominion over violence, ostensibly to foster a non-violent society?
This assertion is far from nonsensical; it is a veritable truth, one conspicuously absent from educational curricula, likely because states find the acknowledgment of their historical predilection for violence too ignominious to bear. Taxation stands as the state’s principal means of amassing resources. Yet, for those states compelled to engage in warfare, mere taxation proves insufficient. Here, the utility of modern fiat currency becomes apparent, facilitating the acquisition of resources beyond what a transparent tax rate would permit. Through fiat, the dilatory effects of inflation serve the dual purpose of either being dismissed as unrelated in the event of victory—perhaps offset by the spoils thereof—or, in the case of defeat, rationalized as a war’s consequence. Regardless, the result is the same: a surreptitious expropriation of the populace’s wealth.
State-initiated actions, notably famine and war, rank as the foremost causes of human mortality, surpassing even health crises and natural calamities.
The inception of the modern fiat system, marked by the establishment of the Bank of England, was explicitly intended for waging war. Indeed, the very creation of the contemporary British Pound was predicated on this bellicose objective.
P.S.: Please excuse the grandiloquence of my discourse; consider it a charming anachronism. I hail from the future, having spent several delightful decades marooned in the 1800s. Only recently have I elected to grace the early 2020s with my presence, and it appears my linguistic preferences have yet to acclimatize to the present era’s vernacular.
Money is just another technology. As a technology it has existed in various forms over thousands of years.
Technologies see continual innovation and change, with various actors and various motives influencing their use, function, reach.
Governments of various forms are our current best method- govern-ance- for managing human-scale assets, resources, and technologies with collective purpose and implication.
Moneys- currencies- as a technology are one of those human assets owned and managed by governments, like land, and other resources. There are over 200 distinct currencies in the world.
The mechanism for this management is based on the notion of a ledger- the record of balances, of debts, of interest, and the creation- inflation- of money supply in the context of that management.
Most governments are poor at this management when measured by how well their implementation of this technology that is money serves the needs of most of their populations.
Governments themselves- both "democratic" and non- in their current form are fragile and vulnerable, with the powers of governments utilized against portions of theirs and other populations.
BTC is a technology, a cryptographically-secured system of record- a ledger- that can be used as a money. It is not under the control of an existing government.
By collective agreement of its participants, a complex balance of users playing different roles with different incentives and risks, the rate of creation of assets recorded there is managed to a low level of inflation. As such, as a technology utilized for money, it is a stable "store of value" in contrast to the moneys supplied by literally every government.
The ledger, the system of record can be preserved- secured- if and only if it is too expensive for attackers to change it. The turning of energy into hash minting is the security for that system of record.
That's it.
Adopting a mindset where the above argument takes hold involves a kind of leap of faith. It is a belief. Sure, a religion. The game theory/mechanism design behind BTC is a true innovation, the first demonstrated solution to the Byzantine Generals problem.
There is an argument- won't people stop believing in it?
Maybe? I would suggest evaluating that argument against the lifespans of other innovative beliefs.
Is it something that comes and goes, or is it like the eye, an invention of evolution that solves a specific problem and appears distinctly and repeatedly in different organisms once they hit certain levels of complexity.
One thing I don't get about the "store of value" belief in Bitcoin is: why specifically this chain? It has only network effects going for it. Mindshare is a fickle thing.
It was first, and first mover advantage is significant, which has turned into network effects and inertia, and now with the ETF recognition has gained "official" validation;
Anti-inflation is one of its core design principles, is the basis for store of value, and commitment to it has remained solid;
After ETH PoS changes it remains the only proof of work chain. PoS has belief failure modes that can lead to collapse of value. PoW-based value by definition is secured by the cost of the work. It is a financial equation- a ledger can be maintained at the underlying cost of recoverable energy- not a political/fashionable one.
Mindshare can be fickle, and if purely based on fashion, if there is no inertia and there are adjacent equivalents, value can be lost quickly. With BTC there is inertia, because at a deeper level there are no adjacent equivalents. BTC continues to occupy a unique niche in the design space of these artifacts/assets.
Sure as long as people believe in Bitcoin it will keep existing. Like other currencies.
I can see the inertia argument. Why switch when it works. I still don't see the store of value argument when Bitcoin requires such exorbitant amounts of energy to keep up. That's a tax on the value. "Look how much energy it's using, it must be worth a lot!"
Yeah, the store of value idea is pretty abstract and most people are completely unfamiliar with the various functional aspects that make money in general a store of value, or, rather, a lack of store of value, given the pervasive practice of currency inflation practiced by every central bank.
People can wrap their heads around there being "value" in an "asset" because it has "revenue streams" associated with it- that's what property and being a landlord is about. You can charge rent, so your property has value. That is very familiar because everyone either owns property or rents property. And then they look at BTC and are like- there are no revenue streams, any "value" is just made up.
Gold, a scarce/low supply inflation asset, and former money, is a good mental model for BTC, but it is completely unfamiliar to most folks, and not even the notion of metal coin being intrinsically valuable applies in any economy any more. In fact if anyone thinks about gold, they probably think people who put value into it are deluded.
People also can understand different currencies having different relative values, some being stronger, some being weaker. Why that is is generally a complete mystery. People think of strong currencies coming from "strong" countries with "strong" economies and weak currencies coming from "weak" countries with "weak" economies, where strong and weak roughly correspond to military capability and economic industrial capacity and diversity.
There is some truth in that mental model, but since BTC is not really "used' as a currency, it doesn't get to be slotted in to the currency mental map.
The actual function that BTC is starting to serve and that is critical to the functioning of all modern economic entities, whether governments or private enterprises, the notion of a "financial settlement layer", is completely unfamiliar. So yeah. It is hard to get traction when the machine is mysterious, to abuse a metaphor a bit.
The unnecessary energy waste argument though is an interesting one, eg where BTC is wasteful like just running your A/C unnecessarily or whatever. The most relevant comparison is looking at something called "home idle load" which in the US is basically the background appliance energy use. BTC total electricity use is in fact a tiny fraction of home idle load, which people don't really get exercised about and many when buying new appliances pay little or no attention to.
If one doesn't see the purpose for the use of BTC energy- which again is an unfamiliar concept of the need for "security" for a system of record- people do see the purpose for the wasted home load energy. They need home appliances, they just wish they were more efficient. That BTC mining becoming more efficient would not result in the network using less energy, in fact, the opposite would occur- this is also strange.
Anyway- I agree with you, it is a set of completely novel concepts that interoperate in ways that are very different from existing related and familiar mental models.
That is why to my mind the only way "in" to arriving at an understanding is to look at money- all moneys- as technology, as technical machines that are different implementations of accounting rules.
BTC is a "store of value" "secured" by burning energy because it is an asset system of record, a ledger, that uniquely for the first time in human history cannot be changed either directly or indirectly (e.g. by inflation) by a political actor who "governs" it. The "value" of a BTC is mathematically related to the cost of energy, and to the demand for use of that sort of ledger. What we have seen is that there is significant and growing demand for this sort of ledger, a ledger that is independent of the political processes that exist in every government, and were some problem with BTC itself to emerge, there are now different implementations o...
I don't like the comparison to gold, because gold just sits there. It's a stable element. Bitcoin needs a variable amount of watts for upkeep. Who is paying for those watts and why?
If we're talking about the value of a currency, we're talking about what we can get in exchange for it. And when we talk about the store of value, it's what we can get in the future. With Bitcoin, we know it must burn energy, so we can get something only less that energy. The currency may get more "believable" due to the burning, when you look at sacrifice as commitment. But what are they committing to? Burning more in the future, because they now have coins they want to keep their value?
The funny thing is that most people trade in virtual Bitcoin they don't control. Because it's more comfortable and the ledger doesn't support the volume. So they need a government to assert their claim on their coins. I guess one can't even get Bitcoin from their ETF and needs to round-trip to some other currency.
The market is settling out of chain, because it's cheaper.
Thanks for the engagement. Not sure if you are asking rhetorical questions to make a point about why BTC seems pointless. I don't necessarily disagree, it's speculative. But for the sake of clarity will say that I think there is a real innovation in BTC and those questions, rhetorical or not, do slightly miss the framing of the innovation.
Will try it this way. The store of value is a derivative result of the actual innovation, which is- BTC for the first time is a computationally secure mechanism that provides a system of record, the contents of which are somewhat resistant to political attack and manipulation.
A system of record is the basis on which rule of law exists, the basis for accounting and financial transactions, the basis for property, etc. Proof of Work vs Proof of Stake vs others as the "costs" for maintaining those systems of record, are experiments, empirical discovery processes to see which one(s) over what timeframe hold water.
Specifically to the points:
> BTC vs Gold
Yes. BTC is a technology that has wider use cases than gold. Store of value is just one use case.
> Who is paying for those watts and why?
Right now, people who want to make money, it is economically viable to turn stranded energy into "mining". Who is benefiting from the use of the ledger for store of value and medium of exchange? Often, not always, elements considered criminal by most governments as well as people whose legitimate needs are not being met by their governments.
> store of value...we can get something only less that energy
This is where I think the disconnect between the mechanism that BTC is, and these "rhetorical" questions, is greatest. BTC is a system of record platform. We have lots of other ones. All systems of record require upkeep. They are out there, they are expensive, we don't think about them. They are just people's jobs. Every county has a system for property and title maintenance. Every single financial institution has a ledger- many ledgers. etc.
Many of these ledgers are private. Oracle, the database company, originally became a big business on being the underlying mechanism for millions of private systems of record around the world. In every one of those ledgers, there is a DBA who can do UPDATE X SET VALUE = Y WHERE KEY = Z and often does- certainly "legitimately" governed by the various policies and protections and business rules and so forth that apply to the ledger. But sometimes those UPDATE SQL statements are "illegitimate" and those often occur when the political and governance mechanisms in the business or in the country are breaking down.
There isn't any of that SQL manipulation in BTC. Storing asset holdings is again, just one use case. Attestations, like on off-chain ownership, are another.
And to be sure:
> The market is settling out of chain, because it's cheaper
Absolutely- or rather, there is a lot of implicit cost hiding and inertial convenience in existing systems, as one would expect. And they work "well enough" in a "worse is better" sense. BTC may be too good, too "perfect", too expensive, as a system of record, long term. We'll see.
My questions are not rhethorical in the sense that I do wonder what makes people think Bitcoin represents something useful.
At the same time I have a hard time accepting that people could see use in the inherent waste of energy. And it irks me when it's framed as use of "stranded energy". Because that's far from reality.
I've heard two voices so which is it to you? Is Bitcoin useful now and worth the lost energy? Or is it an experiment of an interesting tech gone too far?
I think it's here to stay. I buy the thesis that money is a technology, and BTC is a step in that evolution. Whether I think BTC is "worth the lost energy" is not really a useful question in that larger context. It is a technology that cannot be legislated or controlled to the point of shutdown, even by/in China. As a technology it has unique use cases, so even in the face of political pressure it will just shift and move and crop up in new contexts. It is a virus we are stuck with now. It can't be unmade.
Relative to other blockchains, like PoS ETH, etc- the question of whether BTC is "worth the lost energy" does have meaning. I think when one looks at the full spectrum of use and failure cases, the "lost" energy is an important part of the value proposition that BTC as technology offers. I don't see ETH or other PoS replacing it. Instead they are kind of complementary.
As a technology, like all technologies, BTC certainly has costs and externalities. Money as a technology is as important, say, as transportation technologies. So look at cars. Cars powered by internal gas-fueled combustion engines could definitely fit into the classification of "experiment of an interesting tech gone too far" given the incredible waste, ecological and sociological damage, and climate impact car-based travel and -based societies incur that, for instance, are lessened in mass transit-based societies. But we are stuck with cars, their global use continues to grow, and we're adapting, introducing and scaling electric, more efficient materials for roads and the vehicles themselves, safer automated driving, etc.
There is no going backwards. BTC and its ilk are part of the future, for both good and ill, IMO.
Specifically as a store of value, I do think BTC has a bright future. I have a small portion of my net worth in BTC, small because there are still non-nil risk and failure cases that could impact it specifically, and diversity across risks is important. It is also important to understand what one is getting oneself into in terms of one's investments. It is an "active" investment, not "passive." People who are looking for passive-like benefits should not look for them from anything in the "crypto" space.
Well thanks for answering! I still can't see the "value proposition". It feels weird when Bitcoin's properties are posed as sort of a natural law. Like when people compare it to the rareness of gold. Even though it's a cultural artifact!
One thing I'm wondering: did you acquire actual Bitcoin, or title to it?
Re: cultural artifact- yes, it is, but- if you are familiar with "mechanism design"- BTC is a game that incentivizes and rewards narrow-only adherence to the rules that are in fact established by culture/behavior and seemingly could be easily changed- but won't be, because the incentives are all aligned against change. This is kind of how "inertia" in the sense from earlier in the conversation comes about. And that the game was structured this way by the author "Satoshi" I think, again, is a genius-level innovation. The first solution to the Byzantine Generals problem. Now we have a lot of them but that one was first.
In the crypto space there is data to quantify the cost of divergence. People who want to just get off the train- fine- there are others willing to play/drive.
Re: actual BTC vs title- the BTC I count is that which I only have title to, e.g. held by a custodian. Yes, not your keys, not your coins- but as both a technologist who has had to manage- and has lost data- and as someone also with a background in the financial space- custodianship is one of those essential cultural/behavioral features- it only works if people follow certain rules, and those who do not are punished. My custodians have been around for a while and are I believe properly incentivized. As such they will be better suited to asset management than I am, as a single point of failure. Once more mature multisig/social auth workflows are worked out I will probably move to those. I am lucky to have partners who can play parts in those.
The issue with your argument is there's no real evidence that Bitcoin mining is spurring investment in renewable power plants, and quite a bit of evidence that it is deterring disinvestment in dirty power plants. Furthermore, the links you point to start out by talking about how Bitcoin miners are being paid to not mine.
It's actually rather more like "we'll rapaciously use energy to bring the grid to its utmost limits, but don't worry, if you pay us lots of money [in some cases, more than we get from our regular business!], we'll happily not use quite enough to actually cause it to buckle and fail." Sounds like an extortion racket, doesn't it?
> Where once any increase in consumption was considered harmful due to its reliance on fossil fuels, the rise of renewables introduces scenarios where the marginal environmental cost of electricity can be beneficial if the demand is flexible.
This is a major flawed assumption. Even in a 100% renewable world, every extra watt consumed carries an environmental cost. It is of course less than when burning fossil fuels, but it's still there, and not necessarily even that small.
> The ability of Bitcoin mining to consume excess renewable energy when it's available (and potentially at low or negative prices) could improve the financial viability of renewable energy projects by increasing the floor price these new projects can sell electricity at.
The world has not run out of useful things to do with energy yet, so this is already a bizarre claim. But even ignoring the uselessness of Bitcoin for a moment, this clearly incentivizes the wrong kind of renewable development. If you need to turn your power to Bitcoin to be profitable, that means you can't afford to store this power even as the technology to do that improves. And if you can't store the power, then you can't be part of a fully renewable grid, so you're essentially building the wrong thing and it's better to leave the resources alone to be used in other projects that can actually be self sustaining.
> Bitcoin mining has the potential to act as a load balancer for the electricity grid. By increasing its energy consumption during periods when renewable energy production exceeds demand, and reducing consumption during peak demand periods, Bitcoin mining could help stabilize the grid and make renewable energy generation more economically viable.
