And those limits come up to the theoretical maximum of was it 7 or so and in practice around 4
https://www.blockchain.com/charts/transactions-per-second
Also PoW is hilariously inefficient. Because the amount of energy one needs to spend is basically related to the amount of value one could grab by cheating, so if all economy would be based on Bitcoin we'd be talking about basically cooking the planet due to PoW.
When Satoshi originally devised PoW it was more about owning the hardware and using that as basis for voting. Energy costs were miniscule. He simply didn't foresee the, now obvious, result that it will became a function of burned energy rather than amount of hardware out there.
> https://www.blockchain.com/charts/transactions-per-second
The link you provided indicates transactions added to the mempool per second! The mempool is a cache of broadcast transactions from which miners pick transactions to be added to the next block.
At the current block height, 2700 transactions were in the block. https://mempool.space/block/00000000000000000007a3688746c1d0...
> Also PoW is hilariously inefficient. Because the amount of energy one needs to spend is basically related to the amount of value one could grab by cheating
Your statement is entirely unclear. Could you restate it? For Steelman purposes, I'll ignore the non-sequitur about cheating.
You claim that algorithm x is inefficient in absolute terms? Assuming you're an engineer, you know that engineering operates by comparisons and tradeoffs. PoW is how Bitcoin provides final settlement of transactions and unforgeable costliness compared to existing systems of money (e.g. fiat) and money transfer(e.g. visa, paypal, swift) which are all centralised and built for censorship, while bitcoin is decentralised and censorship resistant. And it provides final settlement of transactions every hour for thousands of transactions. "Finality" and "Unforgeability" are the terms you should attend to. These are both tied to hashrate which is tied to the profitability of mining the heaviest chain.
"Bitcoin has unforgeable costliness, because it costs a lot of electricity to produce new bitcoins. Producing bitcoins cannot be easily faked [..]" [0]
"So what are settlement assurances exactly? They refer to a system’s ability to grant recipients confidence that an inbound transaction will not be reversed. Wire transfers using a messaging system like SWIFT are popular in part because they are practically impossible to reverse. They are considered safe for recipients because originating banks will only release the funds if they are fully present in the sender’s account. [...] recipients of a Bitcoin transaction can have extremely high confidence that, once buried under a few blocks, a transaction is unlikely to be reversed."[1]
> When Satoshi originally devised PoW [...] Energy costs were miniscule.
I'm not sure what you mean. In general, energy costs seem to be dropping over time https://ourworldindata.org/grapher/levelized-cost-of-energy
> [Satoshi] simply didn't foresee the, now obvious, result that it will became a function of burned energy rather than amount of hardware out there.
I'm wary of trying to interpret Satoshi, but here are his own words:
"I think the case will be the same for Bitcoin. The utility of the exchanges made possible by Bitcoin will far exceed the cost of electricity used. Therefore, not having Bitcoin would be the net waste. [...] Each node’s influence on the network is proportional to its CPU power. The only way to show the network how much CPU power you have is to actually use it." [2]
[0]: https://medium.com/@100trillionUSD/modeling-bitcoins-value-w...
[1]: https://medium.com/@nic__carter/its-the-settlement-assurance...
[2]: https://satoshi.nakamotoinstitute.org/posts/bitcointalk/327/
> Your statement is entirely unclear. Could you restate it? For Steelman purposes, I'll ignore the non-sequitur about cheating.
By cheating I meant making a sidechain that would become longer than the mainchain, thus enabling a double spending attack. If the amount of money to be made in double spending attack is higher than honest mining someone will make it, the only thing protecting against that is that the cost of mining must be large enough compared to value being transferred.
>I'm not sure what you mean. In general, energy costs seem to be dropping over time
Back when it was CPU mined. Before even the first GPU mining. It was just about proving that you have an actual HW dedicated into the task.
Exactly as mentioned in the quote that you said. He didn't have a clue that it would become dedicated HW that has only a single function, burning energy to calculate SHA256 and nothing more.
