>There's no net-value created by doing the 'mining part' - in fact, it's a value-destroying activity

You don't understand where cryptocurrencies derive their value from if you're saying this. Mining is what give cryptocurrencies their legitimacy, it proves that a digital file is scarce (important for information used to account for wealth/scarcity) and second it proves that the payment hasn't been double spent.

The traditional financial / political system, these processes are obfuscated or inefficient because you need lawyers, judgers, armed guards, vaults, auditors etc etc to preform the same task: to ensure that FedWire isn't inflating the supply, rolling back a payment.

I understand exactly what crypto-currencies are.

'Mining' does not give them 'legitimacy', it's just an odd by-product of how some of them are structured.

And frankly - that 'mining' consumers power and resources is a total waste. There could very well be other, less wasteful ways accomplish the same thing.

Certainly 'Kin' is not 'mined' - they just arbitrarily create and dump them as they please.

>'mining' consumers power and resources is a total waste

Driving a cash truck to merchants, to pick up cash, to take back to a bank, to be counted by a physical machine, to update a database in a bank server is also a 'total waste'.

Just because the waste is hidden in the old financial system doesn't mean it's 'less wasteful'

Ce qu'on voit et ce qu'on ne voit pas

If you know of another way to solve the Byzantine generals problem, there's an entire community of researchers waiting to read your paper.

Another angle of criticism would be that solving the Byzantine generals problem with the threat model that cryptocurrencies target (i.e. anyone can join and leave the network somewhat anonymously at any time) is simply not necessary in the real world unless you are a die hard anarchist. Therefore, for any application that doesn't have those requirements it is a huge waste of resources.

"If you know of another way to solve the Byzantine generals problem"

'Mining' is an arbitrary answer to handing out block-chains.

They could give out Bitcoins to whoever solved specific math problems for which 'computing power' doesn't matter.

They could give new Bitcoins to completely random people.

The 'mining' paradigm is utterly wasteful because it wastes resources for no reason.

The could have issued a 'big block' and than have been 'done with it' - no new Bitcoins.

The level of religious support for this stuff is hilarious.

I'm glad you have outed this rather complex multi billion dollar industry with thousands of extremely competent programmers.

> 'Mining' is an arbitrary answer to handing out block-chains.

No it's not there are many ways to mine a coin and reach consensus, Proof of Work has been the most sensible one - as staking electricity is fundamental and universal.

> They could give out Bitcoins to whoever solved specific math problems for which 'computing power' doesn't matter.

They?

> The 'mining' paradigm is utterly wasteful because it wastes resources for no reason.

Ethereum uses a mining algo to process Smart Contracts. Other currencies like sia, use mining to process decentralised storage. Utterly wasteful is an overstatement. There are plans to move Ethereum to Proof of Stake where mining coins will become incredibly difficult and uneconomic and will reduce the power consumption problem.

> The level of religious support for this stuff is hilarious.

Your poor understanding of the topic made me chuckle

Alexasmyths isn't really making particularly crazy statements there. Ripple is a successful (third in market cap behind only Bitcoin and Ethereum) coin that already works by the "just randomly give them out to people" system without Proof Of Work. Yeah it's not great but neither is using huge amounts of processing power.

The purpose of Mining is not to hand out new coins, this is only done to incentivise mining. The real reason behind mining is to secure the transactions. Mining prevents people from double spending their coins.

You can completely agree with crypto-currencies having value and also believe "There's no net-value created by doing the 'mining part'". The reason is that whatever you gained in BitCoin value you lost in the ability to sell your electricity.

The net value of doing additional mining is that the payment that you accept as a merchant is that much harder to undo by an attacker.

If you accept that a bank vault that has one guard is made more secure by adding another guard you must accept that adding miners to a PoW chain makes it more robust against attackers -- this is the value.

Mining is literally "hacking the security of the coin, measured partially." The whole point is to incentivize mining instead of hacking because they'd both benefit equally from the same discovered flaws in the crypto. That ensures the crypto (which can be swapped out if a weakness is discovered) is essentially impenetrable.

Mining also serves as THE first-known solution to the byzantine generals problem, which is a problem in every decentralized system that needs to agree on the canonical truth. What less-energy-consuming system to solve this problem would you suggest instead?

Yeah, this costs energy, but it's sort of like expending energy to shoot ammunition at a wall constantly in order to know right away as soon as any weakness is discovered.

What is the price of being unable to be hacked (see: Equifax)? Right now, that price is "mining energy expenditure."

Reducing the friction of financial transactions definitely creates value. Credit cards are able to charge ~2% on a large fraction of consumer purchases for exactly this reason. The current return to mining might be disconnected from the value created, but the latter is very far from nothing.

"Reducing the friction of financial transactions definitely creates value."

Crypto-currencies are entirely unecessary for this.

I pay most of my bills 'digitally' with 0% transaction charge.

'Friction' is ultimately derived from 'regulation' - which is a necessary condition when dealing with real money across an economy.

One could argue there is 'too much regulation' - that said, without it, the economy would crash instantly due to mass fraud, corruption, embezzlement, tax avoidance etc. etc..

Irony: the moment 'Bitcoin' is important enough to be considered a 'real currency' by governments - 'poof' it's under regulation and loses a great deal of it's value in this area.