Lots of things have the potential for lots of things. But we need to operate on the reality as it exists, and that reality is that Bitcoin uses a phenomenal amount of power, to the point that people are paying Bitcoin miners to not use electricity when the grid is at capacity (as mentioned in the article).
I see your point but disagree with it. It's not load balancing because you're not putting anything back to the grid at times of high demand. Yes, you're incentivizing production of renewable energy (good), but that could be done equally well by investing more in batteries, whether of the chemical or gravitational variety.
Interestingly whenever this kind of thing comes up, I also hear cryptocurrency critics use the energy argument to deride blockchains in general.
They don't seem to understand that Bitcoin alone accounts for 98% of all cryptocurrency energy usage due to its uniquely energy-intensive algorithm. Hypothetically if Bitcoin were shut down, crypto would be as energy-efficient as any other distributed/federated technology.
How proof of stakes is fire proof is harder to understand, and the information I found did not 100% convince me (not an expert in cryptography so doesnt mean much)
I never put money into crypto btw. Its just gambling right now imo.
There are upsides though. It does add to grid resiliency, as the loads can be easily shed. It does make more funds available for investment in the industry. It's not clear that reducing loads would lead to quicker investment in renewables.
I also don’t think most people realize just how much energy it uses. It is mind blowing. I remember doing some calculations a couple years ago and discovering that if you took the total energy spent on mining bitcoin per year, and divided it by the number of transactions per year, each individual transaction would use more energy than driving across the entire country from New York City to San Francisco in a Tesla Model 3.
The entire system is just so incredibly stupid and inelegant. If you really wanted to build something like this, you could at least have designed it in a way were the work done serves an actual purpose.
i don't understand what the actual consumption has to do with anything. That power that is used in not free - consumers actually pay for it. Unless you are suggesting that we should have regulations around what we can use power on the whole point is moot.
Somehow I live in a different reality where my actions have consequences and I think about them. In that reality, free markets are just a tool. To be used when appropriate.
In the reality I live in money rules everything. I have goods I want to buy, I have money. I exchange money for goods. I am alergic to people that get on their high horses about what I am allowed to spend my money on.
Bitcoin doesn't fall in the category of goods though. It's a service. If it stops operating, any "coins" it had allocated are just bits in the wind.
Now you may say you should be free to spend money on the horrendous energy bill of those miners, so that they allocate some coins to you. If there were no externalities, I'd agree. But since there are, I will argue against doing it. And we won't bridge that divide here I guess.
Free markets only work up to a point. Once you start having hidden costs that don't enter the equation, like climate change or excessive consumer prices due to supply not catching up with demand, is when other control mechanisms are needed.
Yes, sure, we can look at things on a case-by-case basis. It’s pretty easy to look at something like bitcoin and see that inefficiency is the purpose rather than the byproduct, and then make regulations about that.
> because of how competition over mining rewards works, [bitcoin] has the characteristic of consuming more and more energy the more it succeeds.
New bitcoin from mining is halved every ~4 years, so every four years miners can afford to spend only half as much electricity to mine from that revenue.
As revenue from new bitcoins tapers off the work expended will self limit to the value of transactions. If you're charged 1% to include your transaction the value of energy used to mine a block will eventually not exceed the fee for including those transactions.
So it doesn't have the characteristic of consuming more and more energy and is self-limiting in how much energy is used. The bitcoin energy problem will take care of itself in time.
I don't buy this argument (just like the point you are responding to is mostly wrong too). Yes it won't consume more and more but it won't consume less and less either. Miners are n't going to mine a loss it will always be SUM(rewards + fees). The network has to be secured or bitcoin loses all perceived value. Difficulty will have to creep upwards as technology improves. The question is will there be a way to mine more difficult problems using less power. That is the only way bitcoin power usages stops growing (slowly).
> The question is will there be a way to mine more difficult problems using less power. That is the only way bitcoin power usages stops growing (slowly).
That's not how it works. The whole point is to spend power (work).
If there was some breakthrough that allowed finding hashes with 10x less electricity, then the network wouldn't burn 10x less electricity. It would instead find 10x more hashes.
> New bitcoin from mining is halved every ~4 years, so every four years miners can afford to spend only half as much electricity to mine from that revenue.
Not exactly. Miners are paid out of the sum of block reward and fees multiplied by the market price of BTC. Every ~4 years the contribution of block reward goes down, but that doesn't mean that the price goes down, or that the contribution of fees stays the same.
If it was block reward alone and the "energy problem solved itself" then the blockchain would be completely vulnerable to a 51% attack and it would instantly become worthless.
The expectation is that the contribution of fees will go up as the block reward goes down, although it remains to be seen how much direct fee the market will bear. Currently the actual cost of a BTC transaction is hundreds of dollars - but most of it is socialized via inflation. It is unclear if the market will bear paying hundreds of dollars in transaction costs instead -- and if not, there's no reason the 21M coin limit can't be raised to continue doing exactly what has been happening so far.
> Currently the actual cost of a BTC transaction is hundreds of dollars
I thought... huh, this can't be right. So I did some back of the napkin math. We have about 2500 transactions in a block, a block reward is 6,25 BTC. That comes around a cost of 0.0025 BTC per block, or about 112USD. That's without considering the extra tip from the transaction. So, not really hundreads, but damn' close.
It makes me think increasing the block size really wasn't a bad idea.
> there's no reason the 21M coin limit can't be raised to continue doing exactly what has been happening so far.
Sure, but you'd need a hard fork. Not impossible, but hard to reach the consensus.
IF there were people running bitcoin rigs only 4-5 hours per day when the duck curve peaks, it would be plausible for it to incentivize building more solar because the profit is more consistent. Which could be a net positive even though that power gets wasted, since a lot of it would get wasted anyway.
That's me. I am mining only when my Tesla Battery is above 80%.
I have a node-red automation that keeps all of this in check. Mining stops when battery reaches 60%.
It basically runs all day from April to Oktober.
My solar system now has a roi of 6-7 years if everything works out. 2 years in the experiment. I am planning to invest mining profits in other environment friendly projects.
Here in Germany you only get 8 cents/kW from the state. Mining doubles that. Sometimes even triple. During the ETH run it was even 5 times more.
Fun thing 90% of my overproduction still reaches the grid. My mining rig only uses 300 to 600 watts.
Next I am planning to integrate awattar (dynamic price provider) to mine when the price of electricity is negative or close to zero. This happens sometimes during the night because of low demand and wind turbines going strong.
What fraction of miners are doing this? Keep in mind this means they have to get pretty expensive equipment and leave it idle more than 80% of the time.
Energy is fungible anyway, so if it comes from renewables that means that renewable energy can no longer go towards other applications. The pollution is simply outsourced to other non-renewable applications
(Why) do you consider Bitcoin to not be a waste of energy, independent of TikTok or Reddit? What problems has it solved in the last decade that would make it sensible to shut down Reddit before you shut down Bitcoin?
(I'm not even climbing up the tree of Bitcoin's energy consumption being many multiples greater than Reddit's.)
what gives you the right to bucket something as waste? maybe to some people tiktok is a waste of energy, resources, time. Some people would argue that alchohol consumption is wasteful since it does not have any health benefits?
ultimately, once you start thinking you have the right to ban things you should be prepared for someone else to ban things you enjoy.
I give myself the right, as having an opinion. It feels like you're saying that all opinions are equally valid and that we shouldn't strive to critically evaluate and debate things.
While there are different ways to evaluate any given topic, all opinions are not equally valid.
you can have your opinion, but ultimately the question is: do you want me to tell you what you are allowed and what you are not allowed to do with the electricity you PAY for?
you may not like what I do with the power I PAY for but you don't get a say in how I use it.
Social media has - in my eyes - peaked and is in a continuous cycle of enshittification. Youtube, Tiktok, Reddit et al. are built on inducing compulsive behavior in people to feed their business models.
While Bitcoin arguably parasitises energy, social media parasitises human time and attention (which is a much scarcer resource), all while breaking down political institutions and societal cohesion and being a tool for foreign actors to manipulate people on never before seen scales. Social media is "move fast and break things" on a societal scale.
Bitcoin is at worst a speculative asset (no worse than most financial assets) at best a new monetary system in its infancy (unlikely but possible). It is clear to me which technology has more of a raison d'être.
I guess social media pays the salaries of most people on this forum, so the old adage "It is difficult to get a man to understand something, when his salary depends on his not understanding it" applies.
Or maybe I'm completely wrong. It's happened before. The future will show who is right.
everyone like to scream free market until they run into something they don't like.
If I am paying for the electricity do I have the right to use that electricity however I like? Next time you don't like how much electricity "bitcoin" uses ask yourself: am I okay with the government dictating how I am supposed to use electricity? in fact, am I okay with the government dictating anything that can and should be adjustable through the free market?
Probably sheer magnitude, no? The Google results for "how much power data centers use" show numbers between 1% and 3% (it's similar numbers whether I specify global or just the US). Let's assume that's at least somewhat accurate.
If we believe both statistics, then crypto mining uses roughly as much electricity as all data centers. But data centers drive so many different industries and benefit people in countless ways- entertainment (as you mentioned), financial, education, communication, etc, etc.
Crypto is like. Neat? There's some people who benefit greatly from it, sure. But broadly compare how different society would look if crypto didn't exist (not different at all, I'd think?) to how different it would look if data centers didn't exist. Looking at it that way, it's crazy that they at all use similar amounts of electricity.
Because of the demand curve. I can only read so much Reddit, and watch so many TikTok s. devoting all my waking hours to those, I'm still only going to be taking our watching one person's worth. Meanwhile, Bitcoin mining will scale to the amount of money I am willing to throw at it.
Like what? You really believe people are mining BTC in Manhattan?
For mining to be profitable, cost of energy you put in must be lower than the value of a Bitcoin. Where is energy cheap? Not where there is a need for it, like you claim, but where it is wasted. You don't mine BTC in Manhattan, you put a Bitcoin farm mining off peak on a hydroelectric power plant in the middle of nowhere, China.
Please let's stop this nonsense of Bitcoin stealing energy from who needs it the most, as it is utter baseless nonsense that just betrays total ignorance on the simple concept of supply and demand, and why things are priced a certain way.
That doesn't change the extreme: "Taken to the extreme it is an accelerated track to causing a black hole given the incentives of the network and the requirement of computational space having a physical necessity to provide the substrate for it to continue."
Bitcoin is the only solution to really "owning" your money.
Everything in your bank account can be stolen / frozen / or made "inaccessible" at a moments notice because of some vague bullshit reason like supporting right extremists or terrorists - even if you donate a single dollar - like it happened in in 2023 Canada / freedom convoy.
Everything a bank claims to be secure/safe goes away like a poof of smoke if it really comes down to it. The can't be any safety in our increasingly multi-polar world the political boundaries are redefined daily. Today Russia/China is the enemy, tomorrow it's some other country that will suffer economical sanctions. Or your own country decides to apply punitive measures against some minority group because of political opinion - all the control mechanisms are there and politicians are itching to use them.
2. It's less than our current banking sector
Yeah, consuming this much natural resources / electricity sucks.
That's the alternative?
Do you count how much money is spend on the banking spector as a whole? I assure you it consumes much more then the 2% in capital expenditure - so indirectly it's more (you could have build renewables with the same money) .
3. Scalability
About the famous argument that bitcoin does not scale: the 7 transaction per second argument -> this problem is completely solved by the lightning network. Lightning protocol does the same with much lower transaction cost and much less energy usage - something like 100x less. Yes support at major vendors is still a bit lagging behind but that's only temporary.
Need a 100% confirmation? Do full transaction (for example for accounting purposes). Small sums and personal funds -> can be completely handled by a lightweight lightning network transaction. Bitcoin is a highly technical solution and there are myriad ways things can be improved upon if scalability really becomes an issue - even if the lightning network would become saturated.
Bitcoin is actually useful for the people, so spending energy on it is not a waste. The waste is something not useful, like 877 billion U.S. dollars dedicated each year to the military of the United States. Or would you say it is an efficient spend and it is incentivised for even MORE efficiency?
Not everyone around is supporting the idea that the government scam and it's "real" money is the best option for us all. Electricity is burned in exchange for the utility of the bitcoin, avoiding operations with traditional state-issued money, having a currency which nobody truly governs or controls but the people, and it is definitely here to stay since it is a revolutionary financial instrument. If it wasn't, it would simply be gone, and no-one in his sane mind would be "turning electricity into heat" for nothing.
It is a natural economical progression for the humanity, to have the money nobody owns, and the maths behind it make it happen having it's natural energy toll, which is way more efficient that of any government. Commies go downvote, it is your bread
It sure would be nice if more people noticed proof of stake cryptocurrencies (which cut electricity usage by something like 99.99%) like Ethereum instead of the prevailing Bitcoin myopia.
The minimum staking amount is very close to zero. Of course, directly participating in consensus by having the opportunity of building blocks requires 32 ETH (≈$75k), or 16/8 ETH ($37k/$18k) if you run a pool for other people through e.g. the trustless Rocket Pool system.
The minimum cost to acquire an ASIC so that you can even _contribute_ to the consensus is very high (thousands), and to be profitable you have to have close to free electricity. The ironic thing is, that in PoW the "rich get richer" is abstracted away into a combination of economies of scale, and access to free/very cheap power. Plus all the e-waste and wasted power, whereas PoS runs on e-waste people run in their closet, pulling as little as sub-10 watts.
This centralizing effect is actually much more powerful in proof-of-work than proof-of-stake.
Anyone can stake and earn the same % rewards, regardless of how much they have. But if you're bankrolled with hundreds of millions of dollars, you get a much higher mining % return than the little guys because you can design and manufacture your own silicon (or get bulk discounts), colocate next to power generation, and buy electricity in bulk.
Proof of work is converted into proof of stake trivially all the time. You stake by buying lots of mining hardware and power. The more you spend (the richer you are) the more you gain. The work part is just a wasteful, unnecessary step.
It's even worse, because with $1k I can barely afford one miner locally. With $1M, I can afford to buy many (and better ones) and put them in an efficient location with a custom energy plan, etc. This means the actual PoS has linear gain, but PoW is closer to exponential. (The more you have the better the RoI % you can afford for yourself)
If I was rich I could hire a security contractor to steal Bitcoin keys. Or hire a mobster to hit someone with a $8 wrench until they give me the keys. Or hire underlings to create a scam investment vehicle to steal Bitcoin. The opportunities around!
In fact, I'd wager that the majority of opportunities for the rich to enrich themselves exist outside of the pure economic simulation world that bitcoiners use to motivate the existence of Bitcoin.
Obviously this is useful to someone or are we starting the culture of power shaming?
Seems like some section of the media found that drugs / money laundering angle doesn't resonate with people so they try going about power usage.
Sure if you don't use Bitcoin it may appear to you as wasteful, but so someone who doesn't drive may feel about people charging they cars if they could just walk or cycle.
Ultimately, if they pay the bills, then what's the fuss about?
> Ultimately, if they pay the bills, then what's the fuss about?
It's massive waste? How would you feel if someone bought 2 billion gallons of gasoline just to burn it in the middle of a desert biggest fire humanity has ever seen?
I would want to make sure their purchase were taxed at a high enough rate to replace that gasoline with renewable energy, on top of the usual sales taxes. If that were the case, I would tell them to go for it, as their purchase would be a net benefit to society.
If the energy used by bitcoin mining is irreplaceable, that just means we're not taxing it enough to replace it properly with renewables. The solution is simple, just tax industrial energy use so that it's not underpriced relative to the externalities it creates. Spend that tax revenue on bulking up the grid with renewables. Then let people buy however much they want and do whatever they want with it, at the right price.