Also do note that the whole concept of non mining node was foreign. Instead of the original design of nodes that mine we're in situation where nodes don't mine and most mining happens in centralized farms.
A double spend attack can only spend the attackers coins.
> If the amount of money to be made in double spending attack is higher than honest mining someone will make it, the only thing protecting against that is that the cost of mining must be large enough compared to value being transferred.
That's precisely the game theory and why the network remains secure. It's addressed in the whitepaper and fundamental. Economic incentives are the security model. [0]
I'm not sure what the rest of your points have to do with settlement finality and assurances so I can't address them.
There's been a decade of analysis of Bitcoin engineering. I'm yet to hear anyone venture an original criticism that hasn't been rigorously and extensively rebutted already since genesis.
[0]: https://blog.lopp.net/are-chinese-miners-threat-bitcoin/
The reason I linked to a block was so that you could see that transactions can have arbitrary numbers of outputs. See: https://news.ycombinator.com/item?id=26099812
The energy usage of Bitcoin doesn't meaningfully go up with more transactions, so pretending that each transaction uses some specific amount of energy is just misleading.
And if the maximum daily number of transactions is more or less fixed, and the total energy spend is also relatively stable, then it’s very easy to calculate the energy cost per transaction.
You don't understand how transactions work.
A transaction can have arbitrary value, an arbitrary number of inputs, and an arbitrary number of outputs.
Therefore Bitcoin has infinite throughout and 1 hour confirmation/finality latency.
An example:
My company has 100 engineers each paid USD10k in bitcoin per month. We generate 1 transaction worth USD1M with 100 outputs.
Similarly when paying numerous suppliers for hardware, machinery, logistics, transportation, catering. 1 transaction of high value with numerous heterogeneous outputs.
Transaction count is not the correct way to measure the throughout of the Bitcoin network at a given block height or over several retargets.[0]
[0]: https://medium.com/@hasufly/an-analysis-of-batching-in-bitco...
Nah. You don't need to double and triple down on wrong ideas and metrics that are scientifically spurious. You know calculus so you know multiplying by averages won't tell you what you want to know.
Transaction count relative to energy usage doesn't tell you what's valuable about the observed system and its energy consumption, which is its decentralisation, censorship resistance, assurances, and trustlessness.
Assuming you care about logic, simply update your broken mental model.
Because batching will increase as Bitcoin grows, and has practically infinite throughput, its efficiency improves exponentially by securing more value relative to energy consumption.To secure ever more value using the Bitcoin network, humans are incentivised to find and build more efficient energy sources.
Further, an arbitrary number of transactions can occur securely offchain and get aggregated and finalised on-chain i.e the settlement layer. In fact this is how the future will be. See Lightning, Liquid, other L2 designs. The order of operations is first to have a bulletproof settlement layer.
Bitcoin was designed to be the single planetary currency. Spend time studying it and you'll realise that Satoshi was smarter than all his current critics who all imagine they've brilliantly and uniquely perceived some fatal flaw in Bitcoin's engineering, game theory or economics.
Remember, if Bitcoin were a company, it would currently have a market cap of >USD800B. Few programmers can build anything that valuable let alone critique it meaningfully.
Let go of useless, poorly reasoned concepts. Humble yourself and study Bitcoin. It's a wonderful optimistic scientific discovery on par with fire, antibiotics, and electricity. http://lopp.net/bitcoin-information.html
> what's valuable about the observed system and its energy consumption, which is its decentralisation, censorship resistance, assurances, and trustlessness.
The thing you need to understand is that nobody cares about this, except a small fringe of libertarians and computer scientists. Sure, it's cool that it's possible but not a single one of these would come up if you ask the man in the street (or your average economist in the street for that matter) what he wants from money.
> Humble yourself and study Bitcoin
I built a prediction market that used bitcoins in 2014, and ran a small but profitable crypto quant fund a few years later. I think crypto currencies are fun and there are one or two legitimate use cases, but the way you and other zealots look at bitcoin as a kind of panacea is just insane. Your fervour borders on a religious mania.
