Interesting you don't consider this real economy. Do you think banking is also not part of the 'real economy'
Resources spent on PoW are effectively an arms race (outrunning attacks on the network that other systems don't need to deal with). It's meaningful to distinguish between resources devoted to zero-sum arms races vs. positive-sum satisfaction of human desires. Resources spent on PoW take from the latter and add to the former (at the macro level).
Edit: So yes, in that categorization, I would count (at least some) banking as in the positive sum part: they identify which opportunities for investment will pay back, and help enforce the agreement, thereby increasing over capital allocation efficiency and therefore wealth.
I think you got your point across fine. Obviously it doesn't look like 'real' work since there's so much power being spent, seemingly unnecessarily. But I think it is easy to underestimate how effectively it can replace the current financial system.
Why do you think wealth can't be generated with digital currency? What part of 'positive-sum satisfaction of human desires' you think current digital system can't satisfy? And I think you're looking at the resources spent on digital currency and the current financial system in a different way. There's no need of people spending lots of time and energy to safe guard big lock rooms.
Banking can move to the digital ecosystem just fine. And it is just in its first iteration.
I didn't say that. I said that the marginal unit associated with mining can't be credited with the wealth gains of digital currency applications. The criticism was of the mining costs you need to make this work, not the stuff you can layer on top of the currency itself. For it to be a social net positive, all those benefits would have to outweigh the mining costs.
>And I think you're looking at the resources spent on digital currency and the current financial system in a different way. There's no need of people spending lots of time and energy to safe guard big lock rooms.
Of course the financial system has to pay for similar "defense", but the comparison is not favorable to Bitcoin/PoW. The costs of securing conventional centralized mechanisms (or bank vaults) ramp up much slower than Bitcoin per dollar or per unit of wealth secured.
>The costs of securing conventional centralized mechanisms (or bank vaults) ramp up much slower than Bitcoin per dollar or per unit of wealth secured.
Actually I think the costs are much less, because after a certain point, you're not working to secure the network but racing to make more bitcoin. The network can be secure with much less resources than what is currently being spent.
It is a misconception to think that effort to mine is to fight external attacks. It is more like fight between banks to transact faster.
So banks would be defined as not real economy since they are transacting in debt, savings, and other instruments that exist on balance sheets, while Bitcoin mining would be defined as real economy since it bottlenecks on an energy input.
What century was that? I think financial services fit very well into the proper functioning of the real world. I believe it does provide very 'real' value and I'm ready to disagree with the definition of 'real value'.
>while Bitcoin mining would be defined as real economy since it bottlenecks on an energy input.
Bitcoin mining isn't competing with the wealth transaction part, but the wealth creation part. The wealth transaction part was secured a long time ago and now there are efforts to make it more efficient without dealing with the race for creation - like Lightning Network.
Remember, the whole point of proof of work is to make it too expensive for "bad guys" to amass enough work to force their skewed version of the ledger[1].
As long as you have the constant rate of coin production, and difficulty adjustments to ensure it, you have the exact same arms race. Miners might not use more energy[2], but they'll still take away workers, land, metal, etc. from the real economy.
[1] They can't forge transactions, but they can publish empty blocks, effectively shutting it down.
[2] Although even that's doubtful: when you throw money at a problem, you generally end up throwing a proportional amount of energy at it too.