But we know those taxes don't exist right now. That would be a way to fix the problem, but it sounds like you agree that the problem exists and the burning in the thought experiment is a bad thing.
If we start telling people what they can and can't use legitimately-purchased energy for, we go down a dangerous path very quickly. We might as well tell people what they can and can't use wood to build, or what they can and can't use an internet connection to transfer (i.e. net neutrality).
If you purchase gasoline, it's not my right to tell you what to do with it, insofar as it doesn't create additional externalities from that point on, like if you pour it in a river or something. You legally own it now, you get to do whatever you want with it. Same with wood, same with internet bandwidth - this is generally how private property should work.
The burning in the thought experiment is actually the least bad thing imo. The alternative is to seize property from someone who purchased that property legitimately, which is unacceptable.
As a side note, burning gasoline for no reason is pretty close to what billionaires do whenever they fly their private jets. It's a fact of capitalism, and it will exist for as long as capitalism exists.
> If we start telling people what they can and can't use legitimately-purchased energy for, we go down a dangerous path very quickly
No, you make the cost of energy take into account the cost of the carbon emissions. That's what a carbon tax is. It's not a dangerous path, it's basic economics.
I didn't reject it, I just wanted to make the simpler premise clear too, looking at the situation before talking about potential solutions.
And I didn't say anything about "telling people what they can and can't do", you pulled that out of nowhere. The earlier comments were talking about "shaming" and "what's the fuss", not legal mandates.
Also in practice a law like that is almost certainly going to be implemented as a fine, which is pretty close to a tax.
We also don't tax carbon emissions at what they cost to clean up, so bitcoin mining on a grid that uses fossil fuels dirties the planet without paying for its clean up.
Should we look at other entities using energy? For instance, why not look at all the data centres? I am sure the world could live with 90% services shut down.
Memes, gossip sites, blogs are non-essential and many more.
I'm not a bitcoin enthusiast by any means, but this isn't necessarily as bad as it would seem if the miners have wholesale pricing with the power plants.
Depending on the time of day and the type of electric source, power plants have excess power to shed. Miners are better situated than other industries to ramp up and down consumption.
Some of the largest bitcoin operators in the US are located near hydroelectric power plants - for parts of the year dams literally have to dump water because the river has to flow but there is not enough power demand - and wholesale rates sometimes even go negative.
This effectively disincentives expanding storage which would benefit everyone. Mining is getting rid of the issue of temporary excess power, so now the power plant needs to do more work overall to keep up with demand during other times.
Yes, but currently building excess capacity is a problem in itself. We can't install enough green energy production in the time we want, even ignoring the BTC demand. The extra capacity will not be fully carbon neutral and even just putting more generation in place creates negative externalities.
Given the options of "more BTC, more energy production" and "no BTC, more energy storage and shifting existing production", we as humans would be better off with the second scenario.
> .. "no BTC, more energy storage and shifting existing production" ..
The underlying claim to this statement is: more storage could easily be built because it is economically feasible.
Which is - apparently - not the case.
Apparently, the end consumers of electricity (private households, businesses) are not willing to pay enough money for more storage. Or the other way round: storage is too expensive for it to be deployed at a significantly greater scale than it currently is.
Cheap electricity storage is a tough problem. If storage was much cheaper, we'd see much more of it being deployed.
As always, politics has all the levers to set the direction here. Subsidize storage massively and more storage is what you'll get.
What politics can not do through such policies: lower the overall cost of storage for the consumers of electricity (apart from stimulating effects such as economies of scale, ..). Why? Because the subsidies will still be paid by the consumers in their role as tax payers.
You don't get around the fundamental principle that everyone is sensitive to prices. If electricity storage were cheaper, we'd have more of it.
I was an early adopter of BOINC, a distributed scientific computing platform powering research projects, often protein folding with applications to Alzheimer's and cancer such as Folding@home and Rosetta@home, which distribute computationally expensive calculations to users' PCs who wished to donate their spare computing power. Sound familiar? Every time I think about how much energy is wasted on worthless speculation, I'm sick to my stomach thinking about how close we came to this technology being useful or productive in literally any way. It is disgusting. It is vile.
How would someone even calculate this? Aren’t all bitcoins mined initially completely anonymous by design? I’d like to see the math behind this calculation because it seems more likely to be a made up number to support some kind of agenda.
> So, the EIA decided it needed a better grip on what was going on. To get that, it went through trade publications, financial reports, news articles, and congressional investigation reports to identify as many bitcoin mining operations as it could. With 137 facilities identified, it then inquired about the power supply needed to operate them at full capacity, receiving answers for 101 of those facilities.
> If running all-out, those 101 facilities would consume 2.3 percent of the US's average power demand. That places them on the high side of the Cambridge Center estimates.
I'd really like for this to NOT BE TRUE. But let's say that it is. People running bitcoin miners 24/7 are using electricity, which keeps the electric company PROFITABLE. Why is that a bad thing?
I know that the shampoo manufacturers would just LOVE it if I bought 10 million bottles of shampoo and poured them straight down the drain. Oh, the sales figures are doing great! Number goes up!
I know that the Mountain Dew manufacturers would absolutely LOVE it if I bought 20 million 2-liter bottles of Mountain Dew every day.
So, BITCOIN is making capitalism PROFITABLE. Discuss why anyone should think this is a bad thing.
In one word, externalities. Bitcoin is helping reveal that externalities have never been properly factored into electricity prices in the USA. In other words if you purchase too much electricity at market price, you're using more than your "fair share", which should be impossible in a properly functioning market.
The simple solution of course is to just tax industrial energy use properly, no matter what you're using it for. As you start using so much energy that you're putting real strain on the grid, your energy taxes should go up asymptotically to the point where if you keep paying, the government can afford to meet your energy demands with renewables construction.
Think of the environmental impact when creating 10M bottles of shampoo, the absolute mess when pouring it down the drain and the resulting plastic waste.
> let’s examine the hypocrisy of singling out bitcoin specifically
It isn't being singled out though. There's widespread concern across a broad set of cases where energy is being used.
Also, if you recognize that the use of energy isn't always bad, but it's the overuse of energy that is problematic, it's natural to prioritize: you want more of the energy usage to be on the more beneficial things and less on the less beneficial things. So you might target bitcoin on its merits, not because of hypocrisy.
The problem with your argument is that it means either everything should be addressed simultaneously in any discussion of energy usage or nothing should be, since you can make the same argument no matter what the specific topic is.
Because what we get in return is so incredibly tiny with Bitcoin. Less than 450k transactions per day, world wide. With most of them just people speculating.
What's funny it that they are trying to green wash Bitcoin by holding events in places like Costa Rica and talking about "green" bitcoin mining is etc... It's kind of like the for profit companies that are "helping" the "underserved" people in the global south with Bitcoin by selling them a volatile and risky asset (while skimming their transaction fees from these people).
Let's get rid of bitcoin. Then we can use "green" dollars. They don't need servers to run. Well, except for all the banks, federal reserves, and credit card processors. I wonder how much electricity they take to run. Well, probably not 2% of all US electricity.
But why are banks so secure? I guess because of police partially. I guess those police need electricity too. But we need them anyways, so I guess that only partially counts.
But why dollars? Why not pesos, or euros? The dollar is backed by the US military, of course. I wonder how much electricity the military uses.
Anyways. Let's get rid of bitcoin. That will solve the climate crisis! We can sell anti-bitcoin stickers made in China on Amazon to show our support!
But it's not an alternative to the financial system, outside of crime in order to do anything useful with it you have to move it back into the existing financial system.
I literally just answered the question about energy use.
Crypto could arguably become a potential alternative financial system. Bitcoin by itself is not.
Crime is primarily conducted in USD (by volume). The purpose of financial compliance is not to eliminate crime but to manage it, and arguably the techniques we have used to create exclusionary financial systems have done more harm than good (better the terrorist you know in your financial system than the terrorist who doesn’t even use your financial system that you don’t have any awareness of, aka. The Patriot Act missed the mark).
Further, the existing system is working about as well as the war on drugs. Every recommendation I have read is to find ways to shore it up, rather than find new ways to conduct financial crimes oversight, and the primary recommendation for the resulting inevitable escalation is to build a gigantic skynet of information sharing that looks an awful lot like surveillance capitalism.
I personally view Bitcoin as a runaway proof-of-concept. It’s rather insane how successful it’s become considering how it got started.
If we look at it from a product / market fit perspective, there is clearly a product / market fit. And that’s in the face of the intact existing financial system, Visa’s volume, the USD, etc. That’s probably a point worth considering.
Cryptocurrency is a speculative gamble, not an alternative financial system. There’s no path to real world adoption without better cost, performance, fraud control or customer service[1] but the changes needed to deliver negate the concept.
1. Not saying that banks are great here, but that better isn’t an impossibly high bar.
Fiat currency is a speculative gamble, and controlled by a specious and small number of players.
You could have said the same thing about it the early financial system as well.
What you have is a developed ecosystem and a developing ecosystem, and you’re pointing to the developed ecosystem and saying the developing one doesn’t have all the things. Of course it doesn’t. It’s developing. And it’s doing it in spite of the existing financial system trying to damage or destroy it periodically.
Let’s not confuse the technology innovation we’re referring for the mature ecosystem of a graduated and dominant financial ecosystem.
> You could have said the same thing about it the early financial system as well.
Only if you have no understanding of what the words mean. For example, most cryptocurrencies are fiat currencies - just exceptionally weak ones. The reason why using USD isn’t a gamble is that it’s linked to a massive economy with guaranteed demand.
> Of course it doesn’t. It’s developing. And it’s doing it in spite of the existing financial system trying to damage or destroy it periodically.
Ah, yes, this part of the sales pitch was bound to come up. The flaws I described aren’t some sort of minor growing pains, they’re architectural. After 15 years and billions of dollars, not having a progress towards fixing them suggests that telling people to ignore them and buy in anyway is not the way you fix design defects.
1) Sigh. These arguments are far too ideologically generated.
2) There are many “cryptos” and technologies. Crypto is not a homogeneous system. Fiats all suck: even ones I implemented as crypto or digital currencies or whatever terminology one would want to use.
3) I think you have it out for crypto. I’m not a hype person or a crypto advocate, but I like the idea of decentralized financial systems and believe we have had very little innovation in the space (and need more).
4) Technology waves take 20-40 years to reach maturity. Radio. Television. Internet. They all take a lot longer than people realize.
5) There has been plenty of progress. If you want to be closed to that progress and dig your feet in to defending the existing system, that’s fine. But the idea that there hasn’t been “progress in 15 years” is absurd reasoning.
The early internet or web are often used in cryptocurrency sales pitches to excuse the lack of demand, but the comparison falls apart as soon as you learn any of the history. When the internet dawned, computers were incredibly expensive and slow and networks were even worse – but people went to great lengths to get online because it offered something immediately of value which was unrelated to the business of making or selling internet access. By the 1980s, people were paying for connectivity even at telephone monopoly rates because there were things like email, Usenet, IRC, file transfers, etc. which made your life better. When the first TV station opened in the 1920s, ordinary people went to buy sets because it gave them something they’d never had before.
In contrast, Bitcoin has been available globally since it launched and it did so in an era where much of the human population had everything they needed to use it - very much unlike the early internet, or radio, or TV. Tons of speculative money poured in hoping to find demand … but nobody really cares about it because for most it’s not better than what they had before. It isn’t cheaper, faster, or safer and it is much less convenient to use, so even the few people who hold it don’t. The few businesses which accepted it have generally reported very little consumer interest and many have stopped. That just isn’t like the demand curve for those other technologies: as soon as Marconi had his first radio telegraph demo, he had businesses and governments interested and the primary limit was the difficulty of making the technology available, not lack of public interest – anyone could see how it could let them do something they couldn’t do before.
That last part is key: I’m all for changes to the financial system, I’ve followed this space since David Chaum was writing in the 90s, but you have to base it on an advantage over the status quo. The problem is not just that they picked an unsuitable data structure but also that it became the community identity, preventing attempts to learn from the mistake.
Are these Visa numbers published somewhere? The scale and must-not-fail nature of this infrastructure would be an interesting read to understand how they have built out the platform. Probably all sorts of lessons learned that only apply to a global financial network, but still probably some universal truths.
A Visa fact sheet [0] claims 276 billion transactions in a 12-month period, which would be less than 9,000 per second, but still an impressive figure.
Fedwire, the settlement system operated by the Federal Reserve, processed 196 million settlements in 2022, each about $5.4 million, for a total of over $1,000 trillion. [1] That would be about 16 settlements per second. Visa handles many more smaller, individual transactions; aggregates and nets them; and uses Fedwire to settle them between member banks.
Bitcoin could be used in a similar manner, handling a relatively small number of larger settlements; leaving other systems to handle smaller, individual transactions.
> Bitcoin could be used in a similar manner, handling a relatively small number of larger settlements; leaving other systems to handle smaller, individual transactions.
That’s what Lightning does but it also removes most of the sales pitch for the system since you’re giving up the global ledger. Once you’re relying on a bank in all but name for your transactions, it’s unclear what you’re getting for the extra cost and lower usability.
The difference is that the existing financial system is used by about 3/4 of the world population (closer to 94% in developed nations) for the exchange of actual goods and services.
Bitcoin has significantly fewer users, but more importantly it is almost never used for the actual exchange of goods or services.
With my bank (and the accompanying infrastructure that goes along with it), my employer can deposit directly into my account, which I can then use to pay rent online (as opposed to physically traveling to their office), buy groceries at the store, and purchase nearly every legal good or service that is for sale, all while reducing the odds of me being robbed or losing money (e.g. losing my wallet.) If someone or some business scams me, I'm given methods of retrieving my money without confronting them in person. It also allows me to autopay all my bills so I'm never charged for forgetting to pay (and frankly I have very little desire to write and mail several checks each month or travel to various places to pay in cash.)
Credit cards, debit cards, direct deposit and money transfers are far more convenient than using cash, and aside from convenience, I imagine they decrease a nation's carbon footprint over using exclusively cash (due to less need to mint, print and transport physical currency, as well as travel in person to pay or receive payment.)
They do come at a cost of privacy, but if I wanted privacy for a specific purchase, I can still use cash for those specific transactions. While it may have a higher carbon footprint than digital payments, overall ink and paper tend to have low carbon footprints (though it's probably a bit higher for currency than it is for standard A4 paper.) Still, it's near certainly less carbon intensive than Bitcoin (per purchase, maybe not in total since billions of people actually use paper currency to buy things at least sometimes.)
Cryptocurrencies and their accompanying anonymity can bring about good things, so I'm open to at least considering their value — there are countries with authoritarian and oppressive governments, and there have been several democracies that have fallen to dictatorship before and that very well could happen again in the future. As such, being able to anonymously transfer money does have its value, especially in a world with CCTVs and facial recognition.
Cryptocurrencies, of course, also can be used for illegal services that are near universally considered immoral and evil. Currently, in most countries (even ones that aren't exactly liberal democracies), this is likely a much larger harm.
Balancing freedom from and freedom to is always tricky: neither authoritarianism nor anarchy are appealing — allowing personal freedom while preventing people from encroaching on other people's personal freedoms is difficult to achieve.