In reality there is still almost nothing that crypto can do that anyone actually wants, and bitcoin is far from the best even at what it actually does.
And no, the fact that the price of bitcoin is high does not indicate that people think it's useful. It's still a purely speculative asset, almost nobody uses it as a medium of exchange, and those who do are either criminals or zealots. Close to zero non-criminals use it because it solves an actual problem in the real world.
Not saying this will never change, but that is where we are now, more than a decade later.
Um. Don't be obtuse and obdurate. This conversation is getting really tedious. Look at the market, look around the world. Actually research the statements you make. There are already millions who care.
> I built a prediction market that used bitcoins in 2014.
You built on bitcoin yet you never understood how transactions work? That's deeply disturbing. Nonetheless, I sincerely wish you good luck. I respect your effort at building and sincerely hope you keep building winning products.
The market will decide the victor. See you on the builder's battlefield. That's where all the action is. En garde!
> the way you and other zealots look at bitcoin as a kind of panacea is just insane. Your fervour borders on a religious mania.
P.S. I totally want Bitcoin to be declared a religion, if only for the possible tax advantage! Fun times.
> not a single one of these would come up if you ask the man in the street (or your average economist in the street for that matter) what he wants from money.
[sigh] If you asked them what they want they'd have said they want a faster horse, not a car. The purpose of travelling and talking to people is to discover their problems and pain-points not what they imagine the solutions are. The innovator then inserts a solution into the machine.
> bitcoin is far from the best even at what it actually does.
You keep making these vacuous statements yet you don't even have a grasp of what Bitcoin actually does because, apparently, what it does has no value to you. I mean, good for you. What you don't seem to realise is that your inability to look at reality looks like a religious mania.
Now, respectfully, I have to bow out. Code to write, Bitcoin to build on.
No it just always always goes up regardless of transaction volume as the block-difficulty increases infinitely. You've built a system that by design can literally only become less efficient.
It's actually even worse and stupider than if it were a per-transaction energy usage.
[sigh] The difficulty adjustment is so a block is issued on average every 10 minutes. It therefore does not increase infinitely but both increases and decreases depending on the amount of hashpower in the network.
> What is the maximum difficulty?
> There is no minimum target. The maximum difficulty is roughly: maximum_target / 1 (since 0 would result in infinity), which is a ridiculously huge number (about 2^224).
Obviously.
https://www.coindesk.com/bitcoin-mining-difficulty-large-dro...
- There are other, better cryptocurrencies that don't bake the planet.
- There are other, better financial infrastructures that process more transactions and provide a better stable store of value.
- There are other, better distributed computing networks that do more than calculate sha256 over and over again.
People in a free market pay for what they care about. To date, those who use Bitcoin have been happy to pay for the energy the network consumes. In the end, that is all that matters.
Society is made up of individuals. Assuming you don't believe a small cabal of individuals should, in the name of society and ideology, force other individuals to follow their dictates, the questions then are:
- will eliminating Bitcoin really reduce carbon emissions to a meaningful extent compared to other sources of carbon emissions?
- How much are individuals willing to pay to reduce carbon emissions? i.e. skin in the game. One way to pay to reduce Bitcoin's carbon emissions would be to sufficiently/relentlessly short Bitcoin to tank the price or develop/invest in an alternative green currency and let the market decide which is best.
- How much, in carbon emission, are individuals willing to pay for the benefit of a given technology like Bitcoin?
We all pay because of the negative externalities involved with producing electricity. They are not part of the price of electricity currently.
If all countries had robust carbon taxes or similar schemes, then you could possibly argue that the price of bitcoin reflects their true cost. Possibly. But definitely not now.
This contradicts your earlier point that markets can't resolve negative externalities. Presumably a tax will cause a marked market response.
Further, Bitcoin's price is a reflection of demand, not cost. In the long run, however, the price of any currency will likely converge to its cost of production, which is also why fiat is fundamentally a poor store of value.