The 'solution' to e-currency is not Bitcoin, it has too many downsides for practical purposes. It's a great intellectual exercise, and something good may come of it, but 'it' is not the solution.

Even if we ignore all the uses that you don't personally find useful (free international transfers, domestic transfers that clear in an hour rather than days), you've retreated from "crypto currencies don't create value" to "crypto currencies create value to regulation evaders, but the net impact for society is negative", which is just completely different claim.

On the contrary, mining does create value, by creating a demand for computing power therefore financing the development of more advanced lithography, one of the very few areas in which our species is still making substantial progress.

Now if they were getting the electricity by burning coal, a case could be made that the environmental harm outweighs the benefit. But getting it from a renewable source also expands the economies of scale on that renewable source just a little more, so it's a win across the board.

>On the contrary, mining does create value, by creating a demand for computing power therefore financing the development of more advanced lithography

This is like saying hurricanes create value because they create demand for construction

Or Frederic Bastiat's "Candlemaker's Petition", which was a satirical request that officials block out the sun in order "to encourage industry and stimulate employment".

http://bastiat.org/en/petition.html

This is an "apart from that, Mrs Lincoln" - there is no analogy, because you're leaving out the destruction caused by hurricanes, which is their overwhelmingly most important result.

By that definition destroying CPUs is also creating value.

Sure, if you spent a million dollars buying CPUs and destroying them, that would create value. In practice, there are always ways to spend a million dollars to create more value (e.g. buying CPUs and using them to do useful computation!), so nobody does that.

If you have something more useful to do with the wind-generated electricity, the same thing would apply. But thanks to the limitations of the grid and the intermittency of renewable energy, that may not be the case. In that case, mining cryptocurrency may be the highest value thing you can do with it.

> In that case, mining cryptocurrency may be the highest value thing you can do with it.

Wow, how convenient that the thing you like is the single "highest value thing" that anyone can do with energy.

You are in a filter bubble of people patting each other on the back for wasting energy. You've been rewarded for cryptocurrency speculation for so long that you've forgotten what productive work is.

As it happens, this guess is incorrect. I've never been involved in cryptocurrency other than as a curious spectator. I have no strong feelings about it one way or the other.

Do you agree with the general principle that when the heuristics you are using, generate erroneous conclusions, it's a good idea to re-evaluate those heuristics?

> Sure, if you spent a million dollars buying CPUs and destroying them, that would create value.

Can you read what you've just written and see how mad it's become?

The converse of what you've said is that making CPUs destroys value, and by implication Moore's law and the whole process of technological improvement is destroying value.

This is even worse than the Bastiat "broken window fallacy": http://bastiat.org/en/twisatwins.html

You're not reading what I've written.

But I was waiting for someone to bring up the broken window fallacy. The answer is that the unspoken assumption on which it is a fallacy is that resources in the economy are otherwise optimally employed. Back when it was coined, that might have been close enough to the truth to be a useful approximation. Today, it's very much not.

I don't think this argument has become particularly constructive, so I'll let you have the last word, but I suggest instead of just pattern-matching what you think I said to something you've heard somewhere else, try stepping back and just looking at the facts as they are.

You're confusing 'economic stimulation' with 'net value creation'.

A lot of money can change hands, and a lot of people can 'do stuff' with nobody being better off.

Take for example how the GDP is measured: the total value of 'everything produced and sold' PLUS government spending.

Get that: it does not matter how the government spends - it counts towards GDP.

A government could borrow $1 Billion dollars - and literally burn it - but the 'GDP' would be +$1B Billion that year. That doesn't mean $1B in economic value created ... it just a number on a page.

> Take for example how the GDP is measured: the total value of 'everything produced and sold' PLUS government spending.

That's incorrect; GDP is the total cost of everything produced and sold. Government spending isn't added (if it was, there'd be a substantial double counting, because a lot of things produced and sold are bought by government.)

(More precisely, it's private consumption + private investment + government spending + government investment + exports - imports.)

No, I'm pointing out how this does in fact cause net value creation. Sure, when somebody mines Bitcoin, the dollar value of the Bitcoin is purely on paper. When they send dollars to chip manufacturers to buy mining hardware, the movement of dollars from one bank account to another is also purely on paper. But when people respond to the movement of those dollars by building more advanced chip factories, that is indeed net value creation.

That is not 'value creation' - that is 'digging holes and filling them'.

The 'innovation' created from 'more advanced tech' to do something entirely useless is not really 'value creation'.

Now - if those 'advanced shovels' end up being used for other purposes, you might argue there is 'value creation' - but no - this is not right.

Why? Because of the distortionary effects of the impetus of the innovation in the first place.

If there is a 'real reason' to make 'better shovels' - then they will get created for that reason. But because they are being created for a non-reason - i.e. digging holes and filling them, well, it's a misallocation of resources.

If the 'false impetus' did not exist, that investment would go elsewhere, and create value for society in more efficient ways.

It's pointless to invest in things that have no value, because there might be indirect innovation elsewhere - just use the money for rational, value creating things - it's much more efficient.

> If the 'false impetus' did not exist, that investment would go elsewhere, and create value for society in more efficient ways.

Actually no, it probably wouldn't. Most likely, the money would be hoarded and the people would be eking out an existence doing some miserable make-work. The unspoken assumption behind your position is that all resources are currently being used fully and optimally. Unfortunately, this is very far from true.