However, even if I were fully convinced that cryptocurrencies currencies were a net positive on society (open to considering the idea but definitely not convinced yet), I struggle to see how one with such a large carbon footprint is what should be used.
you really think that every credit card reader in the country, every ATM, every computer and piece of electronics at every branch of every bank, and all of Wall Street and everything, adds up to less than the sum total of Bitcoin mining in the country, in terms of energy usage? how could this possibly be the case? I'm not even a Bitcoin guy and this is absurd on its face.
You are comparing the transaction cost of credit cards/banking/trade to the transaction cost + infrastructure cost of bitcoin. Credit card companies, banks, financial institutes have millions of employees that drive to work, HVAC in their offices, etc. that is not required with bitcoin. This is ignoring all of the rest of OPs point that preserving the dollar system has countless other external costs.
I would think those employees exist because people demand a whole bunch of services from the financial system, like fraud protection, chargebacks/disputes, customer support, and so on. If you stripped down Visa or whatever to its bare minimum of just processing online transactions, I'm sure it could do it pretty efficiently. Conversely, if all our money ran on Bitcoin, I'm sure most people would still want to interact with companies that provide extra services and support on top, and then you'd be back in the same place.
Right, but the financial system is actually used by most people in the US. Bitcoin, a small fraction of that...and this figure does not include all of the energy expended to process bitcoin transactions.
This article gives an estimate of about 2% of all electricity usage going to bitcoin mining. All data centers in the country combine to a similar ballpark in energy usage (another comment states 1-3%). Finance accounts for 20% of US GDP, so we'll be charitable, round up its usage of datacenters to 50%, to get about 1% of electricity from financial data centers.
There are about 6.7 million employees in the financial sector [1]. Assume everyone has a computer with a 600W power supply at full bore for 12 hours a day [2]. That comes out to about 18 billion kWh of electricity a year, which is (checks math) 0.425% of US electricity consumption [3]. Sure, I'm not accounting for all the PoS systems at every retail location in the country, but they're going to use far less energy than even the overspecced numbers I'm using.
So overall, this comes out to about 1.5-2% of US electricity usage going to the financial sector, less than Bitcoin mining. Also remember that magically switching everything over to Bitcoin would still require all those PoS systems, not to mention large fractions of Wall Street and bank branches and whatnot, so this isn't really a fair comparison overall. And some amount of the financial sector includes cryptocurrency companies already.
[2] This basically comes out to a decently powerful computer being used at max spec for an 84 hour work week. A generous overestimate, I'd hope you agree.
Police, banks, the military, the Fed all provide many more services than bitcoin does and do more than just protect the dollar. What an incredibly dumb comparison.
Haha. It is, but I always found it funny, the south park song. But yea, bitcoiners will push the military of just being this evil force of violence. And trust me, it can be. I was in the Navy. But we also did so much more. We did search and rescue for civilians missing at sea regardless of their nationality. We did evacuations for scientist and researchers on islands in the path of a really bad storms. Used our hospital on board to respond to calls for helps from smaller ships that needed assistance with emergency medical situations, etc. Provide disaster relief, etc. Had a fellow sailor at the time who was on an air craft carrier that responded to Fukushima by flying all their food on board to the ship to feed victims of that disaster.
In which case the question of "to whom?" still applies. As it stands, the primary beneficiaries of American police and military operations are the very same wealthy elites at the helm of the dollar-based global economy.
Still, considering the tiny amount of Bitcoin transactions per day, and the large number of speculators, hardly anybody can be using it for real things, anywhere.
Your assertion is that it's dumb to compare two competing financial systems?
The dumb analysis is to talk about Bitcoin energy usage in isolation, without comparing it to the present system. The present system would not work without police officers and military. Bitcoin replaces these things with servers and decentralization.
There is no military protecting the internet. You would need to bomb every country in the world to destroy the internet. The same is true for Bitcoin.
US military is 100% necessary for the dollar-based world order. The fact they do other things is not important. You still need the full US military to protect the dollar, even if they didn't do other things.
> Bitcoin replaces these things with servers and decentralization.
This is totally absurd. We would still need police and military even if the USD stopped existing and we switched over to Bitcoin. You cannot replace them with servers because servers can't protect a nation or enforce laws.
> The fact they do other things is not important.
It is important, because it means they must exist anyway. So it makes no sense to factor in their cost if the cost would still need to be paid regardless of which financial system we use.
I don't think so. It's not like we have a branch of the military dedicated solely to maintaining the dominance of the USD. It protects our national security interests as a whole. The fact that it also scares everyone into using the dollar is just a bonus.
And while there are police dedicated to investigating financial crimes involving dollars today, we would still have them. They'd just be investigating crimes involving BTC.
> It protects our national security interests as a whole.
The emphasis of those interests is on ensuring that the US remains the dominant global superpower, particularly economically. Only a modest portion of our "defense" spending actually goes toward defending our own territory; most of it goes toward global force projection.
> And while there are police dedicated to investigating financial crimes involving dollars today, we would still have them. They'd just be investigating crimes involving BTC.
A lot of avenues for financial crime become impossible in a post-dollar world, and said world doesn't really introduce any new avenues compared to cash; that's a strict reduction, and therefore a strict reduction in the need for police on that front.
There's also a considerable reduction in demand for police to investigate robberies when there's a lot less to rob. Banks get reduced to loan centers and safe deposit boxes, armored trucks moving cash around stop being a thing, nothing in cash registers to steal at gunpoint... yeah, criminals will probably try to commit robberies, but will quickly find out that the reward ain't worth the risk.
Police corruption also becomes trickier, especially when it comes to civil asset forfeiture. No cash to steal during traffic stops means less motivation for said traffic stops in the first place.
My dude there is a whole lot of public security infrastructure protecting the internet. Just because the basic internet protocols are public doesn't make it magic.
I do some work with financial tech and let me tell you, working with integration partners for payment processing who are fully into crypto made me realize, we shouldn't trust these people with our financial system. I had to explain to a senior engineer with 20+ years of experience why he shouldn't rely on floating point to calculate service fees (their calculations were always wrong and over charged our customer's customers because they used floating point). Can't calculate a 3.5% service fee properly, but will tell you why he so so much smarter than the everyone in traditional finance (who don't fuck up this calculation). And this has been an ongoing problem for a year, to the point that we built around their system because we can't trust their system does what they say.
Yep. The number of crypto hacks reported by https://www.web3isgoinggreat.com is just mental. Over 100m$ stolen in multiple hacks just this week, and it's not even a particularly busy one.
I don’t know how you can have this conversation without talking what the marginal utilization of that energy is - do I care if crypto miners want to mine at night in west Texas when wind is generating energy and the wholesale cost is negative (I.e. there is really no marginal productive use for that generation)? Absolutely not.
It’s a trickier question when that mining activity is competing with generation assets that could be charging a car or powering a manufacturing facility…
> do I care if crypto miners want to mine at night in west Texas when wind is generating energy and the wholesale cost is negative (I.e. there is really no marginal productive use for that generation)? Absolutely not.
This is complicated though because power grids can resell that slack capacity further away if there’s a persistent surplus and other users will notice (e.g. cheap power really incentivizes overnight EV charging or even industrial users expanding). If all of the slack is being used for unproductive purposes, those positive feedback cycles will be delayed – unlike useful work, there’s no end of cycles which bitcoin mining can use so the potential power consumption is effectively infinite.
That’s like saying meat is not bad per se, because there are happy cows raised on green pastures getting petted by children all day. Yea, those cows do exist - the three of them are just outnumbered by the billions of animals kept in killing factories.
The amount of bitcoin mined exclusively in west Texas when the energy is at a net negative is negligible compared to the rest of the mining activity, by people who couldn’t care less about anything other than their profits. There is NOTHING charming about that technology.
The fact that they care about nothing other than profit is exactly why they're attracted to places where energy costs are a net negative. Lower energy cost = more profit. Higher energy cost = less profit.
I question the math here... I suspect that miners are secretly using more effective hardware than exists on the open market, and therefore they probably get more hashes out of fewer watts.
You know I see these FUD articles every so often, there's some truth to it, but more interesting to me is the timing. BTC is probably going to see lower prices before the post-halving run up. This makes me think it's more likely part of an effort to get BTC at a discount then it is an organic event.
According to the article, this assumes mining operations are running full-power 24-7, which is hard to determine. The article does try to match increases in regional power plant output with bitcoin mining center growth, but that's somewhat circumstantial with many confounding factors. The issue is:
> "The best data on IT’s energy and emissions characteristics are closely held proprietary secrets among tech companies, which compounds these problems."
(2021) "Does not compute: Avoiding pitfalls assessing the Internet's energy and carbon impacts", Koomey & Masanet, Joule
Additionally, whenever you see these kind of estimates you really want the data acquisition method applied across the entire sector in a uniform fashion, to avoid someone trying to cook the data a bit in their favor. This is a very common problem in the energy sector, e.g. energy input/cost estimates for building and operating solar/wind/nuclear/gas/etc power plants tend to suffer from this agenda-driven skewing.
Thus, you'd also want to see energy use estimates for all the AWS and Google etc data centers (NSA Utah?) side by side with the bitcoin miners and the high-frequency traders and the industrial manufacturing centers and households etc, and then check that the sum of estimates from different sources obtained via the same method is <= 100% of production and so on.
Bitcoin incentivizes efficient generation and use of energy.
Until people can find economic uses for, say, the immense solar energy produced in a desert, bitcoin will use it all up because it can be deployed practically anywhere. Likewise anywhere there's excess wasted energy, it will use it. So in that respect, bitcoin finances the construction of energy generation where it is generated the cheapest but may have no other market otherwise due to geographic isolation and transportation. Unfortunately people are biased for one reason or another against accepting this reality, seemingly due to a lack of imagination and prejudice.
> Until people can find economic uses for, say, the immense solar energy produced in a desert, bitcoin will use it all up because it can be deployed practically anywhere.
Okay, how many Bitcoin miners are using immense solar energy produced in a desert?
Do note that the article mentions that the largest clusters are in, um, Texas and the Appalachians, and their providers of electricity seem to largely be, uh, natural gas and coal power, respectively.
For one, miners are already deployed to use up flared oil wells and landfills which mitigates methane emissions which is very important in terms of reducing total impact of GHG emissions.
Otherwise miners are buying cheap energy anywhere they can find it, and using waste energy on the grid, of which there's tons. The idea that they're going to spike demand isn't even correct because mining can scale to any level of power generation. Also mining does not cause emissions, mining simply purchases generated power, and emissions are caused by power generation from non-renewables.
If mining is emitting GHGs you could say the same thing about EV cars or any other power consumer. But like I said at least bitcoin as a consumer can be ideally placed ANYWHERE especially where energy is plentiful but not easily used otherwise.
> Do note that the article mentions that the largest clusters are in, um, Texas and the Appalachians, and their providers of electricity seem to largely be, uh, natural gas and coal power, respectively.
So does driving an EV car in those areas amount to being a horrible person too under that logic?
Efficient use means ability to be deployed to consume. The point being that energy is over-produced as a matter of fact in order to be a reliable utility and bitcoin can be throttled on a dime to profitably match supply to demand unlike much else. But it sounds like you're purposely misunderstanding.
So call it easy to deploy, not efficient use. Or "ease of utilisation of excess energy generation".
The point is that bitcoin would use as much energy as possible as long as it is profitable regardless of fact it is over-produced or under-produced. And regardless if it is "clean" or not.
It also would drive prices up, we already saw it with prices of GPUs/memory.
You're playing semantic games when efficient does not exclusively mean "waste-less" it means capable or effective, which is exactly what Bitcoin is, a very effective way to consume energy on command. You're also arbitrarily calling Bitcoin wasteful. You could subjectively categorize any aspect of existing as wasteful or unnecessary.
> The point is that bitcoin would use as much energy as possible as long as it is profitable regardless of fact it is over-produced or under-produced. And regardless if it is "clean" or not.
It's hard to say that electricity is wasted when no one else is buying it and that's exactly the argument that the article discounts. Low cost and negative cost electricity (that's already produced!) cannot be wasted and consuming it through any means, as someone willing to purchase it, balances the operation of a grid. The fact that no one else is finding a profitable use is their problem and opportunity in a market.
Bitcoin will use whatever energy people decide they wish to purchase to use it. It's not a magic energy vacuum. I can't help but imagine you'd be outlawing people to buy solar panels if they wanted to use that off-grid to do whatever you arbitrarily deem wasteful. The entire thrust of the article is about controlling and demonizing the economic decisions of free people in a market at the behest of political agendas.
> It also would drive prices up, we already saw it with prices of GPUs/memory.
Yes consumption of anything generally drives up prices. Should we ban PC video gaming because they also drive up prices of computer parts? Video games are wasteful too. We could be entertaining ourselves with card games or marbles. Printing money drives up prices too.
I am totally for off-grid generation. As long as people buy their panels without any tax reliefs and incentives. Also, free market is good, if generation is 100% carbon offset which is not now. And yea, you are free to make any economical decisions as long as it is legal. Excessive usage of energy could make it easy to ban though in the near future. Which would not be missed by personally me much.
Allright. I bite. Why is the energy cheap enough, to make big mining operations profitable? Why isn't it taxed if it is needed elsewhere. What happens, if there is to much energy being produced by plants? Why is it, that sometimes electricity gets sold for negative rates.
I am not a hardcore bitcoin fan, but I giggle a little when those transactions versus energy consumption arguments come up.
Maybe my views are wrong, I would love to check if somebody can change my opinion on this topic.
Energy could be taxed higher, but it would make other users (like regular people) of energy unhappy. So far energy is "cheap", but it does not cover the total eco damage it makes.
You could tax mining. Sure, this won't stop private miners, but it is impossible to hide a big mining operation, if you are using the public grid. Most of them are using their own solar anyway, so I am not sure what all this fuss is about.
We do not know what kind of generation they use. Probably the cheapest one. We do not know who operates them (probably people who have a lot of money). And they do not produce their own panels, driving cost up for other people on the free market.
They would not tax mining/crypto though, because gov is interested in it. And it would be sold to people like "freedom" (but would be used by people who has a lot of money for speculation/tax avoidance).
Regulating mining would be a responsible economic policy. Like not printing money. Or regulating speculative markets (derivatives). But we currently doing our best to be least responsible :)
Power consumption is one side of the coin. The net utility is another:
- With sufficient demand-scaling, Bitcoin incentivizes more power generation capacity since it's the buyer of first resort, establishing some floor on electricity price. This makes additional investment into renewables etc. more sustainable. E.g. where I live, there are days of slightly negative prices, and those clearly are not sustainable, so Bitcoin is the perfect way to ensure we get plentiful cheap energy with continuing investments.
- There's a case to be made that there are more and longer wars under fiat currencies since money-printing is a hidden tax that no one votes for, making it possible to fight in wars that exhaust all state resources, whereas under a Bitcoin standard the wars would be few and limited in scope.
Additionally, US Space Force's Jason Lowery argues that Bitcoin is a weapons technology in cyberspace, and the global Bitcoin mining competition is a form of "soft war", and further argues that a constant "soft war" is more efficient way to defend property rights.
The latter two points are not yet all that salient but imo that is the world we're heading towards inevitably. Bitcoin eventually outcompetes other forms of money as a layered technology and leads to this "hyperbitcoinized" world where they hold true.
Why are we focusing so much on reducing energy usage, rather than making energy, especially green energy, cheaper and more accessible? No one is boiling the oceans to mint BTC.