> You really don't get the concept of "tragedy of the commons" do you?
The tragedy of the commons is mostly in the word "commons", as opposed to "private property".
I merely have a different opinion on how negative externalities should be resolved. [0]
> We all pay because of the negative externalities involved with producing electricity [...]
Such a statement is too nebulous to be useful. Consider that what "we" pay is entirely subjective based on what individuals value. I know people who care deeply about every part per millon of carbon emission while others don't. How then do you propose to determine what "we" pay? Who is this "we"?
Are you going to somehow convince nonplussed people that they are paying for some particular externality that they don't care about? Suffering and loss are subjective.
You want carbon taxes, enforced by some authority who can presumably accurately determine the correct price for such things. All I can say is good luck.
And how many other externalities would you like taxed? At what granularity? Perhaps households or individuals should pay carbon taxes too? What about all that energy wasted on Christmas lights?[1] What's your preferred maximum level of elictricity production that will guarantee carbon neutrality? Is carbon neutrality the most important thing and everything else a distant second?
However, for those who care deeply about the matter, they can make their preferences and values felt right now and every day in the market, which is especially easy to do in cryptocurrency markets.
Organise a coalition to short Bitcoin to protect the environment. Surely there are many of you just on HN alone given that this article was on the front page. Shorting is a form of taxing. Drive the price to 0. Save the environment. If one is not willing to have skin in the game to stop Bitcoin's energy consumption, they are just larping as saviours of the environment.
[0]: https://mises.org/library/austrian-theory-environmental-econ...
[1] https://www.nsenergybusiness.com/features/christmas-lights-e...
Not at all. Things like carbon taxes internalise the externalities. It makes all electricity consumers pay the true cost of electricity, at least as far as can be determined.
I know that libertarians are as dogmatic as any marxist, but it seems to me that you should be more interested than anyone else in internalising the true cost of things into their price?
If you want to rely on the market as much as possible, then all the more reason to make sure that the cost of making things includes all the costs. Only then can consumers make a considered purchase.
As the text in your link so eloquently puts it:
"Social inefficiency arises when the social costs associated with external effects, such as air or water pollution, are not incorporated into the cost of producing the pollution generating product or its market price."
Almost every single one of your statements here reflect a misunderstanding of my argument, basic economics and/or your own Austrian philosophy.
You think I don't understand my own thoughts (which aren't Austrian but merely mine). Meanwhile I think you don't understand what I'm expressing. Thus, we agree to disagree. Thanks for the conversation. Bonne chance.
Compared to what else that provides a decentralised, censorship resistant monetary network without trusted third parties required to secure it?
> the metric mentioned is not relevant
It's relevant in explaining the energy usage relative to economic value and architecture of an engineered monetary system.
If you have a metric that can explain Bitcoin's design and value proposition with respect to energy consumption better than Dan Held's explanation, you should propose it and logically demonstrate your idea's superior explanatory and predictive power.
I don't particularly feel that any of those characteristics are very important, and I think most people would agree.
> It's relevant in explaining the energy usage relative to economic value and architecture of an engineered monetary system
Again, that is not how you construct a metric for how cost efficient something is. You start with the "job to be done" of the object. And storing all historical transactions forever is seldom desirable.
If you want to measure the efficiency of electric cars vs combustion engine ones you look at things like miles/Wh or CO2 emissions/mile.
You DON'T look at explosions per second or something like that. It might explain how combustion engines work but it is not the goal of a car.
Bitcoin doesn't care what you feel. It exists as an engineering artifact, continues to exist and functions to serve the needs of those who use it. Those who use it don't pay for it with their feelings but with their hard earned money. You evaluate a piece of engineering for what it aims to achieves not what you feel it should achieve.
Bitcoin at block height 670061 has a market cap >USD800B. That's a lot of people who feel the characteristics of Bitcoin are valuable.
Cf. A statement like: "I don't particularly feel HD screens on a phone are important and I think most people would agree that they're a waste and bad for the environment. Therefore HD screens shouldn't be in smart phones."