Bitcoin's value (not only the monetary value of it) scales with global access to energy. So what? Why is that such a problem? What it is, is a convenient scapegoat for the anti-crypto mobs to complain about. Bitcoin is not stealing energy from anything, it is not making it more expensive nor it is the direct cause of global warming: a Bitcoin mined on solar is worth the same as a Bitcoin mined on fossil fuels. We are literally missing the forest for the trees, and to me, this topic is a populist slogan for tech-educated people that want another reason to have the big bad cryptocurrencies.
Global warming is a major threat to our society, and while the major culprits and those that stand to benefit from the status quo continue with impunity, we, the people, are fighting among ourselves on inconsequential topics like Bitcoin energy usage.
You can have a carbon tax with a border adjustment. If goods are imported from a country without an equivalent (or stronger) carbon tax, then those goods would be subject to a fee at the border. The EU is considering is a system like this, which could be very impactful since they're the 2nd largest economy in the world.
If the US, the world's largest economy, also implemented such a system, then there would undoubtedly be a large global impact in reducing emissions. Creating the political will to do so is difficult of course. Citizens' Climate Lobby has been working on trying to pass a carbon fee with a border adjustment since 2007, though unfortunately with increasing political polarization it has been difficult.
I wouldn't rule out the possibility though — political change can be very slow in the US, but CCL is clearly a group with extreme patience and a focused goal, but is willing to be pragmatic and advocate for any improvements as opposed to taking nothing. Admittedly I haven't volunteered for them in a quite some time, but in the past (at least at where I was at the time), the people I worked with seemed level headed and goal oriented — they may not have always personally liked the Representatives or staff that they were meeting, but they kept personal opinions to themselves and were laser focused on trying to convince them of joining the Climate Solutions Caucus and sponsoring a carbon fee. Perhaps the EU looking to implement one with a border fee adjustment may be the push the US needs to make it happen here.
Agreed, but how is that Bitcoin's problem? Is it Bitcoin's fault our politicians are so corrupt they do not want to put up taxes on carbon emissions and fossil fuels?
This is what I find annoying. If Bitcoin were to disappear tomorrow, we would still run on non-renewables, and pollute our soil and waters. Why isn't this the primary concern, and we look at a single industry downstream that is completely independent on how clean the energy it uses, and in fact, is more profitable with renewables as I mentioned in a sibling comment?
It is not dissimilar to the misplaced hope to reduce the catastrophic disaster of microplastics in our water stream by banning plastic straws. Or demonising meat consumption when it is such a drop in the ocean compared to all our energy and pollution problems, caused by transportation, heavy industries and corruption.
The only things people really care about these days is what fits easily in a Twitter post of fake outrage, without stopping to see the bigger picture.
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Ask around for the going rate for USDT/USDC
Then check the official USD vs local currency exchange rate
Compare the two and ask yourself: why are ordinary people on OTC platforms willing to pay a substantial premium for USDT/USDC?
If you’re on HN, you’re likely smart enough to figure out why. And no, its not just plain “money laundering”.
I totally get why the official exchange rate is probably bogus, but I would expect the black market rate to be the same for USD/USDT/USDC
USDC/USDT are liquid on exchanges as well as OTC markets, very easy to store, and increasingly easy to spend.
Much of the western world is deeply ignorant of the sheer scale of this demand for USDT in the Global South. There are billions of people in these regions, and one thing is clear across all of them: they will prefer USD over their local currencies, but it's too hard to acquire this USD, especially in a digital form.
Hence, USDT/USDC.
I've personally hired people from Phillippines and Nigeria who preferred getting paid in USDT over their local currencies.
But, is the utility of USDT/USDC all meaningful to BTC? Those people aren't asking to hold BTC and those who are are doing so because they want to avoid the regulations governments imposed on money transfers is my guess.
It’s simply economically smarter to hold a currency that appreciates against your own. USD outperforms every currency, and USDT just makes it easier to hold.
Bollocks!
Unlike other technologies that are incentivized to become more efficient over time, because of how competition over mining rewards works, this technology has the characteristic of consuming more and more energy the more it succeeds.
It's designed to waste energy. Even if that was "green" energy, it's still just making heat out of electricity for pretend internet money. Energy that other things could be using.
Bitcoin has no incentive to do this, and no ceiling on consumption, since any efficiency gains just get plowed straight into increased mining, and so energy consumption can only ratchet up, forever. Address that claim, please.
If we just properly externalized the cost of CO2 emissions it solves this problem along with many others. So why don't we do that?
That redundancy is otherwise uneconomical to produce (if there isn't the demand).
When that redundancy is needed, that power can be redirected from the miners. Presumably the miners are expected to behave and switch off at such times, but there is no reason why that expectation can't be legislated.
I don't believe in the concept of a "humanity". There are humans.
It could have been a sqlite db file on a raspberry pi somewhere, keeping track of digital jars of goat semen that people then pay real dollars for. But no, instead we're wasting one Australia worth of electricity on Bitcoin.
That is... oddly specific.
Dollar is also just paper, there is no underlying thing except trusting the united states.
Im not arguing its worth the amount of energy, but its not as dumb as you pretend it is
Using the fact you can sell it for minimal slippage, you could call Apple shares money, but they're not. They're shares. Nothing is priced in Apple shares.
The attributes of money are: durability, portability, divisibility, uniformity, limited supply, and acceptability.
Bitcoin is not accepted basically anywhere (the overwhelming majority of places that claim to, use a service like BitPay that immediately sells it and gives the merchant actual money). It's also not uniform, because each sat carries with it the entire transaction history. It's also not particularly portable because its global transaction count is limited to 7tps and it costs an unbelievable quantity to do so from time to time. It's also not durable because everyone keeps losing their wallets and the lost bitcoin is effectively destroyed. All it has is limited supply and divisibility -- and portability, depending how compelling you find my argument against -- but you really do have to get all 6 to win.
Coinbase attorneys regularly compare crypto to Beanie Babies.
> "It is akin to the sale of a parcel of land, the value of which may fluctuate after the sale. Or a condo in anew development. Or an American Girl Doll, or a Beanie Baby, or a baseball card," Coinbase attorneys stated in a motion it filed in August 2023. [1]
[1] https://www.usatoday.com/story/money/2024/01/19/crypto-beani...
The original USD sunk into the system is mostly gone, spent on electricity, mining rigs, hookers, and blow.
If you attempted to withdraw that much money, you’d be stonewalled.
The only way to do it would be to hire some coders, set up your own “trading” web site, and convince a million rubes to part with a thousand each on average. You’d have to do this for years while loudly saying “Bitcoin is not fake money” in every Internet forum you can spam, because otherwise the music might stop before you can cash out.
By this logic, we should all leave our lights and air conditioners on while we're at work or on vacation because it will increase demand and hasten the transition to renewables.
The idea that you can be paid to waste this power just creates economic incentives against the improvements we actually need to be making.
Firstly, at regular electricity prices, bitcoin mining is profitable and it is profitable for the utility to run renewables (which in turn means it is/was profitable to build renewables). When there is substantial demand or low supply, then it is profitable for the utility to pay the bitcoin miners to turn off, because the alternative to import power is more expensive. This in turn makes your electricity cheaper. In addition, the additional steady state demand for power allows for more renewables to be built, which further increases the supply during low supply periods. Your AC does not automatically turn off when this happens.
I am one of those enthusiasts making "strange logic" claims. I've been making this claim well before others but I feel that I keep getting downvoted on them off of people's emotion rather than rational logic.
The transition from fossil fuels to renewable energy sources has altered the environmental impact of additional electricity consumption. Where once any increase in consumption was considered harmful due to its reliance on fossil fuels, the rise of renewables introduces scenarios where the marginal environmental cost of electricity can be beneficial if the demand is flexible.
Bitcoin mining has the potential to act as a load balancer for the electricity grid. By increasing its energy consumption during periods when renewable energy production exceeds demand, and reducing consumption during peak demand periods, Bitcoin mining could help stabilize the grid and make renewable energy generation more economically viable.
Bitcoin mining's demand for electricity is unique in that it is primarily cost-driven. Renewable energy generation capacity is particularly volatile. Bitcoin mining power usage can be flexible and responsive to the availability and cost of electricity.
The ability of Bitcoin mining to consume excess renewable energy when it's available (and potentially at low or negative prices) could improve the financial viability of renewable energy projects by increasing the floor price these new projects can sell electricity at. This can encourage the development of additional renewable energy capacity by providing a reliable demand for their output during otherwise unprofitable periods.
Here's some examples:
https://news.ycombinator.com/item?id=25444985
https://news.ycombinator.com/item?id=26094279
https://news.ycombinator.com/item?id=26811819
https://news.ycombinator.com/item?id=29367174
https://news.ycombinator.com/item?id=30310572
In other words: your scenario is identical to GP's except that someone is paying you to run your AC while you aren't at home, rather than just doing it because you can. The logical question is then to ask why they're paying you to run your AC, and that is the uncompelling part: it's not clear that we should be paying people to burn energy to crack hashes.
if you want a transition away from carbon, you have to solve that question.
https://en.wikipedia.org/wiki/Carbon_fee_and_dividend
This would remove the incentive to mine crypto on any grid that is coincidentally emitting carbon.
As most (if not all) uses of electricity, Bitcoin mining is sensitive to the electricity price. Introducing a a carbon tax / carbon dividend, doesn't magically make any particular use of electricity economically unviable all of the time. It just pushes the cost equilibria to different values.
In particular when we artificially increase the energy require to crack said hashes. If hash-cracking was, for instance, bid out on a competitive marketplace[0] instead of limited by difficulty bitcoin would need far less power to perform its 'role' as a 'currency'.
[0]Want to mine a block? Bid for the mining rights (in USD or BTC).
Im not saying this is good, but its the way it works...
I'm arguing that the unique energy demand characteristics of bitcoin mining allow it to support building renewable energy projects and balance electricity costs and thus it has effective positive contribution to the environment.
Whether it's used to mine bitcoins or cool a house is irrelevant, except that the demand for cooling a house is location and time sensitive, whereas bitcoin mining is cost sensitive. This flexible consumption gives it unique properties that support deployment of renewables.
Please explain what you mean by "false economy". Is the economy for skins in a game you don't care about "false" because you don't like that game?
Not if someone paid me to do it. That's the point. If there was money in hauling ACs around the US and running them on the cheapest electricity the local market could provide, we'd have exactly the same false economy.
(Besides: the GP points out that Bitcoin appears to be sufficiently profitable on NYC electricity prices, which are not cheap. They also appear to be sufficiently profitable on "retiring coal plant" prices[1], which undermines any kind of unique incentivization of renewals argument.)
[1]: https://www.indystar.com/story/news/environment/2023/12/05/c...
Gold worked as a currency as it was independently verifiable from either side of a transaction. Modern currencies work so long as they’re backed by credible assurances of their value. Ie passing off fakes is dangerous and they may be used as “legal tender.” (That term could itself be further defined via google.) crypto currencies seem to lack this functionality. (Not wanting to abide by any law outside core network mechanics is functionally close to establishing a new form of sovereignty. Only sovereignty doesn’t work like that.) Also note how hyperinflation is dangerous to the assurance of value of a currency. Similarly, any form of instability could shake those assurances.
Modern currency is also almost trivially, embarrassingly parallel.
How is such a purely hypothetical scenario useful as an argument?
It's like saying: "If nobody ever did physical harm to anybody, we could get rid of some part of law enforcement." Not useful because it's simply not the case and very likely never will be.
> They also appear to be sufficiently profitable on "retiring coal plant" prices[1], which undermines any kind of unique incentivization of renewals argument.
Bitcoin mining incentivizes any kind of generation that cannot be consumed by a more profitable process or use case. If the price of electricity on a mostly fossil powered grid is low enough, then Bitcoin mining will be profitable. Same goes for a mostly renewables powered grid.
There are two ways, politics can handle this:
A) Impose a high enough carbon tax on fossil generation. This will lead to higher electricity prices for the fossil grid, possibly making Bitcoin mining unprofitable. But it will also make other uses of electricity unviable.
B) Regulate that Bitcoin mining is prohibited under certain conditions (location, grid generation mix, ...)
B doesn't appear wise to me. Since it's highly subjective what kind of energy/electricity use one deems useful/legitimate. I personally find the use of a > 100 horsepower private car or a private jet totally illegitimate and would welcome regulation that drastically hinders these absurd uses of energy.
And even if that weren't the case, your argument still makes no sense. Every watt that Bitcoin mining incentivizes is then consumed on Bitcoin mining, it's a zero sum game.
It's like building heaters in the desert: if you're willing to spend money for 1GW of electricity to run your heater, someone will build a 1GW plant for you. Now there is nominally one more 1GW plant in the world, but there is 0 extra available power, you're using up all of it to heat the desert.
Bitcoin mining, far from the wasteful ‘heating the desert’ analogy you propose, incentivizes the development of excess energy infrastructure that can be redirected or scaled based on demand fluctuations, acting as a catalyst for innovation in energy production and management.
Moreover, your argument smacks of a dangerous ‘divide the cake’ mentality, suggesting we should cap our aspirations and limit access to energy and technological advancement to maintain a status quo. Should we tell emerging economies that they must forego the benefits of modern technology because we’ve decided there’s simply no more room for energy growth? That’s not only patronizing but inherently regressive.
The beauty of Bitcoin and its underlying energy consumption is that it encourages the search for more efficient, cost-effective, and often greener energy solutions. This is not about wasting resources; it’s about driving forward a future where energy is more abundant, accessible, and sustainable for all. To stifle this under the guise of protecting resources is to deny the very essence of human progress and innovation.
> Bitcoin mining, far from the wasteful ‘heating the desert’ analogy you propose, incentivizes the development of excess energy infrastructure that can be redirected or scaled based on demand fluctuations, acting as a catalyst for innovation in energy production and management.
You do realize that the article here is directly pointing to evidence that the bulk of large bitcoin mining operations are being driven from existing fossil fuel plants that seemed to be on their way to decommissioning?
This is what I don't like about your argument: it's a standard Bitcoin talking point, but people struggle to point to actual examples of Bitcoin mining spurring investment in renewable energy, while it's easy to point to actual examples of Bitcoin mining spurring investment in decommissioned/decommissioning fossil fuel power plants. The facts on the ground just do not support your argument, period.
Blaming Bitcoin for enabling these fossil fuel plants to continue is a red herring that distracts from the real issues: ineffective global energy policies and the threat Bitcoin poses to centralized financial systems. It’s easier for governments and critics to scapegoat Bitcoin than to admit their failure in promoting renewable energy or to face the uncomfortable truth that Bitcoin challenges their control over monetary policies. The narrative that Bitcoin only supports dirty energy is a convenient oversimplification, ignoring the broader economic incentives at play and the potential for technological innovation to drive a shift toward renewable energy sources. Let’s not mistake symptom for cause; the focus should be on fixing flawed energy policies, not demonizing a technology pushing for decentralization and innovation.
One can justify all sorts or environmental destruction with this your argument. Pouring oil on the beach is pushing local regulators to act, spurring the creation of less harmful lubricants.
The numbers show bitcoin mining is doing harm.
It's not clear to me that Bitcoin delivers sufficient economic value to justify the vast power demand. What utility do all these hashes provide, except to other people who bought into crypto trading? If there were some positive externality that'd be great, but there's no inherent value to crypto beyond the artificial scarcity.
The worth of a decentralized and uncensored monetary framework is beyond imagination; it promises to unleash the inherent vigor and potential of an organic market-driven capitalism, unfettered and boundless. Such a system stands poised to precipitate the downfall of the fiat regime—a mechanism that has empowered governments of every stripe to engage in warfare and to subjugate their citizenry, not excluding even the most free and illustrious nation such as the United States.
This assertion is far from nonsensical; it is a veritable truth, one conspicuously absent from educational curricula, likely because states find the acknowledgment of their historical predilection for violence too ignominious to bear. Taxation stands as the state’s principal means of amassing resources. Yet, for those states compelled to engage in warfare, mere taxation proves insufficient. Here, the utility of modern fiat currency becomes apparent, facilitating the acquisition of resources beyond what a transparent tax rate would permit. Through fiat, the dilatory effects of inflation serve the dual purpose of either being dismissed as unrelated in the event of victory—perhaps offset by the spoils thereof—or, in the case of defeat, rationalized as a war’s consequence. Regardless, the result is the same: a surreptitious expropriation of the populace’s wealth.
State-initiated actions, notably famine and war, rank as the foremost causes of human mortality, surpassing even health crises and natural calamities.
The inception of the modern fiat system, marked by the establishment of the Bank of England, was explicitly intended for waging war. Indeed, the very creation of the contemporary British Pound was predicated on this bellicose objective.
P.S.: Please excuse the grandiloquence of my discourse; consider it a charming anachronism. I hail from the future, having spent several delightful decades marooned in the 1800s. Only recently have I elected to grace the early 2020s with my presence, and it appears my linguistic preferences have yet to acclimatize to the present era’s vernacular.
Money is just another technology. As a technology it has existed in various forms over thousands of years.
Technologies see continual innovation and change, with various actors and various motives influencing their use, function, reach.
Governments of various forms are our current best method- govern-ance- for managing human-scale assets, resources, and technologies with collective purpose and implication.
Moneys- currencies- as a technology are one of those human assets owned and managed by governments, like land, and other resources. There are over 200 distinct currencies in the world.
The mechanism for this management is based on the notion of a ledger- the record of balances, of debts, of interest, and the creation- inflation- of money supply in the context of that management.
Most governments are poor at this management when measured by how well their implementation of this technology that is money serves the needs of most of their populations.
Governments themselves- both "democratic" and non- in their current form are fragile and vulnerable, with the powers of governments utilized against portions of theirs and other populations.
BTC is a technology, a cryptographically-secured system of record- a ledger- that can be used as a money. It is not under the control of an existing government.
By collective agreement of its participants, a complex balance of users playing different roles with different incentives and risks, the rate of creation of assets recorded there is managed to a low level of inflation. As such, as a technology utilized for money, it is a stable "store of value" in contrast to the moneys supplied by literally every government.
The ledger, the system of record can be preserved- secured- if and only if it is too expensive for attackers to change it. The turning of energy into hash minting is the security for that system of record.
That's it.
Adopting a mindset where the above argument takes hold involves a kind of leap of faith. It is a belief. Sure, a religion. The game theory/mechanism design behind BTC is a true innovation, the first demonstrated solution to the Byzantine Generals problem.
There is an argument- won't people stop believing in it?
Maybe? I would suggest evaluating that argument against the lifespans of other innovative beliefs.
Is it something that comes and goes, or is it like the eye, an invention of evolution that solves a specific problem and appears distinctly and repeatedly in different organisms once they hit certain levels of complexity.
Cheers.
It was first, and first mover advantage is significant, which has turned into network effects and inertia, and now with the ETF recognition has gained "official" validation;
Anti-inflation is one of its core design principles, is the basis for store of value, and commitment to it has remained solid;
After ETH PoS changes it remains the only proof of work chain. PoS has belief failure modes that can lead to collapse of value. PoW-based value by definition is secured by the cost of the work. It is a financial equation- a ledger can be maintained at the underlying cost of recoverable energy- not a political/fashionable one.
Mindshare can be fickle, and if purely based on fashion, if there is no inertia and there are adjacent equivalents, value can be lost quickly. With BTC there is inertia, because at a deeper level there are no adjacent equivalents. BTC continues to occupy a unique niche in the design space of these artifacts/assets.
I can see the inertia argument. Why switch when it works. I still don't see the store of value argument when Bitcoin requires such exorbitant amounts of energy to keep up. That's a tax on the value. "Look how much energy it's using, it must be worth a lot!"
People can wrap their heads around there being "value" in an "asset" because it has "revenue streams" associated with it- that's what property and being a landlord is about. You can charge rent, so your property has value. That is very familiar because everyone either owns property or rents property. And then they look at BTC and are like- there are no revenue streams, any "value" is just made up.
Gold, a scarce/low supply inflation asset, and former money, is a good mental model for BTC, but it is completely unfamiliar to most folks, and not even the notion of metal coin being intrinsically valuable applies in any economy any more. In fact if anyone thinks about gold, they probably think people who put value into it are deluded.
People also can understand different currencies having different relative values, some being stronger, some being weaker. Why that is is generally a complete mystery. People think of strong currencies coming from "strong" countries with "strong" economies and weak currencies coming from "weak" countries with "weak" economies, where strong and weak roughly correspond to military capability and economic industrial capacity and diversity.
There is some truth in that mental model, but since BTC is not really "used' as a currency, it doesn't get to be slotted in to the currency mental map.
The actual function that BTC is starting to serve and that is critical to the functioning of all modern economic entities, whether governments or private enterprises, the notion of a "financial settlement layer", is completely unfamiliar. So yeah. It is hard to get traction when the machine is mysterious, to abuse a metaphor a bit.
The unnecessary energy waste argument though is an interesting one, eg where BTC is wasteful like just running your A/C unnecessarily or whatever. The most relevant comparison is looking at something called "home idle load" which in the US is basically the background appliance energy use. BTC total electricity use is in fact a tiny fraction of home idle load, which people don't really get exercised about and many when buying new appliances pay little or no attention to.
If one doesn't see the purpose for the use of BTC energy- which again is an unfamiliar concept of the need for "security" for a system of record- people do see the purpose for the wasted home load energy. They need home appliances, they just wish they were more efficient. That BTC mining becoming more efficient would not result in the network using less energy, in fact, the opposite would occur- this is also strange.
Anyway- I agree with you, it is a set of completely novel concepts that interoperate in ways that are very different from existing related and familiar mental models.
That is why to my mind the only way "in" to arriving at an understanding is to look at money- all moneys- as technology, as technical machines that are different implementations of accounting rules.
BTC is a "store of value" "secured" by burning energy because it is an asset system of record, a ledger, that uniquely for the first time in human history cannot be changed either directly or indirectly (e.g. by inflation) by a political actor who "governs" it. The "value" of a BTC is mathematically related to the cost of energy, and to the demand for use of that sort of ledger. What we have seen is that there is significant and growing demand for this sort of ledger, a ledger that is independent of the political processes that exist in every government, and were some problem with BTC itself to emerge, there are now different implementations o...
If we're talking about the value of a currency, we're talking about what we can get in exchange for it. And when we talk about the store of value, it's what we can get in the future. With Bitcoin, we know it must burn energy, so we can get something only less that energy. The currency may get more "believable" due to the burning, when you look at sacrifice as commitment. But what are they committing to? Burning more in the future, because they now have coins they want to keep their value?
The funny thing is that most people trade in virtual Bitcoin they don't control. Because it's more comfortable and the ledger doesn't support the volume. So they need a government to assert their claim on their coins. I guess one can't even get Bitcoin from their ETF and needs to round-trip to some other currency.
The market is settling out of chain, because it's cheaper.
Will try it this way. The store of value is a derivative result of the actual innovation, which is- BTC for the first time is a computationally secure mechanism that provides a system of record, the contents of which are somewhat resistant to political attack and manipulation.
A system of record is the basis on which rule of law exists, the basis for accounting and financial transactions, the basis for property, etc. Proof of Work vs Proof of Stake vs others as the "costs" for maintaining those systems of record, are experiments, empirical discovery processes to see which one(s) over what timeframe hold water.
Specifically to the points:
> BTC vs Gold
Yes. BTC is a technology that has wider use cases than gold. Store of value is just one use case.
> Who is paying for those watts and why?
Right now, people who want to make money, it is economically viable to turn stranded energy into "mining". Who is benefiting from the use of the ledger for store of value and medium of exchange? Often, not always, elements considered criminal by most governments as well as people whose legitimate needs are not being met by their governments.
> store of value...we can get something only less that energy
This is where I think the disconnect between the mechanism that BTC is, and these "rhetorical" questions, is greatest. BTC is a system of record platform. We have lots of other ones. All systems of record require upkeep. They are out there, they are expensive, we don't think about them. They are just people's jobs. Every county has a system for property and title maintenance. Every single financial institution has a ledger- many ledgers. etc.
Many of these ledgers are private. Oracle, the database company, originally became a big business on being the underlying mechanism for millions of private systems of record around the world. In every one of those ledgers, there is a DBA who can do UPDATE X SET VALUE = Y WHERE KEY = Z and often does- certainly "legitimately" governed by the various policies and protections and business rules and so forth that apply to the ledger. But sometimes those UPDATE SQL statements are "illegitimate" and those often occur when the political and governance mechanisms in the business or in the country are breaking down.
There isn't any of that SQL manipulation in BTC. Storing asset holdings is again, just one use case. Attestations, like on off-chain ownership, are another.
And to be sure:
> The market is settling out of chain, because it's cheaper
Absolutely- or rather, there is a lot of implicit cost hiding and inertial convenience in existing systems, as one would expect. And they work "well enough" in a "worse is better" sense. BTC may be too good, too "perfect", too expensive, as a system of record, long term. We'll see.
Hope that makes sense. Cheers.
At the same time I have a hard time accepting that people could see use in the inherent waste of energy. And it irks me when it's framed as use of "stranded energy". Because that's far from reality.
I've heard two voices so which is it to you? Is Bitcoin useful now and worth the lost energy? Or is it an experiment of an interesting tech gone too far?
Relative to other blockchains, like PoS ETH, etc- the question of whether BTC is "worth the lost energy" does have meaning. I think when one looks at the full spectrum of use and failure cases, the "lost" energy is an important part of the value proposition that BTC as technology offers. I don't see ETH or other PoS replacing it. Instead they are kind of complementary.
As a technology, like all technologies, BTC certainly has costs and externalities. Money as a technology is as important, say, as transportation technologies. So look at cars. Cars powered by internal gas-fueled combustion engines could definitely fit into the classification of "experiment of an interesting tech gone too far" given the incredible waste, ecological and sociological damage, and climate impact car-based travel and -based societies incur that, for instance, are lessened in mass transit-based societies. But we are stuck with cars, their global use continues to grow, and we're adapting, introducing and scaling electric, more efficient materials for roads and the vehicles themselves, safer automated driving, etc.
There is no going backwards. BTC and its ilk are part of the future, for both good and ill, IMO.
Specifically as a store of value, I do think BTC has a bright future. I have a small portion of my net worth in BTC, small because there are still non-nil risk and failure cases that could impact it specifically, and diversity across risks is important. It is also important to understand what one is getting oneself into in terms of one's investments. It is an "active" investment, not "passive." People who are looking for passive-like benefits should not look for them from anything in the "crypto" space.
One thing I'm wondering: did you acquire actual Bitcoin, or title to it?
In the crypto space there is data to quantify the cost of divergence. People who want to just get off the train- fine- there are others willing to play/drive.
Re: actual BTC vs title- the BTC I count is that which I only have title to, e.g. held by a custodian. Yes, not your keys, not your coins- but as both a technologist who has had to manage- and has lost data- and as someone also with a background in the financial space- custodianship is one of those essential cultural/behavioral features- it only works if people follow certain rules, and those who do not are punished. My custodians have been around for a while and are I believe properly incentivized. As such they will be better suited to asset management than I am, as a single point of failure. Once more mature multisig/social auth workflows are worked out I will probably move to those. I am lucky to have partners who can play parts in those.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4727999
It's actually rather more like "we'll rapaciously use energy to bring the grid to its utmost limits, but don't worry, if you pay us lots of money [in some cases, more than we get from our regular business!], we'll happily not use quite enough to actually cause it to buckle and fail." Sounds like an extortion racket, doesn't it?
This is a major flawed assumption. Even in a 100% renewable world, every extra watt consumed carries an environmental cost. It is of course less than when burning fossil fuels, but it's still there, and not necessarily even that small.
> The ability of Bitcoin mining to consume excess renewable energy when it's available (and potentially at low or negative prices) could improve the financial viability of renewable energy projects by increasing the floor price these new projects can sell electricity at.
The world has not run out of useful things to do with energy yet, so this is already a bizarre claim. But even ignoring the uselessness of Bitcoin for a moment, this clearly incentivizes the wrong kind of renewable development. If you need to turn your power to Bitcoin to be profitable, that means you can't afford to store this power even as the technology to do that improves. And if you can't store the power, then you can't be part of a fully renewable grid, so you're essentially building the wrong thing and it's better to leave the resources alone to be used in other projects that can actually be self sustaining.
Lots of things have the potential for lots of things. But we need to operate on the reality as it exists, and that reality is that Bitcoin uses a phenomenal amount of power, to the point that people are paying Bitcoin miners to not use electricity when the grid is at capacity (as mentioned in the article).
They don't seem to understand that Bitcoin alone accounts for 98% of all cryptocurrency energy usage due to its uniquely energy-intensive algorithm. Hypothetically if Bitcoin were shut down, crypto would be as energy-efficient as any other distributed/federated technology.
The reason most money goes into bitcoin is probably, that people consider it safer than proof of stake.
How proof of stakes is fire proof is harder to understand, and the information I found did not 100% convince me (not an expert in cryptography so doesnt mean much)
I never put money into crypto btw. Its just gambling right now imo.
See:
> It's like if idling your car 24/7 occasionally produced solved Sudoku puzzles that you could then exchange for heroin.
* https://twitter.com/VessOnSecurity/status/113524359527398604...
[1] https://teslamotorsclub.com/tmc/threads/power-inverters-for-...
do you want someone to tell you how you are able to use that electricity?
what's next? clutching our pearl around gas guzzlers? forbidding people to eat meat? do we want a free market or not?
If the power I use comes from renewables is that cool?
Now you may say you should be free to spend money on the horrendous energy bill of those miners, so that they allocate some coins to you. If there were no externalities, I'd agree. But since there are, I will argue against doing it. And we won't bridge that divide here I guess.
If the proposal is to reexamine and change the way our society works in order to avoid the tragedy of the commons that's great.
If the proposal is to arbitrarily ban something we don't like or understand that's a problem.
How about the amount of power a datacenter uses? What about all this "AI" - the hardware used for training the models is very power hungry?
New bitcoin from mining is halved every ~4 years, so every four years miners can afford to spend only half as much electricity to mine from that revenue.
As revenue from new bitcoins tapers off the work expended will self limit to the value of transactions. If you're charged 1% to include your transaction the value of energy used to mine a block will eventually not exceed the fee for including those transactions.
So it doesn't have the characteristic of consuming more and more energy and is self-limiting in how much energy is used. The bitcoin energy problem will take care of itself in time.
The goal of the "halve every 4 years, plus transaction fees" model is to make sure the above is never possible for an attacker.
That's not how it works. The whole point is to spend power (work).
If there was some breakthrough that allowed finding hashes with 10x less electricity, then the network wouldn't burn 10x less electricity. It would instead find 10x more hashes.
Not exactly. Miners are paid out of the sum of block reward and fees multiplied by the market price of BTC. Every ~4 years the contribution of block reward goes down, but that doesn't mean that the price goes down, or that the contribution of fees stays the same.
If it was block reward alone and the "energy problem solved itself" then the blockchain would be completely vulnerable to a 51% attack and it would instantly become worthless.