> if you want to measure the efficiency of electric cars vs combustion engine ones you look at things like miles/Wh or CO2 emissions/mile.
> You DON'T look at explosions per second or something like that. It might explain how combustion engines work but it is not the goal of a car.
Again, Dan Held said:
"the efficiency of Bitcoin’s PoW, should be defined in terms of the security of an economic history."[0]
That history is perhaps analogous to the entire lifetime travel distance of the vehicle. Let a coin be a vehicle. There are 21M coins. Let a block be a mile long and infinitely wide (for transactions of any value can be contained in a block without limit to the value), for instance, and you can get your miles/Wh. Or just humbly study the Bitcoin timechain and understand what it does and why it does it.
[0]: https://danhedl.medium.com/pow-is-efficient-aa3d442754d3
Torturing metaphors: it's more useful to say that the gas/mile (kw per block) fuels all 21 million cars simultaneously, not just one car, and ensures that all the roads they've travelled remain useable, and that anyone in the world can use a car at any time and verify the journey it made and the cargo it carried. Further, each car can carry an arbitrary amount of cargo (the value of the transaction).
And in any case, there are other ways to build a global system for transferring money that is many orders of magnitude more efficient, so there is still no reason for society to support the cost of bitcoin, because it’s a terrible alternative.
And no, people don’t want or need a completely decentralized, trustless etc payment system. It’s a non-goal.
Good. Build one. That's a huge arbitrage opportunity. The market will decide. Meanwhile we'll continue building systems on top of Bitcoin[2]. Game on. See you in 50 years.
> And no, people don’t want or need a completely decentralized, trustless etc payment system. It’s a non-goal
Now you're being hopelessly naive to the point of being helpless and ineffective in the real world. Travel the world a bit. Learn what real humans need. Learn history.[0] Learn how many have been ruined by a legacy financial system built on manipulable currencies and fiat.[3]
At the very least, open your mind[1] and just learn instead of pounding your chest to confirm your narrow priors. The goal is to get smarter not less smart.
[0]: https://breedlove22.medium.com/our-most-brilliant-idea-aced3...
[1]: https://breedlove22.medium.com/bitcoin-is-hope-bedce21b3648
[2]: https://dergigi.com/2021/01/14/bitcoin-is-time/
[3]: https://breedlove22.medium.com/masters-and-slaves-of-money-2...
I already know a fair bit, that is not the issue here. And I’ve lived long term in places as diverse as Japan, Russia, China, the Middle East and Scandinavia, so I don’t lack experience of the world. That’s why I know that normal people don’t care about trustless or decentralized money.
As to bitcoin alternatives, there are plenty, both with crypto and without. Many other cryptos are technically far superior to bitcoin, but go almost unused because that’s not the point.
Bitcoin energy consumption is not a function of the number of transactions. A node broadcasts a transaction which miners then include in a block which, within limits, can have an arbitrary number of transactions. It is the Proof of Work(PoW) contest to find a valid hash for the block at a certain level of difficulty that creates a valid block.
Further, with Layer 2 solutions, a single transaction in a Bitcoin block can be "dense" with the value of an arbitrary number of transactions that occurred in Layer 2. That is Bitcoin providing the settlement layer.
Importantly, because Bitcoin is a timechain where the current blockheight represents the entire history of Bitcoin.
"The average cost per transaction isn’t an adequate metric for measuring the efficiency of Bitcoin’s PoW, it should be defined in terms of the security of an economic history. The energy spend secures the stock of bitcoin, and that percentage is going down over time as inflation decreases. A Bitcoin “accumulates” the energy associated with all the blocks mined since its creation. LaurentMT, a researcher, has found empirically that Bitcoin’s PoW is indeed becoming more efficient over time: increasing cost is counterbalanced by the even greater increasing total value secured by the system."[0]
[0] : https://danhedl.medium.com/pow-is-efficient-aa3d442754d3