The expectation is that the contribution of fees will go up as the block reward goes down, although it remains to be seen how much direct fee the market will bear. Currently the actual cost of a BTC transaction is hundreds of dollars - but most of it is socialized via inflation. It is unclear if the market will bear paying hundreds of dollars in transaction costs instead -- and if not, there's no reason the 21M coin limit can't be raised to continue doing exactly what has been happening so far.
I thought... huh, this can't be right. So I did some back of the napkin math. We have about 2500 transactions in a block, a block reward is 6,25 BTC. That comes around a cost of 0.0025 BTC per block, or about 112USD. That's without considering the extra tip from the transaction. So, not really hundreads, but damn' close.
It makes me think increasing the block size really wasn't a bad idea.
> there's no reason the 21M coin limit can't be raised to continue doing exactly what has been happening so far.
Sure, but you'd need a hard fork. Not impossible, but hard to reach the consensus.
I don't think basically anyone is doing that.
(I'm not even climbing up the tree of Bitcoin's energy consumption being many multiples greater than Reddit's.)
ultimately, once you start thinking you have the right to ban things you should be prepared for someone else to ban things you enjoy.
While there are different ways to evaluate any given topic, all opinions are not equally valid.
you may not like what I do with the power I PAY for but you don't get a say in how I use it.
Yes. Absolutely yes.
> you may not like what I do with the power I PAY for but you don't get a say in how I use it.
There are thousands of things you're not allowed to do with the power you PAY for.
While Bitcoin arguably parasitises energy, social media parasitises human time and attention (which is a much scarcer resource), all while breaking down political institutions and societal cohesion and being a tool for foreign actors to manipulate people on never before seen scales. Social media is "move fast and break things" on a societal scale.
Bitcoin is at worst a speculative asset (no worse than most financial assets) at best a new monetary system in its infancy (unlikely but possible). It is clear to me which technology has more of a raison d'être.
I guess social media pays the salaries of most people on this forum, so the old adage "It is difficult to get a man to understand something, when his salary depends on his not understanding it" applies.
Or maybe I'm completely wrong. It's happened before. The future will show who is right.
Maybe it was that weird guy on a pole out in the field
If I am paying for the electricity do I have the right to use that electricity however I like? Next time you don't like how much electricity "bitcoin" uses ask yourself: am I okay with the government dictating how I am supposed to use electricity? in fact, am I okay with the government dictating anything that can and should be adjustable through the free market?
If we believe both statistics, then crypto mining uses roughly as much electricity as all data centers. But data centers drive so many different industries and benefit people in countless ways- entertainment (as you mentioned), financial, education, communication, etc, etc.
Crypto is like. Neat? There's some people who benefit greatly from it, sure. But broadly compare how different society would look if crypto didn't exist (not different at all, I'd think?) to how different it would look if data centers didn't exist. Looking at it that way, it's crazy that they at all use similar amounts of electricity.
As far as financial instruments go, Bitcoin is fantastically, comically inefficient, and by design.
What do people get from Bitcoin? Monopoly money with no purpose or intrinsic value.
Like what? You really believe people are mining BTC in Manhattan?
For mining to be profitable, cost of energy you put in must be lower than the value of a Bitcoin. Where is energy cheap? Not where there is a need for it, like you claim, but where it is wasted. You don't mine BTC in Manhattan, you put a Bitcoin farm mining off peak on a hydroelectric power plant in the middle of nowhere, China.
Please let's stop this nonsense of Bitcoin stealing energy from who needs it the most, as it is utter baseless nonsense that just betrays total ignorance on the simple concept of supply and demand, and why things are priced a certain way.
If you're opening to understanding why it may not be bollocks, read this
https://www.lynalden.com/bitcoin-energy/
1. Ownership and Security
Bitcoin is the only solution to really "owning" your money. Everything in your bank account can be stolen / frozen / or made "inaccessible" at a moments notice because of some vague bullshit reason like supporting right extremists or terrorists - even if you donate a single dollar - like it happened in in 2023 Canada / freedom convoy. Everything a bank claims to be secure/safe goes away like a poof of smoke if it really comes down to it. The can't be any safety in our increasingly multi-polar world the political boundaries are redefined daily. Today Russia/China is the enemy, tomorrow it's some other country that will suffer economical sanctions. Or your own country decides to apply punitive measures against some minority group because of political opinion - all the control mechanisms are there and politicians are itching to use them.
2. It's less than our current banking sector
Yeah, consuming this much natural resources / electricity sucks. That's the alternative? Do you count how much money is spend on the banking spector as a whole? I assure you it consumes much more then the 2% in capital expenditure - so indirectly it's more (you could have build renewables with the same money) .
3. Scalability
About the famous argument that bitcoin does not scale: the 7 transaction per second argument -> this problem is completely solved by the lightning network. Lightning protocol does the same with much lower transaction cost and much less energy usage - something like 100x less. Yes support at major vendors is still a bit lagging behind but that's only temporary. Need a 100% confirmation? Do full transaction (for example for accounting purposes). Small sums and personal funds -> can be completely handled by a lightweight lightning network transaction. Bitcoin is a highly technical solution and there are myriad ways things can be improved upon if scalability really becomes an issue - even if the lightning network would become saturated.
Not everyone around is supporting the idea that the government scam and it's "real" money is the best option for us all. Electricity is burned in exchange for the utility of the bitcoin, avoiding operations with traditional state-issued money, having a currency which nobody truly governs or controls but the people, and it is definitely here to stay since it is a revolutionary financial instrument. If it wasn't, it would simply be gone, and no-one in his sane mind would be "turning electricity into heat" for nothing.
It is a natural economical progression for the humanity, to have the money nobody owns, and the maths behind it make it happen having it's natural energy toll, which is way more efficient that of any government. Commies go downvote, it is your bread
https://en.wikipedia.org/wiki/Jevons_paradox
Also true for proof of work. And basically any economic system that exists in the wild AFAIK.
The minimum cost to acquire an ASIC so that you can even _contribute_ to the consensus is very high (thousands), and to be profitable you have to have close to free electricity. The ironic thing is, that in PoW the "rich get richer" is abstracted away into a combination of economies of scale, and access to free/very cheap power. Plus all the e-waste and wasted power, whereas PoS runs on e-waste people run in their closet, pulling as little as sub-10 watts.
Anyone can stake and earn the same % rewards, regardless of how much they have. But if you're bankrolled with hundreds of millions of dollars, you get a much higher mining % return than the little guys because you can design and manufacture your own silicon (or get bulk discounts), colocate next to power generation, and buy electricity in bulk.
It's even worse, because with $1k I can barely afford one miner locally. With $1M, I can afford to buy many (and better ones) and put them in an efficient location with a custom energy plan, etc. This means the actual PoS has linear gain, but PoW is closer to exponential. (The more you have the better the RoI % you can afford for yourself)
In fact, I'd wager that the majority of opportunities for the rich to enrich themselves exist outside of the pure economic simulation world that bitcoiners use to motivate the existence of Bitcoin.
Last time I looked it was a $5 wrench. Inflation hit them too?!
Seems like some section of the media found that drugs / money laundering angle doesn't resonate with people so they try going about power usage.
Sure if you don't use Bitcoin it may appear to you as wasteful, but so someone who doesn't drive may feel about people charging they cars if they could just walk or cycle.
Ultimately, if they pay the bills, then what's the fuss about?
This is a good point. Once something can be called a culture it becomes invalid and should be shunned, such as with hand washing
It's massive waste? How would you feel if someone bought 2 billion gallons of gasoline just to burn it in the middle of a desert biggest fire humanity has ever seen?
If the energy used by bitcoin mining is irreplaceable, that just means we're not taxing it enough to replace it properly with renewables. The solution is simple, just tax industrial energy use so that it's not underpriced relative to the externalities it creates. Spend that tax revenue on bulking up the grid with renewables. Then let people buy however much they want and do whatever they want with it, at the right price.
If you purchase gasoline, it's not my right to tell you what to do with it, insofar as it doesn't create additional externalities from that point on, like if you pour it in a river or something. You legally own it now, you get to do whatever you want with it. Same with wood, same with internet bandwidth - this is generally how private property should work.
The burning in the thought experiment is actually the least bad thing imo. The alternative is to seize property from someone who purchased that property legitimately, which is unacceptable.
As a side note, burning gasoline for no reason is pretty close to what billionaires do whenever they fly their private jets. It's a fact of capitalism, and it will exist for as long as capitalism exists.
No, you make the cost of energy take into account the cost of the carbon emissions. That's what a carbon tax is. It's not a dangerous path, it's basic economics.
And I didn't say anything about "telling people what they can and can't do", you pulled that out of nowhere. The earlier comments were talking about "shaming" and "what's the fuss", not legal mandates.
Also in practice a law like that is almost certainly going to be implemented as a fine, which is pretty close to a tax.
We also don't tax carbon emissions at what they cost to clean up, so bitcoin mining on a grid that uses fossil fuels dirties the planet without paying for its clean up.
Should we look at other entities using energy? For instance, why not look at all the data centres? I am sure the world could live with 90% services shut down.
Memes, gossip sites, blogs are non-essential and many more.
Depending on the time of day and the type of electric source, power plants have excess power to shed. Miners are better situated than other industries to ramp up and down consumption.
Some of the largest bitcoin operators in the US are located near hydroelectric power plants - for parts of the year dams literally have to dump water because the river has to flow but there is not enough power demand - and wholesale rates sometimes even go negative.
Given the options of "more BTC, more energy production" and "no BTC, more energy storage and shifting existing production", we as humans would be better off with the second scenario.
The underlying claim to this statement is: more storage could easily be built because it is economically feasible.
Which is - apparently - not the case.
Apparently, the end consumers of electricity (private households, businesses) are not willing to pay enough money for more storage. Or the other way round: storage is too expensive for it to be deployed at a significantly greater scale than it currently is.
Cheap electricity storage is a tough problem. If storage was much cheaper, we'd see much more of it being deployed.
As always, politics has all the levers to set the direction here. Subsidize storage massively and more storage is what you'll get.
What politics can not do through such policies: lower the overall cost of storage for the consumers of electricity (apart from stimulating effects such as economies of scale, ..). Why? Because the subsidies will still be paid by the consumers in their role as tax payers.
You don't get around the fundamental principle that everyone is sensitive to prices. If electricity storage were cheaper, we'd have more of it.
> So, the EIA decided it needed a better grip on what was going on. To get that, it went through trade publications, financial reports, news articles, and congressional investigation reports to identify as many bitcoin mining operations as it could. With 137 facilities identified, it then inquired about the power supply needed to operate them at full capacity, receiving answers for 101 of those facilities.
> If running all-out, those 101 facilities would consume 2.3 percent of the US's average power demand. That places them on the high side of the Cambridge Center estimates.
I know that the shampoo manufacturers would just LOVE it if I bought 10 million bottles of shampoo and poured them straight down the drain. Oh, the sales figures are doing great! Number goes up!
I know that the Mountain Dew manufacturers would absolutely LOVE it if I bought 20 million 2-liter bottles of Mountain Dew every day.
So, BITCOIN is making capitalism PROFITABLE. Discuss why anyone should think this is a bad thing.
Google it.
The simple solution of course is to just tax industrial energy use properly, no matter what you're using it for. As you start using so much energy that you're putting real strain on the grid, your energy taxes should go up asymptotically to the point where if you keep paying, the government can afford to meet your energy demands with renewables construction.
Dupont would be ecstatic, but it would still not be a good thing.
It isn't being singled out though. There's widespread concern across a broad set of cases where energy is being used.
Also, if you recognize that the use of energy isn't always bad, but it's the overuse of energy that is problematic, it's natural to prioritize: you want more of the energy usage to be on the more beneficial things and less on the less beneficial things. So you might target bitcoin on its merits, not because of hypocrisy.
The problem with your argument is that it means either everything should be addressed simultaneously in any discussion of energy usage or nothing should be, since you can make the same argument no matter what the specific topic is.
Feels like an un-sustainable bubble.
But why are banks so secure? I guess because of police partially. I guess those police need electricity too. But we need them anyways, so I guess that only partially counts.
But why dollars? Why not pesos, or euros? The dollar is backed by the US military, of course. I wonder how much electricity the military uses.
Anyways. Let's get rid of bitcoin. That will solve the climate crisis! We can sell anti-bitcoin stickers made in China on Amazon to show our support!
Visa alone can process 24,000 transactions per second. Bitcoin can handle 7
I do think it’s important to have healthy alternative financial systems. Probably need a more energy efficient one.
Crypto could arguably become a potential alternative financial system. Bitcoin by itself is not.
Crime is primarily conducted in USD (by volume). The purpose of financial compliance is not to eliminate crime but to manage it, and arguably the techniques we have used to create exclusionary financial systems have done more harm than good (better the terrorist you know in your financial system than the terrorist who doesn’t even use your financial system that you don’t have any awareness of, aka. The Patriot Act missed the mark).
Further, the existing system is working about as well as the war on drugs. Every recommendation I have read is to find ways to shore it up, rather than find new ways to conduct financial crimes oversight, and the primary recommendation for the resulting inevitable escalation is to build a gigantic skynet of information sharing that looks an awful lot like surveillance capitalism.
https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/...
I personally view Bitcoin as a runaway proof-of-concept. It’s rather insane how successful it’s become considering how it got started.
If we look at it from a product / market fit perspective, there is clearly a product / market fit. And that’s in the face of the intact existing financial system, Visa’s volume, the USD, etc. That’s probably a point worth considering.
1. Not saying that banks are great here, but that better isn’t an impossibly high bar.
You could have said the same thing about it the early financial system as well.
What you have is a developed ecosystem and a developing ecosystem, and you’re pointing to the developed ecosystem and saying the developing one doesn’t have all the things. Of course it doesn’t. It’s developing. And it’s doing it in spite of the existing financial system trying to damage or destroy it periodically.
Let’s not confuse the technology innovation we’re referring for the mature ecosystem of a graduated and dominant financial ecosystem.
Only if you have no understanding of what the words mean. For example, most cryptocurrencies are fiat currencies - just exceptionally weak ones. The reason why using USD isn’t a gamble is that it’s linked to a massive economy with guaranteed demand.
> Of course it doesn’t. It’s developing. And it’s doing it in spite of the existing financial system trying to damage or destroy it periodically.
Ah, yes, this part of the sales pitch was bound to come up. The flaws I described aren’t some sort of minor growing pains, they’re architectural. After 15 years and billions of dollars, not having a progress towards fixing them suggests that telling people to ignore them and buy in anyway is not the way you fix design defects.
2) There are many “cryptos” and technologies. Crypto is not a homogeneous system. Fiats all suck: even ones I implemented as crypto or digital currencies or whatever terminology one would want to use.
3) I think you have it out for crypto. I’m not a hype person or a crypto advocate, but I like the idea of decentralized financial systems and believe we have had very little innovation in the space (and need more).
4) Technology waves take 20-40 years to reach maturity. Radio. Television. Internet. They all take a lot longer than people realize.
5) There has been plenty of progress. If you want to be closed to that progress and dig your feet in to defending the existing system, that’s fine. But the idea that there hasn’t been “progress in 15 years” is absurd reasoning.
In contrast, Bitcoin has been available globally since it launched and it did so in an era where much of the human population had everything they needed to use it - very much unlike the early internet, or radio, or TV. Tons of speculative money poured in hoping to find demand … but nobody really cares about it because for most it’s not better than what they had before. It isn’t cheaper, faster, or safer and it is much less convenient to use, so even the few people who hold it don’t. The few businesses which accepted it have generally reported very little consumer interest and many have stopped. That just isn’t like the demand curve for those other technologies: as soon as Marconi had his first radio telegraph demo, he had businesses and governments interested and the primary limit was the difficulty of making the technology available, not lack of public interest – anyone could see how it could let them do something they couldn’t do before.
That last part is key: I’m all for changes to the financial system, I’ve followed this space since David Chaum was writing in the 90s, but you have to base it on an advantage over the status quo. The problem is not just that they picked an unsuitable data structure but also that it became the community identity, preventing attempts to learn from the mistake.
Their volume is impressive.
Fedwire, the settlement system operated by the Federal Reserve, processed 196 million settlements in 2022, each about $5.4 million, for a total of over $1,000 trillion. [1] That would be about 16 settlements per second. Visa handles many more smaller, individual transactions; aggregates and nets them; and uses Fedwire to settle them between member banks.
Bitcoin could be used in a similar manner, handling a relatively small number of larger settlements; leaving other systems to handle smaller, individual transactions.
[0] https://usa.visa.com/dam/VCOM/global/about-visa/documents/ab...
[1] https://www.frbservices.org/resources/financial-services/wir...
That’s what Lightning does but it also removes most of the sales pitch for the system since you’re giving up the global ledger. Once you’re relying on a bank in all but name for your transactions, it’s unclear what you’re getting for the extra cost and lower usability.
The fact that 0.025% of transactions use 33% of the power is not exactly a win for Bitcoin.
Bitcoin has significantly fewer users, but more importantly it is almost never used for the actual exchange of goods or services.
With my bank (and the accompanying infrastructure that goes along with it), my employer can deposit directly into my account, which I can then use to pay rent online (as opposed to physically traveling to their office), buy groceries at the store, and purchase nearly every legal good or service that is for sale, all while reducing the odds of me being robbed or losing money (e.g. losing my wallet.) If someone or some business scams me, I'm given methods of retrieving my money without confronting them in person. It also allows me to autopay all my bills so I'm never charged for forgetting to pay (and frankly I have very little desire to write and mail several checks each month or travel to various places to pay in cash.)
Credit cards, debit cards, direct deposit and money transfers are far more convenient than using cash, and aside from convenience, I imagine they decrease a nation's carbon footprint over using exclusively cash (due to less need to mint, print and transport physical currency, as well as travel in person to pay or receive payment.)
They do come at a cost of privacy, but if I wanted privacy for a specific purchase, I can still use cash for those specific transactions. While it may have a higher carbon footprint than digital payments, overall ink and paper tend to have low carbon footprints (though it's probably a bit higher for currency than it is for standard A4 paper.) Still, it's near certainly less carbon intensive than Bitcoin (per purchase, maybe not in total since billions of people actually use paper currency to buy things at least sometimes.)
Cryptocurrencies and their accompanying anonymity can bring about good things, so I'm open to at least considering their value — there are countries with authoritarian and oppressive governments, and there have been several democracies that have fallen to dictatorship before and that very well could happen again in the future. As such, being able to anonymously transfer money does have its value, especially in a world with CCTVs and facial recognition.
Cryptocurrencies, of course, also can be used for illegal services that are near universally considered immoral and evil. Currently, in most countries (even ones that aren't exactly liberal democracies), this is likely a much larger harm.
Balancing freedom from and freedom to is always tricky: neither authoritarianism nor anarchy are appealing — allowing personal freedom while preventing people from encroaching on other people's personal freedoms is difficult to achieve.
However, even if I were fully convinced that cryptocurrencies currencies were a net positive on society (open to considering the idea but definitely not convinced yet), I struggle to see how one with such a large carbon footprint is what should be used.
This article gives an estimate of about 2% of all electricity usage going to bitcoin mining. All data centers in the country combine to a similar ballpark in energy usage (another comment states 1-3%). Finance accounts for 20% of US GDP, so we'll be charitable, round up its usage of datacenters to 50%, to get about 1% of electricity from financial data centers.
There are about 6.7 million employees in the financial sector [1]. Assume everyone has a computer with a 600W power supply at full bore for 12 hours a day [2]. That comes out to about 18 billion kWh of electricity a year, which is (checks math) 0.425% of US electricity consumption [3]. Sure, I'm not accounting for all the PoS systems at every retail location in the country, but they're going to use far less energy than even the overspecced numbers I'm using.
So overall, this comes out to about 1.5-2% of US electricity usage going to the financial sector, less than Bitcoin mining. Also remember that magically switching everything over to Bitcoin would still require all those PoS systems, not to mention large fractions of Wall Street and bank branches and whatnot, so this isn't really a fair comparison overall. And some amount of the financial sector includes cryptocurrency companies already.
[1] https://www.bls.gov/iag/tgs/iag52.htm
[2] This basically comes out to a decently powerful computer being used at max spec for an 84 hour work week. A generous overestimate, I'd hope you agree.
[3] https://www.eia.gov/energyexplained/electricity/use-of-elect...
Extremely cringe to see the HN bubble struggle to grasp how the world economy works. Not all government currencies are properly maintained.
The dumb analysis is to talk about Bitcoin energy usage in isolation, without comparing it to the present system. The present system would not work without police officers and military. Bitcoin replaces these things with servers and decentralization.
There is no military protecting the internet. You would need to bomb every country in the world to destroy the internet. The same is true for Bitcoin.
US military is 100% necessary for the dollar-based world order. The fact they do other things is not important. You still need the full US military to protect the dollar, even if they didn't do other things.
This is totally absurd. We would still need police and military even if the USD stopped existing and we switched over to Bitcoin. You cannot replace them with servers because servers can't protect a nation or enforce laws.
> The fact they do other things is not important.
It is important, because it means they must exist anyway. So it makes no sense to factor in their cost if the cost would still need to be paid regardless of which financial system we use.
We would need less of them.
And while there are police dedicated to investigating financial crimes involving dollars today, we would still have them. They'd just be investigating crimes involving BTC.
The emphasis of those interests is on ensuring that the US remains the dominant global superpower, particularly economically. Only a modest portion of our "defense" spending actually goes toward defending our own territory; most of it goes toward global force projection.
> And while there are police dedicated to investigating financial crimes involving dollars today, we would still have them. They'd just be investigating crimes involving BTC.
A lot of avenues for financial crime become impossible in a post-dollar world, and said world doesn't really introduce any new avenues compared to cash; that's a strict reduction, and therefore a strict reduction in the need for police on that front.
There's also a considerable reduction in demand for police to investigate robberies when there's a lot less to rob. Banks get reduced to loan centers and safe deposit boxes, armored trucks moving cash around stop being a thing, nothing in cash registers to steal at gunpoint... yeah, criminals will probably try to commit robberies, but will quickly find out that the reward ain't worth the risk.
Police corruption also becomes trickier, especially when it comes to civil asset forfeiture. No cash to steal during traffic stops means less motivation for said traffic stops in the first place.
My dude there is a whole lot of public security infrastructure protecting the internet. Just because the basic internet protocols are public doesn't make it magic.
It’s a trickier question when that mining activity is competing with generation assets that could be charging a car or powering a manufacturing facility…
This is complicated though because power grids can resell that slack capacity further away if there’s a persistent surplus and other users will notice (e.g. cheap power really incentivizes overnight EV charging or even industrial users expanding). If all of the slack is being used for unproductive purposes, those positive feedback cycles will be delayed – unlike useful work, there’s no end of cycles which bitcoin mining can use so the potential power consumption is effectively infinite.
The value of Bitcoin is thus supposed to be tied to some underlying measure of value.
We used to have gold-backed currency. Then we went to fiat currency. It seems like with Bitcoin we are going to coal-backed currency.
If nuclear fusion became a thing and energy prices went to near zero, would Bitcoin expand to the point that it was using 99.9% of all electricity?
Personally I think this is a ghastly waste of energy.
I'll put Lyn Alden's response to the cliam here: Bitcoin’s Energy Usage Isn’t a Problem. Here’s Why. https://www.lynalden.com/bitcoin-energy/
> "The best data on IT’s energy and emissions characteristics are closely held proprietary secrets among tech companies, which compounds these problems."
(2021) "Does not compute: Avoiding pitfalls assessing the Internet's energy and carbon impacts", Koomey & Masanet, Joule
https://www.cell.com/joule/fulltext/S2542-4351(21)00211-7
Additionally, whenever you see these kind of estimates you really want the data acquisition method applied across the entire sector in a uniform fashion, to avoid someone trying to cook the data a bit in their favor. This is a very common problem in the energy sector, e.g. energy input/cost estimates for building and operating solar/wind/nuclear/gas/etc power plants tend to suffer from this agenda-driven skewing.
Thus, you'd also want to see energy use estimates for all the AWS and Google etc data centers (NSA Utah?) side by side with the bitcoin miners and the high-frequency traders and the industrial manufacturing centers and households etc, and then check that the sum of estimates from different sources obtained via the same method is <= 100% of production and so on.
Until people can find economic uses for, say, the immense solar energy produced in a desert, bitcoin will use it all up because it can be deployed practically anywhere. Likewise anywhere there's excess wasted energy, it will use it. So in that respect, bitcoin finances the construction of energy generation where it is generated the cheapest but may have no other market otherwise due to geographic isolation and transportation. Unfortunately people are biased for one reason or another against accepting this reality, seemingly due to a lack of imagination and prejudice.
Okay, how many Bitcoin miners are using immense solar energy produced in a desert?
Do note that the article mentions that the largest clusters are in, um, Texas and the Appalachians, and their providers of electricity seem to largely be, uh, natural gas and coal power, respectively.
Otherwise miners are buying cheap energy anywhere they can find it, and using waste energy on the grid, of which there's tons. The idea that they're going to spike demand isn't even correct because mining can scale to any level of power generation. Also mining does not cause emissions, mining simply purchases generated power, and emissions are caused by power generation from non-renewables.
If mining is emitting GHGs you could say the same thing about EV cars or any other power consumer. But like I said at least bitcoin as a consumer can be ideally placed ANYWHERE especially where energy is plentiful but not easily used otherwise.
> Do note that the article mentions that the largest clusters are in, um, Texas and the Appalachians, and their providers of electricity seem to largely be, uh, natural gas and coal power, respectively.
So does driving an EV car in those areas amount to being a horrible person too under that logic?
The point is that bitcoin would use as much energy as possible as long as it is profitable regardless of fact it is over-produced or under-produced. And regardless if it is "clean" or not.
It also would drive prices up, we already saw it with prices of GPUs/memory.
> The point is that bitcoin would use as much energy as possible as long as it is profitable regardless of fact it is over-produced or under-produced. And regardless if it is "clean" or not.
It's hard to say that electricity is wasted when no one else is buying it and that's exactly the argument that the article discounts. Low cost and negative cost electricity (that's already produced!) cannot be wasted and consuming it through any means, as someone willing to purchase it, balances the operation of a grid. The fact that no one else is finding a profitable use is their problem and opportunity in a market.
Bitcoin will use whatever energy people decide they wish to purchase to use it. It's not a magic energy vacuum. I can't help but imagine you'd be outlawing people to buy solar panels if they wanted to use that off-grid to do whatever you arbitrarily deem wasteful. The entire thrust of the article is about controlling and demonizing the economic decisions of free people in a market at the behest of political agendas.
> It also would drive prices up, we already saw it with prices of GPUs/memory.
Yes consumption of anything generally drives up prices. Should we ban PC video gaming because they also drive up prices of computer parts? Video games are wasteful too. We could be entertaining ourselves with card games or marbles. Printing money drives up prices too.
Efficient: (of a system or machine) achieving maximum productivity with minimum wasted effort or expense.
Bitcoin is least efficient way of doing transactions. Pretty efficient way doing ecological damage though.
I am not a hardcore bitcoin fan, but I giggle a little when those transactions versus energy consumption arguments come up. Maybe my views are wrong, I would love to check if somebody can change my opinion on this topic.
They would not tax mining/crypto though, because gov is interested in it. And it would be sold to people like "freedom" (but would be used by people who has a lot of money for speculation/tax avoidance).
- With sufficient demand-scaling, Bitcoin incentivizes more power generation capacity since it's the buyer of first resort, establishing some floor on electricity price. This makes additional investment into renewables etc. more sustainable. E.g. where I live, there are days of slightly negative prices, and those clearly are not sustainable, so Bitcoin is the perfect way to ensure we get plentiful cheap energy with continuing investments.
- There's a case to be made that there are more and longer wars under fiat currencies since money-printing is a hidden tax that no one votes for, making it possible to fight in wars that exhaust all state resources, whereas under a Bitcoin standard the wars would be few and limited in scope.
Additionally, US Space Force's Jason Lowery argues that Bitcoin is a weapons technology in cyberspace, and the global Bitcoin mining competition is a form of "soft war", and further argues that a constant "soft war" is more efficient way to defend property rights.
The latter two points are not yet all that salient but imo that is the world we're heading towards inevitably. Bitcoin eventually outcompetes other forms of money as a layered technology and leads to this "hyperbitcoinized" world where they hold true.
Bitcoin's value (not only the monetary value of it) scales with global access to energy. So what? Why is that such a problem? What it is, is a convenient scapegoat for the anti-crypto mobs to complain about. Bitcoin is not stealing energy from anything, it is not making it more expensive nor it is the direct cause of global warming: a Bitcoin mined on solar is worth the same as a Bitcoin mined on fossil fuels. We are literally missing the forest for the trees, and to me, this topic is a populist slogan for tech-educated people that want another reason to have the big bad cryptocurrencies.
Global warming is a major threat to our society, and while the major culprits and those that stand to benefit from the status quo continue with impunity, we, the people, are fighting among ourselves on inconsequential topics like Bitcoin energy usage.
Putting a fair price on CO2 would solve the problem for bitcoin (and many others).
That sadly will never happen, unless the world somehow gets a unified government (imo).
If the US, the world's largest economy, also implemented such a system, then there would undoubtedly be a large global impact in reducing emissions. Creating the political will to do so is difficult of course. Citizens' Climate Lobby has been working on trying to pass a carbon fee with a border adjustment since 2007, though unfortunately with increasing political polarization it has been difficult. I wouldn't rule out the possibility though — political change can be very slow in the US, but CCL is clearly a group with extreme patience and a focused goal, but is willing to be pragmatic and advocate for any improvements as opposed to taking nothing. Admittedly I haven't volunteered for them in a quite some time, but in the past (at least at where I was at the time), the people I worked with seemed level headed and goal oriented — they may not have always personally liked the Representatives or staff that they were meeting, but they kept personal opinions to themselves and were laser focused on trying to convince them of joining the Climate Solutions Caucus and sponsoring a carbon fee. Perhaps the EU looking to implement one with a border fee adjustment may be the push the US needs to make it happen here.
This is what I find annoying. If Bitcoin were to disappear tomorrow, we would still run on non-renewables, and pollute our soil and waters. Why isn't this the primary concern, and we look at a single industry downstream that is completely independent on how clean the energy it uses, and in fact, is more profitable with renewables as I mentioned in a sibling comment?
It is not dissimilar to the misplaced hope to reduce the catastrophic disaster of microplastics in our water stream by banning plastic straws. Or demonising meat consumption when it is such a drop in the ocean compared to all our energy and pollution problems, caused by transportation, heavy industries and corruption.
The only things people really care about these days is what fits easily in a Twitter post of fake outrage, without stopping to see the bigger picture.